TMI Blog1994 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the suspense interest account should not be included in the assessee's case for the assessment year 1972-73 ? 2. Whether the Appellate Tribunal's view that the method of accounting followed by the assessee in crediting the interest in the suspense account with reference to sticky loans could be accepted is sustainable in law ? " Assessment year 1973-74 : " 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the income of Rs. 60,41,528 credited in the suspense interest account should not be included in the assessee's case for the assessment year 1973-74 ? 4. Whether the Appellate Tribunal's view that the method of accounting followed by the assessee in crediting the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covery of the principal amount itself was doubtful of realisation, it was considered not prudent to take credit for the interest debited in such accounts as income of the year. However, the Income-tax Officer was of the view that since the assessee was following the mercantile system of accounting, there was no escape from inclusion of this amount as interest income. On appeal, the Appellate Assistant Commissioner deleted the addition on the ground that the credit of such interest on doubtful debts to the suspense interest account and bringing it in the profit and loss account only when it is realised is also a method which cannot be said to be inconsistent with the mercantile system of accounting. The Appellate Assistant Commissioner was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Commissioner deleted the addition of Rs. 83,884. On further appeal, the Tribunal following its own order in the case of the same assessee in the earlier years remitted back the assessment order to the Income-tax Officer for fresh disposal in the light of the observation made by it in its order. So also the Income-tax Officer brought to tax Rs. 43,12,656 being the interest, commitment charges and guarantee commission on accrual basis in this assessment year. On appeal, the Appellate Assistant Commissioner, following his order for the earlier assessment year accepted the assessee's claim and on further appeal by the Revenue, the Tribunal following its earlier order I. T. A. Nos. 1824 and 1825/(Madras) of 1976-77 for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that would not affect its taxability as such. The interest on 'sticky' advances was rightly treated as income which had accrued to the appellant." This view was followed by the apex court in another decision in Kerala Financial Corporation v. CIT [1994] 210 ITR 129. This court also had an occasion to consider a similar question in CIT v. Annapurani Veerappan [1992] 193 ITR 426, wherein this court following the decision of the Supreme Court in State Bank of Travancore v. CIT [1986] 158 ITR 102 held that interest accrued on sticky loans where the assessee followed the mercantile system of accounting is includible in the total income of the assessee for assessment purpose. Thus, in view of the decisions cited supra, we hold that the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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