TMI Blog1993 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year involved is 1984-85. The Assessing Officer found that the paid up capital of the assessee-company was Rs. 24,50,000 and almost the entire capital was invested on loans bearing interest. However, no interest receipt had been accounted for on certain advances to parties. The auditor's note showed that the assessee followed the cash system of accounting. The Assessing Officer further found that, during the year, the assessee received back sum of Rs. 12,60,894 from Messrs. Ramnarayan Kayan and Co., to whom a sum of Rs. 23,84,400 was advanced last year and the assessee advanced fresh loans during the year to the following parties : Name Amount (Rs.) Messrs. Bhartia Commercial Co. Ltd. 7,00,000 Mrs. Renuka Goenka 1,50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) and allowed the assessee's appeal with the following observations : " 9. We have perused the facts and considered the arguments. We have also gone through the judgments of the Calcutta High Court relied on and cited in support of the contention regarding the claims of the assessee. There is no dispute that the appellant company has been following the cash system of accounting regarding the interest. The appellant-company has shown the interest in the subsequent assessment year and which is accordingly assessed. The appellant-company is at liberty to manage its affairs in a manner of tax planning. If the tax planning is lawful, then it would be incorrect to allege the deliberate intention and device of the income. Though such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down by the judicial Committee has been explained and reiterated by the Supreme Court in CIT v. T. S. PL. P. Chidambaram Chettiar [1971] 80 ITR 467. The fact remains that the real income has to be assessed. The assessee has maintained the cash system of accounting and has not reflected any interest in the accounts, no interest having been actually received in the year of account. The Income-tax Officer cannot, on an estimate, assess income by way of interest irrespective of the method of accounting regularly employed. As we have already indicated, the interest income has been assessed in the subsequent year. If the assessee is entitled in law to manage its affairs so that the interest income will be assessable in a particular year, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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