TMI Blog1992 (12) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... rued to the assessee-company following the mercantile system of accounting ?" The brief facts of the case are that the assessee-company agreed to advance a sum of Rs. 20 lakhs to Messrs. Citric India Ltd. and an agreement in this regard was executed on July 27, 1965. The amounts were to be advanced in instalments of Rs. 10 lakhs from February, 1966, and the loan was to carry interest at 12 per cent. per annum. The assessee-company advanced loans amounting to Rs. 15.37 lakhs as on June 30, 1969, Rs. 15.39 lakhs as on June 30, 1970, and Rs. 17.39 lakhs as on June 30, 1971. The interest amount on these loans amounting to Rs. 1,81,000 for the assessment year 1970-71, Rs. 2,08,864 for the assessment year 1971-72, and Rs. 2,28,156 for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was following the mercantile system of accounting. No evidence was produced to show that the agreement for charging the interest at 12 per cent. was modified at any subsequent date. The contention of the assessee that the principal amount itself has become doubtful of recovery was also not relied upon since further loans were advanced by the assessee to the debtor-company. The Appellate Assistant Commissioner relied upon the decision in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835, wherein the apex court held that : "The income accrues when it becomes due". The postponement of the date of payment does not affect the accrual of income because it has a bearing only in so far as the time of payment is concerned. The moment the income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the assessee-company and it was observed that no prudent businessman is likely to advance amounts to a company from which the recovery becomes doubtful. Relying upon the decision in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC), referred to above, it was held that non-receipt of interest by the assessee does not detract from the fact that it had accrued to the assessee and the appeal was dismissed. We have considered the arguments. A charge has been created under section 5 on the accrual of income as well as on the receipt of income. The assessee-company is maintaining its accounts according to the mercantile system, and this not been disputed. It is also not disputed that, in accordance with the letter produced by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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