TMI Blog1992 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... or 1980-81 are as follows : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that, in the case of an assessee maintaining accounts on the mercantile system, the amount of interest which accrued on doubtful debts was not includible in the income of the assessee ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the total income on which deduction under section 36(1)(viii) is allowable should be computed before making deduction in terms of section 36(l0)(viii) of the Income-tax Act, 1961 ?" For the assessment year 1981-82, the following question has been referred : " Whether, on the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in various courts. But, from April 1, 1973, the assessee changed the method of accounting because it felt that crediting interest in respect of such loans would be unrealistic and a correct financial picture is not reflected. The Reserve Bank of India also issued a letter to change the method of accounting followed by the assessee. Accordingly, changes were effected from April 1, 1973, in that so far as the interest on the loans for recovery of which cases are pending in various courts were not reflected in the profit and loss account, they were credited to a separate account known as the " interest suspense account ". Interest on the basis of actual receipts after termination of litigation was reflected in the profit and loss account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgo on the change of method of accounting and the only condition postulated was that it must be a bona fide change. It also upheld the Commissioner's view that, for 1974-75, reopening of the proceedings on the basis of the audit note was not in order. Reliance was placed on the decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC). But, so far as 1975-76 is concerned, it was held that reopening was made on the basis of the instruction of the Central Board of Direct Taxes and, therefore, was valid. It, however, endorsed the view of the Commissioner of Income-tax (Appeals ) on the merits. Ultimately, therefore, all the appeals were dismissed. So far as assessment years 1974-75 and 1976-77 are concerned, the Revenue m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 36(1)(viii) is allowable was held by the Tribunal to be computable before deduction of relief under that provision for the relevant year. For coming to such conclusion; the Tribunal relied on the view expressed in another case (Industrial Promotion and Investment Corporation of Orissa Limited in I.T.A. No. 22/CTK/84, disposed of on January 8, 1986 ). On being moved under section 256(1) of the Act, the questions have been referred for the assessment years in question. The primary stand of learned counsel for the Revenue is that the assessee changed the method of accounting from mercantile system to cash system in respect of accrued interest on " sticky loans " after the close of the accounting year. Without giving up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting subject to the condition that the change is effected in good faith and is bona fide, and that the real state of affairs is reflected. The Tribunal found that there was no dispute that the change effected by the assessee with regard to interest realisable from persons against whom cases are pending was done in good faith. It, therefore, did not feel it necessary to consider the controversial issue as regards the real income concept. In our view, the case which was under consideration of the apex court in State Bank of Travancore [1986] 158 ITR 102 did not relate to cases where suits had been filed. The situation is different where the interest relates to cases covered by suits. Under section 34 of the Civil Procedure Code, award ..... X X X X Extracts X X X X X X X X Extracts X X X X
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