TMI Blog1991 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the accounting year because the suits were pending for recovery of the loans ? 2. Whether the Tribunal was justified in putting off the fact of accrual of the interest in spite of the fact that the assessee followed the mercantile system of accounting and the loans were interest-bearing ? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the amount of Rs. 42,716 as interest accrued was not includible in the total income of the assessee in the assessment year 1973-74 ? " The assessee, the U. P. Financial Corporation, is a financial institution lending money to others. The assessment year concerned herein is 1973-74, the "previous year" being the financial year 1972-73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of pendency of the suit. Aggrieved by the order of the Appellate Assistant Commissioner, the Revenue carried the matter in appeal to the Tribunal. The Tribunal dismissed the appeal following its decision in an appeal relating to the assessment year 1969-70. The Tribunal too was of the opinion that once a suit is filed, interest pendente lite falls in jeopardy. It cannot be said that, during the period a suit is pending, interest accrues to the assessee. Hence, the mere fact that the assessee was maintaining its accounts on the mercantile system cannot mean that the interest accrued or that it should be added to its income. Thereupon, the Revenue applied for and obtained this reference. Learned counsel for the Revenue relied upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 36(2) of the Act. The court observed that the concept of real income cannot be read so as to defeat the object and the provision of the statutory enactment. Learned counsel for the assessee, however, sought to distinguish the said decision on the ground that the case before the Supreme Court was not one where a suit (or suits, as the case may be) was filed to recover the doubtful loan(s). He submitted that, in the case before us, suits were flied prior to the commencement of the relevant "previous year" and that they were pending during the course of the said "previous year". He submitted that awarding of interest pendente lite was within the discretion of the court, as provided in section 34 of the Code of Civil Procedure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as it thinks just and proper in the circumstances. It may be that, according to this provision, the plaintiff is entitled to interest even for the period pendente lite, but at what rate, he cannot say, until the court determines the same. In such situation, it would not be possible for the plaintiff-assessee to say that interest is accruing to him from year to year, pending the suit, at a particular rate. It accrues to him on the date of the decree. This feature, as pointed out by learned counsel for the assessee, was not present in the case before the Supreme Court in State Bank of Travancore v. CIT [1986] 158 ITR 102. It is, therefore, not possible to apply the principle of the said decision of the Supreme Court to the facts of this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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