TMI Blog1990 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal was justified in holding that the interest forgone by the company was for commercial expediency and that should be treated as business expenditure in computation of the income of the assessee for the assessment year 1980-81 ?" The assessment year involved is 1980-81 for which the relevant accounting period ended on March 31, 1980. The facts narrated by the Tribunal in the statement are as follows : "The assessee-company filed its return on June 17, 1980 showing "nil" income. In the course of examination of the accounts, it was found that a loan of Rs. 2,90,000 was advanced by the assessee-company to Newspaper Limited earlier and for which the company charged interest regularly in these years but, in the relevant accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous years had accrued and had to be assessed as income of the year. In view of the discussion made in the earlier paragraphs on the subject drawing support from the Supreme Court's decision in the case of Morvi Industries Ltd. [1971] 82 ITR 835, 1 am of opinion that the interest of Rs. 44,950 on the basis of the previous year which accrued to the assessee cannot escape assessment by a stroke of the pen in a resolution passed just a few days before the end of the accounting year." The argument of the assessee before the Commissioner of Income-tax (Appeals) was as under : "It is submitted before me that this interest was not given up by the appellant unilaterally but, on the basis of the letter received from Newspaper Limited. It is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st was made to convert the loan into a non-interest bearing one due to its difficult financial position. It is true that the resolution was passed on March 21, 1980, at the fag end of the accounting period but this was before the interest had actually accrued. This was done on the assurance given by Newspaper Ltd., for liquidation of the outstanding dues as soon as its financial position permitted. According to my opinion, therefore, this was on the ground of commercial expediency with a view to getting back the amount advanced. Under these circumstances, the decision of the Tribunal cited before me is fully applicable on the facts of the case. Respectfully following this decision, the appellant's contention is accepted and the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expediency. There was sufficient material before the Commissioner of Income-tax (Appeals) for coming to this conclusion. In this case, the interest was forgone before the closing of the accounting year and, as the Commissioner of Income-tax (Appeals) has pointed out, before the accrual of the interest income. It was held by the Division Bench of this court in the case of James Finlay and Co. v. CIT [1982] 137 ITR 698, at page 716 : "The real principle seems to be that the root or the germ as to accretion of income must be in the accounting year and if such root or germ fructifies in the subsequent years, that can be taken into account and not otherwise. Now, applying the same principle to the facts and circumstances of this case, if i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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