TMI Blog2015 (1) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... fective till September, 2008 only i.e., for a period of three years. In these circumstances, if the assessee was not receiving interest, then in our opinion, the addition should not have been made just because it had accrued to the assessee as per the mercantile system of accounting. In the case of Eicher Ltd. [ 2009 (7) TMI 43 - DELHI HIGH COURT ] the same principle has been propounded. - Decided in favour of assessee. Disallowance of interest expenditure - HELD THAT:- FAA has not given any reason for the disallowance. As his order is non-speaking, therefore, same has to be reversed. Decided in favour of assessee. - Income Tax Appeal No. 33 To 35 Of 2012 - - - Dated:- 27-1-2015 - Rajendra, J. JUDGMENT Rajendra, 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment passed is liable to be quashed. (a) For that on the facts and circumstances of the case, the ld. CIT(A) grossly erred on facts in misconstruing and arbitrarily assuming that the appellant could not furnish any evidence to show that the agreement with Al-Haj Abdur Salam Barlaskar had expired on 30.09.2002. The addition of ₹ 1,20,000/- being confirmed by the ld. CIT(A) solely on the basis of above erroneous assumption of facts, the addition of ₹ 1,20,000/- is legally unsustainable and liable to be deleted. (b) For that the ld. CIT(A) erred in not holding that the ld. AO was not justified in arbitrarily rejecting the bona fide and genuine explanation of the assessee by simply branding the same as 'cannot be ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily made disallowance of ₹ 44,739/- out of the interest expenditure. For that the disallowance made being without jurisdiction and being against the principles of natural justice, is bad in law and is liable to be deleted. For that your appellant denies its liability of being charged off of interest u/s 234B of the Act. For that interest charged under the aforesaid section at ₹ 35,200/- in the impugned order being not in accordance with the law the same may kindly be deleted in full.'' 2.1 In the other two assessment years i.e. 2005-06 and 2006-07, the only difference is about amount involved. As the issues are common, therefore, for the sake of convenience, we adjudicate all the appeals by a single order. 2.2 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan advanced to Al-Haj Abdus Salam Barlaskar for the year under consideration. The assessee vide its letter dated 07-12-2009 explained the circumstances under which the income had not been shown on accrual basis. Invoking the provisions of Sec. 145 of the Income Tax Act, the AO held that the interest is accrued to the assessee @ 24% of ₹ 5 lakhs for the year under consideration, and resultantly he made an addition of ₹ 1.20 lakhs to the total income of the assessee. Aggrieved by the order of the AO, assessee preferred appeal before FAA. 3. During the course of hearing before the FAA, the assessee-firm furnished copy of deed of agreement made between it and Mr. Al-Haj Abdus Salam Barlaskar dated 22-12-1999. After considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had to write off the loan finally during the AY 2008-09. Just because, the interest was due, it cannot be always presumed same had to be taxed. The agreement in question is effective till September, 2008 only i.e., for a period of three years. In these circumstances, if the assessee was not receiving interest, then in our opinion, the addition should not have been made just because it had accrued to the assessee as per the mercantile system of accounting. In the case of Eicher Ltd. (supra) the same principle has been propounded. Respectfully following the same, we reverse the order of the FAA and decide the effective grounds i.e., 1 to 5 in favour of the assessee. 6. Ground No. 6 is about disallowance of ₹ 44,739/- out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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