TMI Blog1981 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner to decide the issue afresh after the result of the suit is known ? " This reference relates to the assessment years 1971-72 and 1972-73 for which the corresponding accounting years ended on 31st October, 1970, and 3lst October, 1971. The assessee is a company carrying on the business of manufacture of jute. The dispute which the Tribunal was called upon to decide for these two years related to the inclusion, by the authorities, of the sums of Rs. 4,99,984 in the assessment year 1971-72 and Rs. 5,28,762 in the assessment year 1972-73. It appears that the assessee had been advancing moneys, from time to time, to another jute company, known as M/s. Chandpur jute Co. Ltd., during the period between 1951 and 1961. The advances were interest bearing. By the end of April, 1961, after giving credit for the amounts repaid by the debtor-company, a sum of Rs. 57,59,532 was found to be the balance of principal still outstanding. On 6th October, 1961, the assessee-company filed a suit, being Suit No. 1772 of 1961, to recover the debt from the debtor-company of the aforesaid sum of Rs. 57,59,532 and also a further sum of Rs. 1,13,771 being interest on the said sum for the period fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sirable to put the observations in the words of the Tribunal. The Tribunal observed as follows: "It is no doubt a well-established proposition that the interest accrues from year to year and in a case where an assessee adopts the mercantile system of accounting the interest accruing to the assessee each year has to be computed at the contract rate and assessed to tax in the relevant assessment year on accrual basis. But this principle is subject to one qualification. Where an assessee files a civil suit against his debtor for recovery of the debt, the further interest from the date of the suit cannot be assessed to tax on accrual basis, computing the same at the contract rate. In a suit for recovery of a debt he can ask for a decree for the principal amount and the interest accruing, as per the contract rate, up to the date of the suit and he can also ask for further interest from the date of the suit. Even if the court passes a decree for the principal amount and the interest accruing up to the date of the suit at the contract rate, it may not grant further interest from the date of the suit at the contract rate. Under section 34 of the Code of Civil Procedure, the awarding of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to those decisions in detail. Our attention was also drawn to several provisions of the I.T. Act itself to highlight the question that whether an income arises or accrues in a particular year and the manner how an income arises or accrues are provided for in the provisions of the I.T. Act. Our attention was also drawn to s. 2(45), s. 5(1)(b) and about the scope and effect of the method of accounting. Our attention was also drawn to s. 145 of the I.T. Act, 1961. Learned advocate for the Revenue also drew our attention to the observations in the case of CIT v. Chunilal V. Mehta Sons P. Ltd. [1971] 82 ITR 54, at p. 61 (SC), where the Supreme Court highlighted that what was important in determining these matters was the method of accounting followed by the assessee and not a particular entry made on a particular date. Similarly, learned advocate for the Revenue contended that income under the I.T. law becomes assessable when it arises or accrues to the assessee and if the mercantile system of accounting is followed and an accrual is made in a particular year then that income should be included in the particular year. There is no dispute that in the instant case the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court may, in a decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of decree in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit : Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions..." (2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the court shall be deemed to have refused such interest and a separate suit therefor shall not lie. " Learned advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 ; in fact it is in consonance with the same. The second aspect upon which reliance was placed was the aspect that the Tribunal had not decided the question before them for the years in question. The Tribunal has, according to learned advocate for the Revenue, decided the question in vacuum and it was contended that the Tribunal must find the fact and apply the law in the particular aspect and not decide the question in a vacuum. In aid of this proposition reliance was placed on the decisions in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), and in the case of Rajinder Nath v. CIT [1979] 120 ITR 14 (SC). It is true that this proposition cannot be disputed. But in this case the Tribunal has not, in our opinion, decided any question in vacuum. The Tribunal has borne the facts of the years in question in mind. The Tribunal has noted that the " suit has not yet been decided ". The Tribunal has, therefore, directed that the appeal should be restored to the file of the AAC and decided after disposal of the suit in the manner indicated by the Tribunal. Such a direction, in our opinion, is not beyond the jurisdiction of the Tribunal. We should rather think that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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