TMI Blog2009 (7) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 15-7-2009 - A. K. SIKRI and VALMIKI J. MEHTA, JJ. Mr. P. C. Yadav and Mr. N. P. Sahni, Advocates, for the appellant. JUDGMENT A.K. SIKRI, J. - The present appeal of the Revenue under Section 260(A) of the Income Tax Act impugns the order dated 30.5.2008 of the Income Tax Appellate Tribunal (ITAT). The ITAT allowed the appeal of the assessee against the order of CIT(A) which authority upheld the order of the Assessing Officer(AO) whereby the AO made an addition to the return filed by holding the assessee liable with respect to accrued income not actually received on the ground that the assessee was maintaining books of accounts on mercantile basis. 2. The order of Income Tax Appellate Tribunal is a very detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged on record are that the total outstanding amount of Rs.617 lacs including principal amount of Rs.350 lacs and interest amount of RS 267 lacs was ultimately settled at Rs.480 lacs (principal Rs.350 lacs and interest Rs.130 lacs) vide one time settlement agreement dated 15.12.2003 of the assessee with M/s Lottee and which one time settlement amount was to be paid by 31.1.2004. By a Deed of Assignment dated 30.12.2003, the assessee company had assigned the settled debt of Rs.480 lacs to be recovered from Lottee to M/s Eicher Goodearth Ltd for a consideration of Rs. 470 lacs. 4. On the above facts, the Tribunal therefore, found that it was clear that the outstanding interest amounting to Rs.267 lacs had already been offered to tax up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Income-tax Officer did not represent the income which had really accrued to the assessee company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said views of the Tribunal." (Emphasis added) 5. The relevant observations of this court in Goyal M. G. Gases (P) Ltd. are as under: "Applying the law laid down by the Supreme Court, what has to be seen in the present case is whether there was any real accrual of interest to the assessee. Both the CIT(A) as well as the Tribunal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiate any legal proceedings was clearly doubtful. We do not agree. For business expediency and a practical approach a commercial decision was arrived at by the assessee to settle at an amount of Rs.480 lacs and which is nothing unusual because many factors come into play such as time of litigation, costs of litigation, need of the funds by the assessee company and so on and so on. We find that the Tribunal was right in observing as under: "We do not find any reason why the sound principles based upon realisability of the amount due on the objective criterion of a sticky account should not be accepted even if accounts are maintained under the mercantile system, which recognizes revenue not on the abstract theory of right of recovery but on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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