TMI Blog1981 (7) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to the assessment year 1969-70. The assessee-company had advanced certain loans to M/s. Howrah Trading Co. (P.) Ltd. which was a sister concern of the assessee-company. The outstanding loan of this year was Rs. 71,10,000. The ITO found that no interest was being shown on this loan. He further found that the assessee was following the mercantile system of accounting. The ITO, therefore, added Rs. 3,37,725 as interest at 4% on the above amount of loan. The assessee went up in appeal before the AAC. The AAC followed the reasons given in the earlier year's order and deleted the amount of Rs. 3,37,725. In the earlier year the AAC had found that the assessee-company had charged interest up to April, 1966. After that date no interest was bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere were transactions up to 1954 and there was no transaction after 30th June, 1954. The balance outstanding on the date was Rs. 41,23,750 on which interest was being charged from year to year. The Tribunal considered that at no time the interest was actually received by the assessee. The assessee-company in those circumstances stopped charging interest after 30th April, 1966; and the outstanding balance against the debtor-company had come to Rs. 71,10,357 and after this a suit had been filed. Considering all these circumstances, the Tribunal was of the view that the debt bad become doubtful as regards its recovery and it was, therefore, not required, in those circumstances, of the assessee-company to show the interest in its account. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but whether the income legally accrued in case the assessee had followed, in its dealings, as in this case, the mercantile system of accounting. For this reliance was placed on the observations of the Supreme Court in the case of CIT v. Thiagaraja Chetty Co. [1953] 24 ITR 525. This proposition again, in our opinion, cannot be disputed. But in this case, we have to bear in mind that the debtor-company had stopped paying interest for a very long time. Indeed, prior to 1966, a suit had been filed by the assessee-company against the debtor-company for the recovery of the principal as well as the interest. The debtor-company had denied liability. In a case, where a suit has been filed, the right to get interest for the period subsequent to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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