TMI Blog1988 (2) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be charged for the year ended 30th June, 1980 and onwards. It was submitted that the principal amounts had become doubtful of recovery and as such, interest was given up. Consequently, no interest accrued and hence, no interest was shown in the profit and loss account. The Income-tax Officer called upon the assessee to place the material on record to show that those parties were suffering from financial difficulties and that original advances were of doubtful recovery. The assessee could not produce the details called for by the Income-tax Officer. The Income-tax Officer held that interest had accrued from those parties and that the assessee was not justified in not crediting in its accounts the accrued interest. He calculated the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and as such, the interest could not be said to have accrued. He, therefore, submitted that the addition was not justified. He also submitted that it was not within the powers of the assessee to produce the financial statements regarding the debtors and as such, they could not be produced before the Income-tax Officer. However, the assessee made efforts to obtain from the debtors and subsequently succeeded in obtaining the financial statements in respect of three debtors. The copies thereof have been duly filed which indicated that the financial condition of those debtors was so bad that even the principal amount could not have been recovered. Consequently, the decision to waive interest was bona fide and had been taken on business co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has mentioned it in the assessment order. That resolution cannot be ignored as far as assessment year 1983-84 is concerned. That resolution of the Board of Directors indicates that the assessee had waived interest on those amounts before the interest accrued in the relevant accounting year. The assessee as a creditor was entitled to waive interest when it formed an opinion that the financial condition of the debtor party was such that even principal amount was of doubtful recovery. Neither interest nor the principal amount has been recovered till the date of hearing of this appeal in January 1988. The assessee has obtained the information regarding financial condition of the 3 parties and submitted the said information which indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla Gwalior (P.) Ltd. [1973] 89 ITR 266. In that case the assessee, who was following mercantile system of accounting, had foregone commission after the end of the previous year but before the accounts of managed company were made up. It was held that when such commission was fore gone on grounds of commercial expediency the same could not be included in the present case also the interest has been waived on commercial expediency and as such, the interest could not be included. 5. Before parting we may mention that before the Income-tax officer another stand taken by the assessee was that the assessee would offer for taxation, interest when received as the assessee should be deemed to have decided to adopt cash system regarding interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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