TMI Blog1988 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITO 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 ITO. The ITO held that interest had accrued from those parties and that the assessee was not justified in not crediting in its accounts the accrued interests. He calculated the accrued interest at 15 per cent per annum which amounted to Rs. 2,41,955 and added this amount to the total income of the assessee. The assessee filed appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such, they could not be produced before the ITO. 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 Considerations. 3. The learned departmental representative, on the other hand, relied on the earlier decision of the Tribunal. He admitted that the resolution of the Board of Directors regarding waiver of interest had been placed before the ITO. However, according to him, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itor 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 indicates that those parties had suffered heavy losses. In respect of one of the parties, viz., M/s Citric India Ltd., the Central Bank of India has issued certificate that the said company had been classified as sick unit as per the guidelines issued by the Reserve Bank of India. Considering the entire circumstances, we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITO 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 income from these parties. This submission was rightly rejected. The assessee could not adopt mercantile system in respect of some parties and cash system in respect of other parties. In the present case, since the assessee had waived interest, the interest had not accrued and on that ground, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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