TMI Blog1984 (3) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... te of that, in the returns filed, the assessee showed these amounts as due and was assessed. For the assessment year 1979-80, no such income was shown. We are concerned with the assessment year 1980-81. In this year also, no interest was shown as receivable. 2. The ITO found that the assessee was maintaining his accounts on mercantile basis. He further found that the assessee had not relinquished any of his rights to receive the interest. He, therefore, held that the interest had accrued and should be included in the assessment. 3. Against this finding, the assessee appealed. The AAC found that the amount due has not become a bad debt. As the accounts were maintained on an accrual basis, the interest due must be included in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. To a query whether such change of method has been followed in respect of each of the other loans, he submitted that no change had been effected by them but, according to him, each loan is a separate source of income. For this purpose, he relied on the decision of the Supreme Court in the case of CIT v. Lady Kanchanbai [1970] 77 ITR 123. 6. Shri Tuli, for the department, submitted that there is no evidence to show that the assessee had changed the method of accounting. He submitted that the assessee cannot change his method according to his sweet will. He then pointed out that there is no evidence also to show that the debtor has become financially weak so that it could be said that no income had accrued. 7. We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be treated as a separate source of income. All the transactions together would constitute one source of income. 8. Since we find that there is no material to show that the assessee has changed the method of accounting to cash, we have to consider the next submission as to whether any income has accrued during the accounting year. It is true that merely because the method of accounting followed is mercantile, the income should be treated as accrued. In a case where the debtor is quite unable to pay the principal or interest, no income would accrue. As the Madras High Court has laid down, whether the income has accrued or not has to be seen with reference to the commercial and business realities of the situation in which the assessee is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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