TMI Blog2002 (12) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... d to establish and substantiate the above contention as per note by filing the certificates from the appropriate authority of the above two deposit funds to the effect that the said sums and the interest thereon will not be receivable at all. Hence, the above contentions were not proved and held as not supported by any facts and evidence in the last year. The assessee has again put the same note during the year also in the statement of computation of income attached with the return of income filed. And at the hearing stage it is admitted by the A.R. that the facts of the case are exactly same as in the last year. In the light of the above, the contention for non-disclosing of the interest income from A/c. Nos, I II with the Savings Trust as raised through the note are not supported by any facts and evidence during the year also and as such the contentions are hereby rejected and the interest income @ 5 1/2 per cent on the last year's closing balance is included as in the past year." Aggrieved by the said order of the ITO, the assessee preferred an appeal before the CIT(A). 3. Before the CIT(A), the assessee's counsel contended that the entire interest together with the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the income accrued on the two deposit accounts with it. By a letter dated 2-5-1980 the Savings Trust regretted its inability to furnish the desired information since the Hon'ble Calcutta High Court directed the trustees of the Savings Trust to finalise the accounts and have the same audited after completion of the winding up of the Savings Trust. In such circumstances in the case of Sri D.K. Das Gupta when the WTO included the said assessee's investment of Rs. 44,700 in the same Trust, the AAC held that the said assessee's investment in that Savings Trust should be taken at nil for the assessment years 1980-81 and 1981-82. In the assessee's own case also for the assessment year 1979-80 i.e., in the immediately preceding year, the CIT(A) by his order dated 28-6-1989 held that it will be unjustified to include the interest income from the Savings Trust since the Savings Trust itself was no longer traceable and that it was unjustified to include Rs. 17,026 when there was no income. In that view, he allowed the appeal of the assessee for the assessment year 1979-80. The assessee does not maintain any books of account and so the interest should have been assessed on cash basis. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the result, the appeal is allowed. Per Shri Vimal Gandhi, J.M.--The facts in this case are that the assessee-trust had deposited with a certain trust on which it was entitled to interest at a rate of 5 per cent per annum. All along the assessee did not maintain any books of account. But as per assessment order was assessed on mercantile basis in respect of interest income from the trust. For the period ending on 31-3-1980 the assessee claimed that no interest on deposit with the trust had accrued as no certificate of accrual of interest was issued by the said trust in the relevant period. It has been further claimed that Saving Trust was no longer traceable and therefore inclusion of interest in the income was unjustified. This claim of the assessee has been rejected by the learned Assessing Officer as also by the learned CIT(Appeals). I fully agree with the view taken by the learned CIT(A). 2. In the case of Aeicorp (P.) Ltd. v. ITO [IT Appeal No. 617 (Cal.) of 1987] I have discussed the decision (the majority view) of the Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102. In the said decision their Lordships referred to the decision of the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutta High Court in Suit No. 350 of 1975 had appointed ad hoc Board of Trustees to manage the affairs of the Savings Trust. As per letter dated 2nd May, 1980, members of the above Board had written to the assessee as under: "Please refer to your letter No. DB/BK/BA/1108 dated 21st March, 1980 and the visit of your Mr. A. Bose to us in the above connection. We confirm to have informed Mr. A. Bose that the ad hoc Trustees of the Savings Trust have been directed by the Hon'ble High Court at Calcutta to finalise the Accounts and to have the same audited after the completion of the winding up of The Savings Trust. In the premises, we regret our liability to furnish to you the desired information." Thus, even after the close of the accounting year on 31-3-1980, the Savings Trust is available in Chartered Bank Building. It is, therefore, difficult to accept that Savings Trust's whereabouts are not known. Now, simply because the Savings Trust did not complete the books of account of 1979-80 in the relevant period it cannot be said that interest on deposit as per the agreed term did not accrue. No variation of original agreement has been pleaded or proved. The case in hand, in my view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and, therefore, it is liable to be assessed during the year. He, therefore, computed interest income from Account No. I at Rs. 8,294 and from Account No. II at Rs. 9,668, making a total of Rs. 17,962. 3. Aggrieved by the said order, the assessee took up the matter in appeal before the CIT (A), it was argued before the Learned CIT(A) that the entire investment in the Savings Trust had become bad and that there being no chance of even recovering the capital amount, there was no way of declaring the interest income. Since the Savings Trust also did not issue any certificate in regard to the interest income receivable, it was not possible for the assessee to disclose the income. It was further submitted that the affairs of the Savings Trust were the subject-matter of proceedings before the Hon'ble Calcutta High Court in Suit No. 350 of 1975 and, therefore, there was no chance of recovery of the interest. The learned CIT(A), however, did not accept the plea and upheld the order of the Assessing Officer. 4. Still aggrieved, the assessee took up the matter in appeal before the Tribunal. The Learned Accountant Member agreed with the assessee and held that the Assessing Officer was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: "2. In the case of Aeicorp (P.) Ltd. v. ITO [IT Appeal No. 617 (Cal.) 87] I have discussed the decision (the majority view) of the Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102. In the said decision their Lordships referred to the decision of the Hon'ble Bombay High Court in CIT v. Confinance Ltd. 89 ITR 292. It was observed that- 'Under income-tax law, receipt of income, either actual or deemed, is not a condition precedent to taxability. These were assessable if these had arisen or accrued or were deemed to have accrued or arisen under the Act. This principle would be attracted even in cases where an assessee followed the mercantile system of accounting. However, in examining any transaction or situation rather than purely theoretical or doctrinaire aspect. It was held in that case after discussing the facts that there were hardly any receipts in respect of item of interest or that the bona fides of the assessee in not charging interest were not disputed, were circumstances which were by themselves insufficient to support the conclusion that there was no real income in respect of the items of interest as none of the debts due by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known. Now, simply because the Savings Trust did not complete the books of account of 1979-80 in the relevant period it cannot be said that interest on deposit as per the agreed term did not accrue. No variation of original agreement has been pleaded or proved. The case in hand, in my view, is fully covered by the decision of their Lordships of the Supreme Court and the two decisions of the High Court referred to above. The decision of the AAC in the case of Shri B.K. Gupta refers to some valuation of shares and is, therefore, of no avail. The alleged order for the assessment year 1979-80 referred to by the representative of the assessee is not traceable on record. It is also not relied upon in the order of the learned Accountant Member. For the above reasons I am inclined to sustain the addition of accrued interest. In my view the assessee's appeal should be dismissed." 6. On this difference of opinion, the matter was referred to me for decision. At the hearing, none appeared on behalf of the assessee. Shri Kai Sang, the learned Sr. Departmental Representative appeared for the Revenue and submitted that the learned Judicial Member correctly appreciated the nature of the income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est income and the amount of interest income can only be ascertainable after the accounts were finalized and audited. In these circumstances, it cannot be said that the interest income has accrued on 31st March, 1980. Until the income of the Savings Trust itself is determined including the interest income payable to the assessee and the same is credited to the account of the assessee, it will not be proper to say that interest income has accrued merely on the basis of the terms of the agreement. As rightly pointed out by the assessee before the Assessing Officer and the CIT(A), the recovery of the capital itself is in jeopardy and the realization of the capital including interest can only be determined after the winding up process is completed and the accounts are finalized and audited by the Auditors. Though it will not be right to say that the assessee is not liable to be taxed on the interest income of Rs. 17,962, it will definitely be correct to say that the assessee is not liable to be taxed on the interest income of Rs. 17,962 during the present assessment year. 10. The above view taken by me is indirectly supported by the provisions of section 194A, i.e., deduction of tax ..... 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