Interest suspense account treatment for sticky loans upheld where the cash basis change in accounting was accepted.

Interest on sticky loans may be credited to an interest suspense account where the adopted accounting treatment is acceptable, and the assessee-corporation's change from mercantile to cash basis for such interest was upheld by following the assessee's earlier case. The first question was answered in favour of the assessee and against the Revenue. The second question was not answered because the Tribunal had recorded no definite finding and the issue did not properly arise from its order.

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Issues: Whether the assessee-corporation had validly changed its method of accounting from mercantile to cash in relation to sticky loans and credited accrued interest to an interest suspense account.

Analysis: The dispute concerned the accounting treatment of interest on sticky loans. The question was answered by following the earlier decision in the assessee's own case, on the basis that the accounting method adopted in respect of such interest was acceptable. The second question was not answered because no definite finding had been recorded by the Tribunal and it did not properly arise from the Tribunal's order.

Conclusion: The first question was answered in the affirmative, in favour of the assessee and against the Revenue.

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