Notional interest on trade debtors was disallowed where no actual receivable existed and the addition was only estimated.

Notional interest on trade debtors from trading activities was held to be unsustainable where no interest was actually charged, no provision existed for charging interest on such debts, and no real income was receivable on that account. The addition had been made only on estimate, and the assessee's position had also been accepted in the later assessment year. On those facts, the notional interest addition was deleted in favour of the assessee.

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Issues: Whether any notional interest could be added as income in respect of trade debtors on which no interest was charged.

Analysis: The debtors arose from trading activities. No provision was shown for charging interest on trade debts, and there was no actual income receivable from such debts. The addition had been made only on estimate, though the position taken by the assessee was accepted in the later assessment year as well.

Conclusion: The addition of notional interest was not sustainable and was deleted in favour of the assessee.

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