TaxTMI 
TaxTMI 
2012 (6) TMI 269
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....he assessee to some other Kerala Government industrial undertakings on the direction of the State Government of Kerala. 3. The facts relating to the issue are stated in brief. The assessee-company is wholly owned by the Government of Kerala. The assessee is engaged in the business of marketing of products manufactured by M/s. Travancore Titanium Products Ltd. On the direction of Government of Kerala, the assessee advanced money to various other Government of Kerala undertakings aggregating to Rs. 2,20,50,000/-. Since the said advances have become sick, the assessee did not provide for interest income from such advances. However, the Assessing Officer took the view that the interest accrued on such advances have to be accounted, as the as....
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.... Kerala Soaps & Oils Limited 50,00,000 874/H3/2001/ID dated 19.01.2001 Principal Secretary to Govt. 9,50,445 Alongwith interest 5. Scooters Kerala Limited 42,00,000 874/H3/2001/ID dated 19.01.2001 Principal Secretary to Govt. 24,74,640 Alongwith interest -do- 25,00,000 18531/D2/96/ID dated 12.02.2001 Commissioner & Secretary to Govt. 6. Metropolitan Eng. Co. Ltd. 25,00,000 35304/H2/2000/ID dated 12.02.2001 Secretary to Govt. 6,98,424 Alongwith interest -do- 15,00,000 1873/H2/2001/ID dated 31.03.2001 Secretary to Govt. 7. Travancore Plywood Industries Ltd. 50,00,000 874/H3/2001/ID dated 19.0....
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....f Govt. orders referred to therein. It may be noted that in the case of loans given to Keltron Projectors Ltd., and Keltron Sidkel Televisions Ltd., Government order is silent about interest and hence there is no mandate to charge interest. It is submitted that no interest income was recognised on these loans during the A.Ys. 2003-04 and 2004-05 as the loans had turned out to be irrecoverable and bad and the date on account of the critical financial position of the above said companies. The fact that the above said companies had become sick and non-functional has also been reported in the notes to accounts and Auditor's Report for the years ended 31-03-2003 and 31-03-2004. Copies of the Notes to Accounts and the Auditor's Report for the yea....
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....bsp; Kerala Soaps and Oils Ltd. (b) Scooters Kerala Ltd. (c) Metropolitan Engineering Co. Ltd. (d) Travancore Plywood Industries Ltd. The other loanee companies as detailed below are presently under liquidation under supervision of the Court or dormat and the financial position of these companies are reported to be extremely precarious as their liabilities have exceeded their assets by significant amounts. (a) Keltron Counters Ltd. (b) Keltron Projectors Ltd. (c) Keltron Sidkel Televisions Ltd. (which has been subsequently renamed as Sidkel Televisions Ltd.) (Dormat) The copies of Company Master Details downloaded from the website of Ministry of Corporate Affairs,....
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....ing company, even though following mercantile system of accounting, cannot be charged to tax in respect of notional interest on stick loans which was not even accounted for as income by assessee in it books of accounts - Provisions of s. 145(1) are subject to provisions of s. 145(2) and AS-I notified by Central Government under s. 145(2) mandates that notwithstanding method of accounting followed by assessee, financial statement prepared on the basis of method followed must represent a true and fair view of the state of affairs of the business based on the policy of prudence - Provisions of s. 145 cannot override s. 5 and if income has neither actually accrued nor received within the meaning of s. 5, whatever s. 145 may say, such income can....