TaxTMI 
TaxTMI 
2012 (8) TMI 18
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.... facts herein that the assessee advanced loan of Rs. 25 lakhs to Credential Finance on 11.5.1995. We may immediately point out herein that the borrower is not a sister concern, though it has been said so in the Tribunal's order. The assessment order nowhere states this concern as the sister concern. Learned counsel appearing for the assessee/appellant herein also pointed out that the borrower was not a sister concern. It is seen that the company received interest at 24.5% till 16.8.1996. After that, the assessee had not received any interest and it made necessary provision for the year ending 31.3.2001 in respect of the interest receivable by it at 24.5%. Since no amount was forthcoming from the borrower, notice was issued to the borrower t....
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....ppeals) held that there could not be an assessment of income on a notional interest and a notional interest could not be treated as real income for the purpose of assessment. The Revenue went on further appeal before the Income Tax Appellate Tribunal. The Tribunal held that the assessee, even though had not received any amount, the principal amount itself was not a bad debt. Hence, interest income on the advance amount had become due. As the assessee was following the mercantile system of accounting, interest accrued therein had to be assessed at the hands of the assessee. Thus, the order of the Commissioner was set aside. Aggrieved by this, the present appeal has been preferred before this Court. 4. Learned counsel appearing for the ass....
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....acted. However, when the subject matter of taxation is income, if the income does not result at all, there could be no tax. Irrespective of the method of accounting, there could be no tax on a hypothetical income. 6. The assessee therein, the Electricity Company, enhanced charges of electricity rate in 1963. Immediately thereon, suits were filed by the consumers, which went upto the Apex Court. The appeals by the consumers were dismissed in the year 1969. Thereafter wards, the Government of Gujarat advised the assessee Electricity Company to maintain status quo on the rates to the consumers for at least six months and the Chief Electrical Inspector was directed to report to the Government about the actual position on the reasonable retur....
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....he Bombay High Court reported in [1960] 39 ITR 706 (Bom) (H.M. Kashiparekh & Co. Ltd. v Commissioner of Income-Tax), which reads as under: "In examining any transaction and situation of this nature the court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language." 7. Referring to the decision reported in [1986] 158 ITR 102 (SC) (State Bank of Travancore v. Commissioner of Income Tax (Appeals)), the Apex Court pointed out: "...In determining the question whether it is hypothetical income or whether real income h....
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.... which is not the same as the assessee forming a probable and reasonable view on the possibility of receiving any interest, even by accrual, was a remote one. Learned counsel appearing for the assessee fairly submitted that the assessee had written off the amount only in the year 2007. Thus, the doubt of improbability of receipt does not appear to have been entertained at all for the assessee at least till 2007 and it made a conscious decision, for reasons best known, to write off the amount only in the year 2007, which means, the assessee did not doubt that there was no probability of real income accrual by way of interest, or for that matter, recovery of the amount due. 10. It is a matter of relevance herein to note that the assessee r....
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...., even though the assessee had followed the mercantile system of accounting, the materials placed before the Assessing Authority and before the Tribunal, do not, in any manner, advance the cause of the assessee to substantiate its contention that the accrued interest was only hypothetical income and hence, not available for taxation. Thus, taking note of the test laid down by the Apex Court and taking note of the conduct of the parties herein in writing off the amount in the year 2007, we have no hesitation in holding that the order of the Tribunal does not call for any interference by this Court. 13. As far as the decision of this Court reported in [1981] 127 ITR 572 (Commissioner of Income-tax v. Motor Credit Co. P. Ltd.) is concerned,....