2012 (9) TMI 351

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....1,54,95,137. 3. Shri N.S. Rajagopal, the ld.representative for the assessee submitted that the assessee is a government company engaged in the business of processing raw cashew nuts and export of cashew kernel. During the year under consideration, the assessee claimed deduction of Rs.11,54,95,137 being the interest and penal interest accrued on the government loan. However, the assessing officer rejected the claim of the assessee on the ground that the government order sanctioning the loan did not specify any terms and conditions with regard to payment of interest or penal interest. The assessee has not paid even a single instalment of either the principal amount or the interest. Therefore, the assessing officer disallowed the claim o....

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....e government by an order dated 03-08-1996 stated that the loan will be treated as working capital loan and the same shall be repaid in five annual instalments commencing from the first anniversary of the drawal of the amount. The government has also specified the rate of interest at 19.5% per annum payable half yearly and in default a penal interest @2.75% per annum for the detaulted amount for the default period. Even though the government specified that the amount has to be paid in five annual instalments commencing from the first anniversary of the drawal of the amount, the assessee has not paid a single instalment uptill now. When the assessee has not paid even the single instalment of the principle amount and has not paid any interest ....

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....ct and separate, therefore, the income accrued or arisen in a particular year has to be assessed. The income accrued in the earlier year or prior period cannot form part of the income of this year. Therefore, we are unable to uphold the order of the lower authority. Accordingly the orders of the lower authority are set aside and the addition of Rs.13,47,592 is deleted. 8. The next ground of appeal is with regard to addition of interest on government loan outstanding as on 31-03-2004. 9. We heard the ld.representative for the assessee and the ld.representative for the revenue. The loan was outstanding from the year 1996. The interest accrued was already converted into share capital. The claim of the assessee is that the interest was no....