2013 (7) TMI 222

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....00/- each for the years under consideration on account of notional interest on debentures on the ground that the said interests have been accrued to the assessee. 3. Briefly stated, the assessee, a company engaged in the business of advertising had invested in interest bearing 2% non-convertible debentures of Rs.42,00,00,000/- issued by M/s. Marketing and Brand Solution (India) Private Ltd during the Financial Year 2003-04. The assessee had not offered the said interest to tax since the same was waived due to the severe financial crisis faced by M/s Marketing and Brand Solution (India) Private Ltd. However, in the assessment framed u/s 143(3), the AO had made additions of Rs.84,00,000/- each in both the assessment years being 2% of Rs.84....

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....O on the basis that the interest has been accrued to the assessee. Also, the Ld.CIT(A) is not correct that the variation of the shareholders rights and resolution passed to that effect is required to be registered u/s 106 r.w.s. 192 of the Companies Act 1956, when the waiver has been substantiated by the assessee by relying on the minutes of the debenture holders dated 31st May, 2004 to the effect. The assessee has also relied on the order of the ITAT in the case of Riya Holdings Ltd in ITA Nos. 1119 to 1124/Mum/2011 to substantiate the claim of the assessee. On the other hand, the Ld. AR has relied on the orders of the AO and the Ld. CIT(A) in support of the Revenues Case. 5. We have heard both the parties and perused the material on re....

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....f in given facts and circumstances the assessee decides not to charge interest in order to safeguard the principal amount and ensure its recovery, it cannot be said that he has acted in a manner in which no reasonable person can act. C) The guidance note on accrual of income on accounting issued by the ICAI lays down that where the ultimate collection with reasonable certainty is lacking, the revenue recognition is to be postponed to the extent of uncertainty involved. In terms of the guidance note, it is appropriate to recognize revenue in such cases only when it becomes reasonably certain that ultimate collection will be made. D) Non-recognition of income on the ground that the income had not really accrued as the realisability of t....