TaxTMI 
TaxTMI 
TaxTMI 
2003 (7) TMI 11
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....cantile system of accounting?" The assessee-company agreed to advance a sum of Rs. 20,00,000 to M/s. Citric India Ltd. at 12 per cent, interest per annum, but the assessee failed to advance full amount of Rs. 20,00,000 under the agreement. The borrowing company raised an objection regarding non-fulfilment of the terms and conditions of the agreement as the assessee has not advanced the full amount of Rs. 20,00,000 as per agreement. It fell short of Rs. 3,00,000. The assessee thereafter has also advanced some more amount in the year 1967. As no interest has been received, therefore, the assessee has not shown any income from the interest on the money advanced to M/s. Citric India Ltd., in the assessment year 1973-74. Uptil 1972-73, the int....
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.... in dispute that there was an agreement for advance of Rs. 20,00,000 loan to M/s. Citric India Ltd. at 12 per cent, interest per annum but the amount of Rs. 20,00,000 was not advanced. About a sum of Rs. 17,00,000 has been advanced under the agreement to M/s. Citric India Ltd. There is also no dispute in the fact that the assessee has followed the mercantile system of accounting. Till 1972-73, the interest has been taxed on the basis of accrual in the hands of the assessee on the amount advanced by the assessee to M/s. Citric India Ltd. The arguments advanced by Mr. Ranka are almost considered by the Tribunal in para. 4 of its order. The relevant decision reads as under: "We have given a careful consideration to the rival submissions. The ....
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....ssessee-company has filed copies of its accounts as appearing in the books of M/s. Citric India Ltd., for the period August 4, 1965 to March 31, 1975. The accounting period of the assessee for the assessment year 1973-74 under appeal ended on June 30, 1972. According to the copy of accounts filed the balance outstanding with M/s. Citric India Ltd., as on April 1, 1972 was Rs. 17,39,165/75. Such balance as on April 1, 1971, was also the same. In addition to these balance an amount of Rs. 1,48,567.67 on account of interest for the years 1965-66 and 1966-67 was also outstanding which was transferred to the liabilities account. Thus, according to the assessee itself, the amounts outstanding with the borrowing company was on April 1, 1971, and A....
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....5.75. There is no transaction thereafter. But according to the assessee's own version the outstanding as on June 30, 1971, were at Rs. 19,01,319. Even if the outstanding interest of Rs. 1,48,557.67 is taken into consideration, even then the outstanding balance would be at Rs. 18,87,723.42 and not Rs. 19,01,319 as mentioned in the balance-sheet for the period ending June 30, 1972. There is as such definite discrepancy in the accounts maintained by the assessee. We are drawing this inference because right from August 4,1965 to October 21, 1970, all entries relating to credits and debits have been shown in the accounts. It is not known whether the assessee has taken into consideration the outstanding interest of Rs. 1,48,557.67 while mentionin....
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....s no waiver of interest. The interest, therefore, accrued to the assessee on the lending to M/s. Citric India Ltd., and has rightly been included in the income of the assessee. It is not a case where the assessee could have earned interest but has not earned inasmuch as there is no evidence on record that the assessee waived interest. In the circumstances, we have no hesitation in upholding the orders of the authorities below for the assessment year 1973-74 also." When the assessee is following the mercantile system of accounting, actual receipt of the interest is not necessary and till 1972-73 the interest has been taxed on the basis of accrual. Shri Ranka failed to satisfy this court as to when the interest has accrued and been taxed in ....