2004 (11) TMI 43

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....debtors had deteriorated and the recovery of even the principal amount had become doubtful? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 37,776 made on account of accrual of interest?" and for the assessment year 1979-80: "1. Whether, on the facts of the case, there was material before the Tribunal to hold that the financial position of the debors had deteriorated and the recovery of even the principal amount had become doubtful? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 31,560 (Rs. 10,500 + 21,060) made on account of accrual of interest?" The aforesaid questions fo....

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....79 addition of Rs. 4,500 was not challenged by the respondent before the Tribunal. The Commissioner of Income-tax (Appeals) passed a fresh order in which he had held that there was an agreement for charging interest even though it was an unwritten one. He then worked out the interest which could be added at Rs. 37,776 in the assessment year 1978-79 and Rs. 21,060 for the assessment year 1979-80. In addition, he further held that an amount of Rs. 10,500 in the assessment year 1979-80 was liable to be added on account of accrued interest in the account of Carpet Traders. In further appeal before the Income-tax Appellate Tribunal, the Tribunal deleted the additions on the ground that the financial position of the debtors had deteriorated and r....

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....tors had considered the proposal of taking over the cold storage from Bhadohi Cold Storage in discharge of its debt. Thus, the recovery of interest was not possible. In the case of State Bank of Travancore v. CIT [1986] 158 ITR 102, the apex court has held that where interest has accrued and the assessee has debited the account of the debtor, the difficulty of recovery would not make its accrual non-accrual. However, the apex court in the case of UCO Bank v. CIT [1999] 237 ITR 889, has held that the majority decision in State Bank of Travancore [1986] 158 ITR 102 (SC) cannot be looked upon as laying down that a circular which is properly issued under section 119 of the Act for proper administration of the Act and for relieving the rigour....