TaxTMI 
TaxTMI 
2017 (11) TMI 1548
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....erefore, the grounds raised for the A.Y. 2010-11 are reproduced as under:- "1. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition of Rs. 49,94,000/- made on account of accrued interest income without appreciating the facts that the assessee company followed mercantile system of accounting. The Appellant crave, leave or reserving the right to amend modify, alter added or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 2. The assessee company is engaged in the business of real estate. There was a search & seizure action in case of Johari group on 05.09.2011 to which the assessee belongs. The assessee filed its return of income in....
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....and consequently the bank took over the possession of the property. The cheques for payment of interest issued by M/s R.L. Verma (HUF) were got dishonored when the assessee presented for encashment. Accordingly, the assessee filed a complaint before the Metropolitan Magistrate u/s 138 of Negotiable Instrument Act. Thus, the assessee contended that the recovery of the principal as well as interest was doubtful and therefore the interest income which was not a real income cannot be charged to tax. Further, when the assessee has not claimed any interest expenses, then no interest on advance can be brought to income tax on accrual basis particularly when the interest could not be realized or recovered. The Assessing officer did not accept the c....
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....o bearing on the accrual of the income which is a real income and cannot be termed as notional income. The Assessing Officer has not calculated the interest on the basis of any notion or notional basis but the same has been calculated on the basis of the terms of the lease entered into between the parties and as per rate agreed upon between the parties. Therefore, the contention of the assessee that the interest income cannot be charged to tax on notional basis is not acceptable as it was a real income and not notional income. Further, part of the total interest to be received during the A.Y. 2010-11 was received by the assessee to the extent of Rs. 46,42,000/- and the AO has made the addition only of the balance amount of Rs. 49,94,000/-. ....
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....e complaint filed by the assessee are not in dispute then the interest on the deposit is not a real income to be taxed as the recovery of the principal amount itself is doubtful. The assessee though following accrual system of accounting, however, even in accrual system of accounting any income cannot be recognized until there is reasonable certainty to its realization. When there is bleak chance of recovery of interest as well as advance from the lessor then no income in this regard can be brought to income tax. The ld. AR has further contended that the advance has been subsequently written off in the assessee's books in the year 2014-15 as the same was not recoverable and the Assessing Officer has accepted the written off these advances o....
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....ave also entered into a loan agreement in respect of a sum of Rs. 4,50,00,000/- paid by the assessee to the lessor being security deposit on which an interest @ 2.92% P.M. was payable to the assessee. The Assessing Officer has not disputed this fact that the property in question was mortgaged by the lessor with the bank against the loan availed and therefore the property was not free from liean/charges. However, the assessee has not purchased the property and even if the said property was mortgaged with the bank so long the property is not physically taken over by the bank the assessee right over the property as a lessee was not affected. It is also undisputed fact that after the initial payment of interest the cheques issued by the lessor ....
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.... as income of the assessee as it is only a right to received but it is not certain to be received by the assessee so long this right to receive the interest is not going to be materialized it will not result any income and cannot be taxed as income of the assessee. Hence, even in this case the assessee is following the accrual system of accounting the income is accrued only on the point when it is finally to be received by the assessee with reasonable certainty and absence of certainty of receipt and recovery of the amount cannot be classified as income accrued for the purpose of charging to income tax. The Hon'ble Supreme Court in case of CIT Vs. Excel Industries Ltd. (Supra) has observed that the probability or improbability of realizatio....