AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2003 (11) TMI 34
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....sessment year 1987-88. It was an appeal by the Revenue before the Tribunal. The appellant has suggested that the following substantial questions of law arise for consideration in this appeal: "1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in deleting the addition on account of interest chargeable or the debit balances of (i) M/s. Jai Mangal Investment and Trading Co. and (ii) M/s. Banswara Textile Mills Ltd. on the ground that the debit balances were trade debts, ignoring the fact that both the companies are owned by the same group of persons and non-charging of interest is not due to their poor financial position but in fact it is waiver of interest income in favour of the sister concerns wh....
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....nt of notional interest on the debit balances of M/s. Jai Mangal Investment and Trading Co. and M/s. Banswara Textile Mills Ltd. Interest On these accounts had not been charged in the accounts of the assessee for the accounting period relevant to the assessment year in question. The Assessing Officer was of the opinion that when the assessee is maintaining his books of account on the mercantile system, not debiting the two parties named above with the interest accrued on the debit balances cannot absolve it from inclusion of the interest which has accrued on the debit balances during the previous year relevant to the assessment year 1987-88 in its total taxable income. It was the opinion of the Assessing Officer that both the companies a....
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....nd further that the system has been followed by the assessee consistently. Thus, a natural corollary follows that till the amount of interest is realised, the assessee will not be charging any interest in his books of account. Generally, the basic reason to adopt the system of charging interest would depend on many factors varying from case to case. Thus, in the case before the Tribunal, indisputably the outstanding debits are trade debts, they are not advances made by the assessee to the two concerns. Also, there was nothing to show that there was a stipulation between the parties to charge interest on such debt. Further, it is also undisputed that the two concerns had gone sick and reference was pending before the BIFR for the rehabilitat....
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....or cash basis, as has now been made imperative since amendment of section 145 vide Finance Act, 1995, with effect from April 1, 1997. Prior to its amendment, section 145 envisaged that income chargeable under the head "Profits and gains of business or profession" or "income from other sources" shall be computed in accordance with the method of accounting regularly maintained by the assessee, whereas after the amendment, the provision envisages that income chargeable under the head "Profits and gains of business or profession" or "income from other sources" is to be computed in accordance with the accounts either on the cash or mercantile system regularly maintained. We are concerned with the assessment for the assessment year 1987-88. In th....
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....e findings of fact reached by the Tribunal and in view of our conclusion to question No.1, question No.2 becomes of academic importance and need not be dealt with in detail. Questions Nos. 3 and 4 relate to making addition of amounts paid in violation of the provisions of section 40A(3) of the Act. Payments made by the assessee to M/s. Banswara Textile Mills were not by account payee cheques but were paid in cash. The Assessing Officer found these amounts to be not falling in any of the exceptions provided in rule 600 and made additions of these amounts to the income of the assessee for the assessment year in question. The Commissioner of Income-tax (Appeals) held the said amounts to be falling in the exception. Rule 6DD(j) at the rel....
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....rey cloth processed. The assessee-company has made payment to its company for making day-to-day payments so as to continue the production. The only source of revenue for this company was the assessee-company's job work. Since the bank does not allow the withdrawals to BTM, the payments were to be made in cash. Thus, there was a genuine difficulty in making payments through banking channels. We are of the opinion that the assessee had made payments in cash due to exceptional and unavoidable circumstances. Payment through crossed cheque or crossed bank draft could have led the assessee into practical difficulties and would have caused genuine difficulty to the payee. The appellant had already established the genuineness of the payment and ide....