1998 (8) TMI 15

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....s delivered by R. JAYASIMHA BABU J.---Having heard counsel and gone through the elaborate order of the Tribunal, we are not in the least satisfied that any reference is called for, as sought by the Revenue. The respondent-assessee is the Pondichery Industrial Promotion Development and Investment Corporation. In order to protect itself against the likelihood of default in the repayment of mon....

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....had committed default in repaying the monies. For the assessment years in question, viz., 1987-88 to 1989-90, the asses see had received a sum of Rs. 16,48,657 during the assessment year 1987 88 and the sum of Rs. 3,52,079 for the assessment year 1988-89. The Commissioner sought to treat these sums as constituting the income of the assessee. The Tribunal has set aside the order of the Commissio....

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....ed towards principal as bad or doubtful debts for the purposes of section 36(1)(vii) read with section 36(2) even when at a later point of time, the assessee writes off the amount in its books of account with the previous approval of concurrence of DIGGS ; ---fourthly and finally, that the interest and other charge component of the guaranteed sum, if any, appropriated towards interest and/or ot....

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....essee, is wholly untenable. The guarantee was in respect of the sums lent. The amount lent was part of the circulating capital of the assessee. If the object of the guarantee was to protect itself against the likelihood of loss of the part of the capital in the event of the borrower committing default, the reimbursement of a part of the amount lent to the corporation under the terms of the guarant....