1998 (2) TMI 25

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....court was delivered by R. JAYASIMHA BABU J.---The questions referred to us for our decision at the instance of the assessee for the assessment year 1977-78 are : "1. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the accrued interest on hire purchase of machinery on loans and penal interest are liable to be included in the total income, notwithsta....

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....sment year 1974-75. This court after considering the argument that was advanced for the assessee that notwithstanding the fact that it was following the mercantile. system of accounting, the interest payable by the borrowers had not accrued, as the date on which they were to pay the instalment fell subsequent to the end of the accounting year, rejected that argument holding that the interest accru....

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....tion between accrued interest and penal interest though it was the case of the assessee before the Tribunal that the two are to be treated on the same footing. Penal interest becomes payable only in case of default in paying the interest and the two are interlinked. We do not find any error in the decision of the Tribunal holding that the penal interest also be treated in the same way as accrued i....

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....t year in question. It is well settled that the answers we are required to give to the questions referred to us are in the context of facts and circumstances of the case in which those questions arose for consideration. The right of the assessee to establish its claim for a larger benefit, having regard to the facts established in relation to the assessment of the other years, are therefore not af....