1935 (1) TMI 25

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....erned by the decision of this Court in Commissioner of Income Tax, Burma v. V.S.A.R. Firm, Rangoon [1935] 3 ITR 158. The only difference in the facts between the two cases is that, whereas in V.S.A.R. Firm, Rangoon' s case (supra). , the new promissory note related both to the principal and the interest that had accrued upon it, the new promissory note in the present case refers to the interest only. In my opinion the same principle governs the two cases. As was pointed out in V.S.A.R. Firm, Rangoon' s case (supra). , the real question that falls for determination is; " Whether there were materials before the Income Tax Officer upon which he could find that the sum of Rs. 57,511 was interest upon loans that had accrued to the ass....

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....gment Napier, J., (at p. 92 of I.L.R 44 Mad.) expressed the opinion that " if a person entitled to receive money agrees with his debtor to let the money stand in the hands of the debtor, either by way of deposit or as a fresh loan or investment, that would, in my opinion, amount to receipt." In the present case in the course of the argument I asked the learned advocate for the assessees what his defence would be if after a fresh promissory note had been executed a suit had been brought against the debtors to recover the interest due under the old loan, and his answer inevitably was that the old loan had been discharged by the acceptance of the new promissory note. As was pointed out in the V. S. A. R. Firm's case (supra) in Raja Ragh....

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....of accounting in respect of other Chettiyar firms no complaint is raised to the effect that notional receipts of interest should not be treated for purpose of income tax as upon the same footing as actual receipts. The mercantile system probably works out as satisfactorily to the assessees and the income tax authorities as does the method of accounting known as the cash system. But it so happens that in connection with their transactions with non-Chettyars the assessees normally adopt the cash system, and if in connection with a transaction such as that under consideration in which a fresh loan is taken for debts already accrued from non-Chettyars the cash system of accounting had been adopted, so far from there being any necessity for a....