2021 (10) TMI 1204

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....Rs. 412.93 lakhs made by the AO on account of accrued interest on seed money loans in view of the fact that since all items of accounts were maintained as per mercantile system of accounting, there was no basis for accounting said accrued interest income on cash basis as section 145(1) of the Income Tax Act, 1961 clearly provides that income should be computed either on cash or on accrual basis as per amendment w.e.f. A.Y. 1997-98. 2. The appellant craves to leave, add, amend or alter the grounds of appeal." 3. Briefly, the facts of the case are as under :- The appellant is an autonomous body set up by the Government of Maharashtra. It is mainly engaged in promoting the industrialization of the Western Region of Maharashtra. The return ....

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....ch of the Tribunal in assessee's own case for earlier years. 8. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the taxability or otherwise of the interest on the seed money advances given to the entrepreneurs, which are classified as sticky advances. Admittedly, the respondent-assessee is following the mercantile system of accounting. It is the policy of the respondent-assessee company to account for the interest on such loans under seed money assistance scheme on receipt basis following the uncertainty of the recovery, realization of the interest. This policy is clearly stated in Clause (5) of Note No.23 read with 36 of Notes to Accounts forming part of Audited Financial State....

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....of interest on Non-performing Assets held that when interest was not received and the possibility of recovery almost Nil, the interest could not be treated to have accrued. Recently, the Hon'ble Jurisdictional High Court in the case of PCIT vs. Solapur District Central Co-op. Bank Ltd., 428 ITR 306 relying on the decision in case of (i) CIT v. Shoorji Vallabahdas & Co. [1962] 46 ITR 144 (SC), (ii) Pr. CIT v. Shri Mahila Sewa Sahakari Bank Ltd. [2017] 395 ITR 324/[2016] 242 Taxman 60/72 taxmann.com 117 (Guj.), (iii) Pr. CIT v. Sarangpur Co-operative Bank Ltd. [2018] 406 ITR 302/258 Taxman 230/97 taxmann.com 304 (Guj.) and (iv) Pr. CIT v. Ludhiana Central Co-operative Bank Ltd. [2018] 99 taxmann.com 81 (Punj. & Har.) on the issue of taxabilit....

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....ppeals have been dismissed by the Supreme Court. Thus, the Supreme Court can be seen to have approved the decision of the Gujarat High Court. Therefore, there is no reason to entertain these Appeals, since no question of law can be stated to have arisen. [Para 7]. For the reference, it may also be noticed that subsequently, legislature has amended section 43D. Section 43D essentially provides for charging of interest on actual basis in case of certain special circumstances, in the hands of the public financial institutions, public companies etc. Explanation to section 43D defines certain terms for the purpose of said section. Clause (g) was inserted in the said explanation by Finance Act, 2016 which provides that for the purpose of such s....