TaxTMI 
TaxTMI 
1985 (6) TMI 23
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....nion of this court : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the interest credited to the suspense account is not chargeable to interest-tax ? " The assessee-company is a banking company and had received interest on loans and advances during the previous years relevant to the three assessment years in question. The assessee-company credited the interest that accrued during the three relevant accounting years, viz., Rs. 78,910, Rs. 67,330 and Rs. 38,591, respectively, to an account styled as " Interest Suspense Account". The assessee had not taken credit and shown it in the profit and loss account for the three years, since suits had been filed against the debtors....
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....Rs. 54,485 taken directly to the interest suspense account is not assessable to income-tax ?" The point for consideration in these references is: Whether the opinion given by this court in ITRC No. 175 of 1982 governs the questions that arise in these references. It is argued by Sri Srinivasan on behalf of the Department that Corporation Bank's case [1986] 157 ITR 509 (Kar) does not govern these references since the interest credited to suspense account which was the subject-matter of assessment in Corporation Bank's case [1986] 157 ITR 509 (Kar) was not interest which was taxed under the Interest-tax Act. No doubt, the assessee in ITRC No. 175 of 1982 was also a bank. But the interest that had accrued to the assessee therein represented....
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...., since the interest had not accrued to the assessee-company during the relevant year. The matter was in litigation and suits were pending and the chances of recovering the interest also were bleak. In support of his contention, Sri Bhat has relied upon a few decisions of High Courts. Firstly, the decision of the Madras High Court in CIT v. Motor Credit Co. P. Ltd. [1981] 127 ITR 572, has been relied upon. The Madras High Court has held in that case that there could be no hypothetical accrual and there can be no assessment of an illusory interest. The assessees in that case were financiers who had advanced monies to two firms for purchase of motor vehicles on hire-purchase basis. It happened that the routes were taken over by the Governme....