1980 (9) TMI 36

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nal was justified in holding that interest income accrued to the assessee on the deposits in question with the Hira Mills Ltd., Ujjain, in these assessment years ? " The material facts giving rise to this reference, as set out in the statement of case, briefly are as follows: The assessee is a private limited company registered under the Companies Act. The assessee carried on the business of money-lending and ginning and pressing of cotton. The assessee had advanced an interest bearing loan to the Hira Mills Ltd., hereinafter referred to as the Mills, but in the returns filed by the assessee for the assessment years 1969-70 to 1972-73, the assessee did not include the amount of interest due from the Mills. It was contended on behalf of t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....irtue of the provisions of s. 4(1) of the Act No. 25 of 1965. The right of the assessee to recover interest from the Mills could not, therefore, be enforced. Can it be then said that interest income had accrued to the assessee ? It is clear, as observed by the Supreme Court in E. D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27, at p. 51, that if the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later, on its being ascertained and that the basic fact is that he must have acquired right to receive the income. In Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC), on which reliance has been placed by the Tribunal, the facts are distinguishable. In that case, income by....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....at if the amount of income was irrecoverable, it could not be held to have accrued. The question, referred to in CIT v. Ferozepur Finance (P.) Ltd. is, however, slightly different. In that case, the Tribunal had found that the assessee followed the method of not charging interest in cases of those debtors whose financial position was weak and that that method was accepted by the Tribunal in the past. It was in that context that the Division Bench of the Punjab and Haryana High Court observed that even in the mercantile system of accounts, an assessee can forgo the whole or part of a debt which is irrecoverable and that the same cannot be added to the income of the assessee. In the instant case, there is no finding that the assessee had forg....