TaxTMI 
TaxTMI 
TaxTMI 
1984 (10) TMI 55
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....ed him to calculate the interest, if any, on the loans on accrual basis and add the same to the total income of the assessee. The particulars of these loans are as follows : Name of the party Loan amount Rs. 1. Balaji Enterprises 3,00,000 2. Smt. Saraswati R. Tanna and Mr. Bhogilal R. Tanna 25,000 3. Shri V.K. Shah and Padmaben 1,75,000 4. Shri Vinodchandra Pandya 14,000 5. Noble Engineering Works 25,000 6. Subhash International 75,000 --------- 6,14,000 --------- Shortly stated, the assessee's case was that there was not much hope of recovery of these loans and, therefore, the interest on it should not be added to the assessee's income on accrual basis. The Commissioner has considered the relevant details regarding these loans which s....
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....and to Shri V.K. Shah and Shri Vinodchandra in 1972. All these three loans were given on securities of immovable properties. The suits were filed and preliminary decrees obtained. In respect of all the three loans the assessee has filed copies of letters of 1983 from the solicitors stating that the applications for certified copies of decrees had been made but they had not yet been obtained and that efforts were being made to obtain them expediciously. The principal debtor Shri V.K. Shah had become insolvent before his death and the official assignee has no assets of the insolvent in his hands. This was stated to the Commissioner by the assessee in reply to the show-cause notice. 3. The loan to Noble Engg. Works was given on a demand promi....
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....3 and CIT v. Motor Credit Co. (P.) Ltd. [1981] 127 ITR 572 (Mad.). He also argued regarding loans to Balaji Enterprises and Subhash International that the interest during the pendency of the suits is subjected to the discretion of the Court and could not be said to accrue as a matter of right, relying upon the decisions in the cases of CIT v. Naskarpara Jute Mills Co. Ltd. [1983] 141 ITR 384 (Cal.) and Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1983] 143 ITR 166 (Guj.) and the dismissal of special leave petition by the Supreme Court on this point in favour of the assessee. 4. The learned departmental representatives on the other hand argued that the in cases relied upon by the assessee's advocate, the debts were irrecoverable which was not the....
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.... interest should not be regarded as having accrued thereon. The position regarding interest is that it becomes bad if the principal amount itself has become bad but it is not necessary in all cases that the principal amount should become bad. The position regarding the recoverability of principal amount may be such that at least the interest cannot be regarded as having accrued. It is necessary to appreciate that the interest amount is not regarded as having become bad but that it has not accrued. In other words there is such a zone of twilight between recoverability and complete irrecoverability for the principal amount that at least the interest thereon should not be considered as having accrued. The possibility of recovery of principal a....
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....e there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transaction. Under Explanation II a transaction is a commercial transaction if it is connected with the industry, trade or business of the party incurring the liability. Therefore, although according to the aforesaid decision the interest may be discretionary under section 34 the decrees which have been obtained would provide for it. The periods relevant to the assessment years in question would be covered by the award of interest from the date of decree. Therefore, the decree should be seen and whatever interest has been awarded therein should be considered as having accrued to the assessee and added to the income. ....