TaxTMI 
TaxTMI 
1984 (10) TMI 55
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....nbsp; 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 ....
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....d to show that there was hardly any hope of recovery of these loans and so at least the interest amount thereon should not be added to the assessee's income merely because the assessee was following mercantile system of accounting. At this stage it is necessary to give some further particulars regarding these loans. The loans to Balaji Enterprises and Subhash International were given on the security of the right of distribution of certain films. Both these loans were given in the year 1977 and the assessee had filed suits in respect thereof. There was no recovery so far and the suits were transferred to the list of long causes in the Bombay High Court. The assessee's advocate has filed copies of letters of 1983 from the assessee's solicitors stating that the suits will appear for hearing and final disposal before the Court after about five or six years and the letter regarding Balaji Enterprises also states that it normally takes eight to ten years before a suit which is transferred to the list of long causes, to appear for hearing and final disposal. He also pointed that the said films had been proved to be flops and so there was hardly any security. The loans to Smt. Saraswati R.....
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....aji 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 case here. Regarding the debtor Balaji and Subhash, he pointed out that they were firms and the liability of the partners was unlimited and it has not been shown that the debt would not be recoverable. Regarding the debts from Smt. Saraswati and Mr. Bhogilal, Shri V.K Shah and Shri Vinodchandra, he emphasized that these were secured on immovable properties and that the prices of immovable properties had sky-rocketed and also that the decrees in respect of these debts had been obtained. He argued that the said decisions in the cases of Naskarpara....
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....y the assessee's counsel that it would be difficult to satisfy the decrees. The submission made by the learned departmental representative that value of immovable properties has greatly increased, is justified and it has not been shown that the property would not be sufficient to meet the assessee's claim. In fact the letters from the solicitors show their readiness to recover the dues by getting the property sold and give no indication of any difficulty in that regard. The decrees have been obtained in 1977 and under section 34 the Court has power to award the interest from the date of decree till the payment or to such earlier date as the Court thinks fit. Under the proviso for commercial transaction the rate of interest can exceed 6 per cent per annum but not the contractual rate and where 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 sectio....