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2021 (2) TMI 20 - ITAT BANGALOREIncome accrued or received by assessee - overdue interest income - recovery of outstanding dues in lieu of unaccomplished contract with M/s Engineering Industry Commission (EIC), Ministry of Defence, Government of Ethiopia - outstanding interest due from the EIC in the form of 'Notes forming parts of account', indicating that the amount relates to overdue interest due from February 1991, which has not been accounted for in the books of account - HELD THAT:- In the present case, the said overdue interest income is not accrued by the assessee or received by the assessee from the Financial Year 2002-03 and the position remained to be the same. The overdue interest is not recovered by the assessee from February 1991 and the assessee stopped recovering of overdue interest from the Financial Year 1996-97 and stopped accounting from the Financial Year 1996-97. There is uncertainty in the collection of this overdue interest. When the overdue interest partakes the character of uncertain income, it cannot be brought within the purview of taxable income, unless and until it comes to the hands of the assessee. Under mercantile system, interest income accrues with the time. In such cases, interest charged and debited to account as income as recognized under the accrual system but in cash system it is not so. In the present case, it is an overdue interest and it is not collectable from the Financial Year 1996-97 and as a prudent businessman, following AS 9 issued by ICAI the assessee has not recognized the said income. In the present case, there is no question of claiming as a Bad Debt because it is not accountable as there was uncertainty of collection. The same cannot be recognized as income accrued till it is realized by the assessee. It is not correct to say the judgment of Delhi High Court in the case of Vasisth Chai Vyapa [2010 (11) TMI 88 - DELHI HIGH COURT] is not applicable. In this judgment, it considered the AS 9 along with other provisions of the Act while deleting the addition. We find no merit in the argument of DR that that judgment is not applicable. Accordingly, we do not find any infirmity in the order of CIT(A) in allowing the appeal of the assessee on this issue.
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