9911796707
TMI Blog2012 (11) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.123.53 lakhs made by the Assessing Officer (A.O.) to the assessee's assessed income (per order u/s. 143(3) dated 22-12-2006 for Rs.262.75 lakhs) vide order u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 ('the Act' hereinafter) dated 20-03- 2009, having been sustained by the first appellate authority. 3. The brief facts of the case are that on a perusal of the assessee's (a company owned by the Government of Kerala) balance-sheet, it was found to have advanced loan/s of Rs.1235.26 lakhs to M/s. Trivandrum Rubber Works Ltd., another public sector undertaking of the State Govt., as on 31-03-2004. The Auditors, vide their statutory report under the Companies Act, 1956, commented thereon as an advance to a company under the same manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal or procedural formalities in the matter had been observed, or even initiated, so that reference to the said Order was of little moment, and neither would it operate to alter the character of the amount advanced as an investment toward acquisition of a capital asset, as contended by the assessee. The advance, accordingly, stood correctly categorised as a loan in the assessee's balance-sheet/s, with the auditors also treating it as such and, further, making their comments thereon. The addition on account of interest receivable, considering the rate at which it was reckoned, i.e., 10%, as reasonable, was, accordingly, upheld by the ld. CIT(A). Aggrieved, the assessee is in appeal. 4. We have heard the parties, and perused the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eover, as being claimed by the assessee, and which definitely appears to be the case in the absence of any other basis or material or consideration for the said transfer of funds, we are unable to appreciate or comprehend as to how the same could be considered as an `interest bearing loan'. In fact, this is all the more so as, admittedly, the lendee-company is a sick and defunct company, with its proposed takeover being mooted by the State Government with a view to revive it. The ultimate realizability of any income, which by definition is an accretion to capital, is an essential ingredient in deciding its accrual, inasmuch as it is only the real and not notional or hypothetical income that is under contemplation for, or could be the subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal amount is in jeopardy, we find no legal or contractual basis to hold that any interest or rights in its respect have inured to the assessee, lender-company. There is no reference to any loan agreement or even to any resolution by the respective Boards of the two companies to that effect. Merely because the balance-sheet classifies the amount as an unsecured loan, and in our view not incorrectly, without anything more, would not by itself clothe the assessee with the right to receive interest, considering that there is, as aforesaid, no other legal or contractual basis for contending so. It is not the case that the interest has been provided in its books by the lendee-company. We could understand scope for some controversy where the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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