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TMI Blog2012 (11) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... case that any interest has been received on the said loan even on a subsequent date, so as to consider it as having been accrued, including for the relevant year - no legal or factual basis to confirm any interest as receivable from the lendee company, so as to consider it as having accrued, and the impugned income only represents a hypothetical/imaginary income - Addition deleted – In favor of assessee - I.T.A No. 100/Coch/2010 - - - Dated:- 27-12-2011 - S/SHRI N.R.S.GANESAN, AND SANJAY ARORA, JJ. Assessee by Shri S.S. Daniel Mobesh, FCA-AR Revenue by Ms. S. Vijayaprabha, Jr.DR ORDER Per Sanjay Arora, AM: This appeal by the Assessee is directed against the Order by the Commissioner of Income-tax (Appeals)-I, Triv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `income from other sources . The assessee s claim that the amount had been advanced on the direction by the Government of Kerala; both the lender (assessee-company) as well as the lendee-company (Trivandrum Rubber Works Ltd.) being the undertakings of the Government of Kerala, was considered as of no consequence by the AO as the Government of Kerala had not anywhere stated that the loan under question would be a interest-free loan, so that the company was liable to account for interest on accrual basis. In appeal, the matter was considered in more detail by the ld. CIT(A), with the assessee adducing before her the Government Order, i.e., G.O. (MS) No. 31/94/AD dated 08-02-1994 (PB pgs. 14-16), where-under the said loan/s was stated to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at its non-booking by the assessee-company, admittedly following mercantile method of accounting, which is rather mandatory for it to follow in terms of its governing Act, i.e., the Companies Act, 1956, would be of no avail, and the same is liable to be assessed u/s. 56 of the Act. 4.2 Accural (or otherwise) of an income is essentially a matter of fact, to be determined on the basis of the consideration of the entirety of the relevant facts and circumstances. Firstly, there is no mention whatsoever of any loan by the assessee-company to the lendee-company in the State Government Order dated 08/2/1994. The same only contemplates and approves the acquisition of the lendee-company by the assessee-company subject to the satisfaction of some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly applicable to companies, as the assessee, and emphasizes the absence of any uncertainty in the realizability of income as a condition for its recognition as such. In the facts of the instant case, as explained by the ld. AR during hearing, even the feasibility of the proposed takeover stands seriously jeopardised as the same was on the basis of 14 acres of highly valued land belonging to the lendee-company (referred to in the G.O.), and which is now being considered for being acquired for an airport. This could be the, or among others the, reason why no headway stands made in the matter of take-over despite lapse of a number of years. Whatever may be the fate of the same or the assessee s impugned loan, it is an admitted fact that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a unilateral action. It is also not the Revenue s case that any interest has been received on the said loan even on a subsequent date, so as to consider it as having been accrued, including for the relevant year. There is, as such, neither any obligation to pay nor any inclination nor capacity to pay interest. We, therefore, find no legal or factual basis to confirm any interest as receivable from the lendee company, so as to consider it as having accrued, and the impugned income only represents a hypothetical/imaginary income. Reference in this context is also drawn to the decisions by the apex court in the case of UCO Bank vs. CIT (1999) 237 ITR 889 (SC) and Godhra Electricity Co. Ltd. v. CIT (1997) 225 ITR 746 (SC). The tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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