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TMI Blog2014 (11) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, after amendment, which was rectified resulting in addition of Rs. 7,24,96,894/- in respect of accrued interest on government securities (including broken period interest)? (2) Whether the Appellate Authorities were correct in holding that no expenditure can be allotted to the exempted income earned by the assessee when the Assessing Officer had worked out 5% and the Appellate Commissioner had worked out 2.5% despite the assessee incurring expenditure for earning such income? (3) Whether the Appellate Authorities were correct in holding that the bad debts of Rs. 45,32,983/- was an allowable deduction u/s. 36(1)(vii) of the Act despite the same having been deducted by the assessee in the computation made u/s.36(1)(viia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at should be offered as tax. The contention that Assessing Officer is entitled to tax on the interest income although not due and payable as accrued, is untenable. The fact that the assessee in its internal books of accounting mentions the proportionate interest, which is entitled to receive, in its balance sheet for the purpose of profit and loss cannot be deemed as income accrued, unless such income has become due and payable. On the basis of such amount, the A.O. has no right to charge the interest, which has not become due and payable. 17. In fact, we find no inconsistency between the amended provisions of Sections 145 and 5 of the I.T. Act. It may be that the amended provisions of Sections 145 now insists mercantile system of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. In other words, the persons with whom the amounts are invested by the assessee are crediting the aforesaid amount to the assessee's account by way of a bank transfer. Therefore, no human agency is involved in collecting these dividends and interest for which the assessee has to incur any expenditure. This is the consequence of computerization, online transaction through NEFT[National Electronic Fund Transfer], RTGS [Real Time Gross Settlement] and also DEMAT Accounts. The assessing authority should take note of these developments in deciding whether any expenditure is incurred in earning the said. income. The discussion by the assessing authority clearly demonstrates these aspects has not been taken note of and the notional ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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