9911796707
TMI Blog2015 (6) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... erest shown as payable by the assessee to his group concern. 2. The brief facts of the case are that the assessee had borrowed the loan from its sister concerned M/s. Lok Financiers Company (LFC), an Association of Persons (AOP) earlier to A.Y. 1997-98. The interest payable on borrowed loan has continuously shown as expenditure as the assessee has been following the mercantile system of accounting. In the year A.Y. 2002-03, the entire capital loan account was paid off/adjusted towards allocation of shares. However, the outstanding accumulated interest of Rs. 42,67,650/- pertaining to A.Y. 1999-2000 and A.Y. 2002-03 was shown as outstanding from year to year basis. The said interest had not been paid by the assessee upto the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance-sheet and the profit and loss account of LFC for A.Y. 2008-09, the said AOP had distributed the share of profit amongst the five members who are family members of the assessee. The assessee had also received share of profit of Rs. 41,71,321/-. The A.O. observed that on the one hand LFC was making the payment in the form of share of profit to the assessee but on the other hand the assessee had been showing the accrued interest payable of Rs. 42,67,550/- since so many years and thereby preventing it from getting taxed. He observed that had the lender company not changed to cash system, it would have to offer the interest as its receivable income, but, the assessee and his group AOP have managed the affairs in such a dubious way t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .I. that it could not do the finance business the A.O.P. had stopped its business of finance. Under these circumstances M/s. Lok Financiers Company considered it fit and commercially expedient to switch over to cash system from the mercantile system accounting w.e.f. A.Y. 1998-99. This change has been accepted by the department. On account of the fact that the M/s. Lok Financiers Company is now following an duly accepted by the department - the cash system accounting for the receipt & expenditure the company has not shown an interest of Rs. 42,67,550/- being receivables from the appellant. On carefully going through the entire facts of the case, I find that because of the cash method of accounting - M/s. Lok Financiers Company has not acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed conclusion of the ld. CIT(A) reveals that the ld. CIT(A) has deleted the disallowance observing that since the LFC (AOP) had switched over to cash system from the mercantile system of accounting w.e.f. A.Y. 1998-99, the company had not showed the interest of Rs. 42,67,550/- being receivable from the assessee because of the fact that the same was not actually received. He, therefore, has held that the provision of section 41(1) of the Act are not applicable as the amount of interest payable has not been written off nor the debt has extinguished. The ld. DR, before us has contended that it was not a case where the debt was payable by the assessee to a third party. The sister concern, i.e., the AOP was managed by the assessee along with hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder such circumstances, the various higher courts have held that merely because the limitation period to recover the amount through process of court had lapsed, that itself, does not mean that the liability has ceased to exist. The principle led that the enforcement of debt being barred by limitation does not ifso facto lead to the conclusion that there is extinguishment of debt itself. Though on the face of it, there seems to be a force in the contention of the ld. AR, however, when we go through the facts of the present case, we find that same are distinguishable from the facts of the case laws cited by the assessee. In the case of the assessee, the creditor, AOP is also managed by the assessee and his family members. The said AOP is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to some circumstances could not pay the liability but had intention to pay the liability and that the debt had not extinguished, but, it is the case where the assessee had deliberately managed his accounts as well as the accounts of his AOP to avoid the tax. The A.O., therefore, in our view, has rightly held that the assessee had no intention to pay the said liability to the AOP and more over the said AOP had also never made any effort to recover the amount in question from the assessee. 6. At this stage, the ld. AR has vehemently contended that the assessee has paid the liability in the year 2013. He has contended that the payment of the liability in the subsequent year shows that the assessee had the intention to pay the same and which h ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
