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TMI Blog2013 (10) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... identical. For brevity, the facts are being extracted from ITA No. 235 of 2009. 2. ITA No. 235 of 2009 has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 30.1.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh (hereinafter referred to as "the Tribunal") in ITA No. 988/Chd/2008 for the assessment year 2001- 02. The appeal was admitted vide order dated 28.4.2010 for consideration of the following substantial question of law:- "Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified on facts and in law in confirming the findings of the authorities below while denying deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee-appellant submitted that the revenue was in error in making an addition on account of interest which was to be received on sticky loans by the assessee in view of the judgment of the Hon'ble Apex Court in UCO Bank v. Commissioner of Income Tax (1999) 237 ITR 889 and of this Court in Commissioner of Income Tax v. Punjab Financial Corporation Ltd. (2007) 295 ITR 510 (P&H. It was argued that the amount was given by way of loans in the year 1991-92 and the same was not recoverable. In such a situation, the interest which was accruing on the same was also not being received and its recovery was also doubtful. In such circumstances, the same could not be said to be the real income of the assessee as held by the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 of the Act relates to method of accounting. Originally enacted, Section 145 provided that income under the head "profits and gains of business or profession" or "income from other sources" shall be computed in accordance with the method of accounting regularly followed by an assessee. Accordingly the assessee was entitled to choose any one of the following system of accountancy:- (a) cash or receipts system; or (b) mercantile or accrual system; or (c) mixed or hybrid system. 8. Finance Act 1995 with effect from 1.4.1997 relating to assessment year 1997-98 and subsequent years, substituted Section 145 which reads thus:- "145 (1). Income chargeable under the head "Profits and gains of business or profession" or "Income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od in a manner that does not reflect the correct income. The Finance Act, 1995, has amended section 145 of the Income-tax Act to provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed only in accordance with either the cash or the mercantile system of accounting, regularly employed by an assessee. The first proviso to subsection (1) of section 145 has been deleted. 44.2 The Finance Act, 1995 has also empowered the Central Government to prescribe by notification in the Official Gazette, the accounting standards which as assessee will have to follow in computing his income under the head "Profits and gains of business or profession" or "Income from other so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countancy, the assessee is liable to pay tax on the income on the basis of cash receipts during the year under consideration whereas under the mercantile system of accountancy, the liability of an assessee is determined according to accrual of the income relating to the assessment year in question. 12. Adverting to factual matrix involved in the present case, it has to be noticed that the Tribunal while upholding the findings of CIT(A) had recorded as under:- "8. The relevant facts relating to this issue are that the assessee had advanced loans to some other cooperative societies. The interest was being provided on such loans at the agreed rates. The assessee claimed that no interest had been received from specified cooperative society s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein any income accruing even though not received was subject to tax. The assessee had not claimed any amount by way of bad debts under the provisions of the Act and in such a situation, the interest accrued thereon also cannot be said to be not arising to the assessee. Moreover, the findings recorded by the Assessing Officer, CIT (A) and the Tribunal have not been shown to be erroneous or perverse in any manner. 14. The judgments relied upon by the learned counsel for the assessee in UCO Bank and Punjab Financial Corporation's cases (supra) being prior to the amendment in Section 145 of the Act would not come to the rescue of the assessee-appellant. Further, the Godhra Electricity Co. Limited's case (supra) was decided by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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