2017 (2) TMI 228

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..... : "(i) Whether on the facts and in the circumstances of the case and on a proper interpretation of agreements, letters and resolutions dated May 13, 1987, June 26, 1987, March 14, 1989, March 15, 1989 and March 17, 1989, the Tribunal was justified in law in holding that interest on loans advanced to M/s. Marigold Holdings and Trading Company Ltd, and M/s. Shivtrishul Finance Limited (now known as Dakshinanchal Finance Limited) by the assessee-company (formerly Renusagar Power Company Limited) accrued from day to day and did not accrue at the end of the accounting year ? (ii) Whether on the facts and in the circumstances of the case and despite the fact that before the close of the relevant accounting year, the board of the assessee-comp .....

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..... est accrued on monthly basis and also that the board of directors of the assessee have no power to waive accrued income retrospectively and the reduction could at the best be on a prospective basis. It assessed interest accrued for the period January 1, 1988 to February 28, 1989 at the rate of 12 per cent. per annum resulting in addition of Rs. 58,50,000 in the income. 6. In appeal preferred by the assessee, the Commissioner of Income-tax (Appeals) (hereinafter referred to as "CIT(A)") felt that arrangement was a device to reduce tax liability and hence issued notice under section 251(2) of Income-tax Act, 1961 (hereinafter referred to as "Act 1961") requiring the assessee to show cause why interest income for the month of March 1989 be al .....

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..... ery day, but for the purpose of accounting, interest rate is on annual basis and not daily or monthly basis. If it is shown to have accrued on monthly basis to the net interest per annum would become much more than 12 per cent. since it will take a nature of compound interest, accruing every month. There is no reason to add such burden when parties have agreed on simple interest at 12 per cent. per annum. So long as the interest has not accrued, rate thereof could be reduced and this preposition is not disputed. 10. In the present case 12 per cent. interest could have accrued at the end of the assessment year and since it was reduced before end of assessment year, in our view the assessee was entitled to have charged reduced rate of intere .....

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