2000 (1) TMI 1009

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..... n respect of other matters and and cash system of accounting only in respect of interest on certain types of doubtful loans, can be considered to be a bona fide and acceptable one and present system followed by the assessee can be considered to be a valid system? 2. Whether on the facts and in the circumstances of the case, the tribunal was right in holding that no interest accrued to the assessee in this year on loans classified under suit filed accounts, claims lodged accounts and accounts provided for bad and doubtful debts? The assessee is a banking organisation. It was following the mercantile system of accounting. With effect from the assessment year 1987-88, the assessee stopped charging interest on doubtful debts and the amoun .....

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..... following: 1)Suit filed accounts; 2)Claims lodged accounts and 3) Accounts provided for bad and doubtful debts. The tribunal further held that maintenance of accounts on the hybrid system is not at all irregular provided that profits of the concern can be deducted correctly therefrom. The assessee started maintaining accounts in respect of interest on sticky loans on case basis whereas all the other account are being maintained on mercantile basis. The tribunal also held that because of the very nature of the sticky loans, recovery of the principle amounts in respect of which itself is extremely doubtful, consideration of further interest thereon and inclusion of the same in the profits of the bank. Finally, therefore, the trib .....

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..... ed. In view of the above observations, we are of the vies that the change over of the method of accounting by the assessee, w.e.f. assessment year 1987-88, from a purely mercantile system to t6he present hybrid system viz., mercantile system in respect of other matters and case system of accounting only in respect of interest on certain types of doubtful loans, can be considered to the be a bona fide and acceptable one and the present system followed by the assessee can be considered to be a valid system. The Tribunal was right in holding that no interest accrued to the assessee in this year on loans classified under suit filed accounts, claims lodged accounts and accounts provided for bad and doubtful depts. Reference is accordingl .....

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