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TMI Blog2005 (7) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... credited to the interest suspense (suit filed) account and interest suspense (recalled) account had accrued to the assessee and was chargeable to tax for the assessment year 1980-81?" Factual Matrix The factual matrix reveals that the issue pertains to the relevant accounting year ended on March 31, 1980, (assessment year 1980-81). The assessee-Maharashtra State Financial Corporation Ltd. is set up under an Act of Parliament to finance small and medium scale industries. The assessee-Corporation filed its return for the assessment year 1980-81 declaring its income in the sum of Rs. 2,34,99,280. The Income-tax Officer amongst others considered the taxability of the amount credited to (a) "Interest suspense (suit filed) account" amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sticky advances. This was in contrast to the accounts of debtors who were considered good in whose cases interest accrued was being debited to the debtor's account and accordingly credited to the interest account. The credit balance in the interest account was taken to the profit and loss account at the end of the year while the credit balance in the "interest suspense account" was not carried to the profit and loss account. After the financial year 1978-79, the assessee made a change in the system of account. While the debit regarding accrued interest was made to accrued interest suspense account and not to the account of the debtors, credit was given to "interest suspense (recalled account) instead of interest suspense account. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been legally incurred before it is actually disbursed". The Tribunal applying the above test has also observed that the Supreme Court had approved the decision of the Bombay High Court in CIT v. Confinance Ltd. [1973] 89 ITR 292 wherein it was held that receipt of income either actual or deemed is not a condition precedent to taxability and it is assessable if it had arisen or accrued. Following this decision the Tribunal held that the amount shown in "interest suspense (suit filed) account" amounting to Rs. 59,57,822 and "interest suspense (recalled) account" amounting to Rs. 57,38,782 was assessable. It is out of this finding of the Tribunal that the assessee has sought to raise the above mentioned question. As already stated hereinabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC) was decided by it and as such it was not followed in UCO Bank v. CIT [1999] 237 ITR 889 (SC). Since the circular was binding on the assessing authority the interest on the arrears could not have been taxed. In this view of the matter the Tribunal was not justified in taxing the amount of Rs. 57,38,782. Now, what remains to be considered is the amount of interest shown in the "interest suspense (recalled) account" amounting to Rs. 59,57,822. Learned counsel appearing for the assessee submitted that the award of interest for the period subsequent to the filing of the suit till the date of decree, lies within the discretion of the court and as such the interest from the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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