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TMI Blog2017 (11) TMI 1548X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the income by the assessee has to be considered from a realistic and practical point of view which is one test laid down by the Hon’ble Apex Court in determining the income when accrued. Only a right under the agreement to receive the interest by the assessee without reasonable certainty of realization of the same cannot be brought to income tax. Hence, in view of the facts and circumstances of the case when the realization of the amount is not certain then the same cannot be charged to income tax. - Decided against revenue - ITA No. 582/JP/2016, ITA No. 583/JP/2016, ITA No. 584/JP/2016 And ITA No. 332/JP/2017 - - - Dated:- 22-11-2017 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Sandeep Jha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 4,50,00,000/- paid by the assessee. The AO further noted that for A.Y. 2010-11 the assessee has admitted interest income of ₹ 46,42,000/- as against the interest accrued of ₹ 96,36,000/-. For the A.Y. 2011-12 the assessee has admitted the interest income of ₹ 3,12,000/- as against the accrued interest of ₹ 1,57,68,000/-. For the A.Y. 2012-13 and 2013-14 the assessee did not admit any interest income as against the accrued interest of ₹ 1,57,68,000/- and ₹ 1,05,12,000/- respectively. The AO was of the view that the assessee company is following accrual system of accounting and therefore the accrued interest on security deposit should have been disclosed by the assessee in its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cheques of interest issue by the lessor have got dishonored against which the assessee filed the claim u/s 138 of Negotiable Instrument Act. Thus, the ld. CIT(A) accepted the claim of the assessee that no recovery of principal as well as interest could be made and therefore the addition made by the AO was deleted. Aggrieved by the impugned order of the ld. CIT(A) the Revenue has filed the present appeal. 3. The ld. DR has submitted that as per lease dated 19th August, 2009 the assessee deposited ₹ 4,50,00,000/- with the lessor as a security and was to receive interest @ 2.92% P.M. on the security deposit amount every 20th days on each month. Thus as per the said lease deed as well as loan agreement of even dated the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e offered the interest income for the A.Y. 2010-11 to the extent the assessee received the amount from the lessor, however, subsequently it was revealed that the lessor has defrauded the assessee and this property in question was already mortgaged with the Kotak Mahindra Bank against the loan and therefore the bank took over the possession of the property. The ld. AR has further submitted that when the recovery of principal amount of ₹ 4,50,00,000/- paid as security deposit as well as interest was doubtful as lessor was not having capacity to pay the same and the assessee has exercised all its legal remedy to recover the amount then the interest as per lease agreement and loan agreement not recoverable and not received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Revenue recognition has to be postponed to the extent of uncertainty involved. Thus, the ld. AR has contended that the income tax only be levied on real income and not notional income. No tax can be charged of notional interest income in the case of the assessee when it is quite clear that neither the advance nor interest income is recoverable. It is settled law that the income tax cannot be levied on hypothetical income. In support of his contention he has relied upon the following decisions. CIT Vs. shoorji Vallabhadas Company 46ITR 144 (SC) Godhra Electricity Co. Ltd. Vs. CIT 225 ITR 746 (SC) CIT Vs. Excel Industries ltd. 358 ITR 295 (SC) CIT Vs. Eastern Investment Ltd. 213 ITR 334 (Cal.)(HC) CIT Vs. Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inty when the assessee would finally is able to recover the interest from the lessor when the recovery of principal amount of ₹ 4,50,00,000/- itself is doubtful. Therefore, when the amount of interest was not actualy received by the assessee and there was a very bleak chance of recovery of the said amount of interest as well as principal amount then the interest which is accrued as per the lease deed and loan agreement would not be regarded as the income of the assessee so long the recovery of the same is uncertain. We further noted that for the A.Y. 2014-15 the assessee has claimed write off the principal amount and the Assessing Officer while passing the order u/s 143(3) which is placed at page 123 124 of the Paper Books has not m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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