9911796707
TMI Blog1999 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1922, had directed, as a result of the conclusions arrived at in the conference of the Income-tax Commissioners, that the interest accruing to money lenders who entered the same into a suspense account because of the extreme unlikelihood of recovery of the loan, need not be included in the assessee's taxable income. That circular was extended to banks by the circular dated October 6, 1952, which reads as under : "In its Circular No. 37 of l924, dated August 25, 1924, the Board held, as a result of the conclusion reached at the conference of the Income-tax Commissioners, that interest accruing to a money lender on loans entered in a suspense account because of the extreme unlikelihood of their being recovered need not be included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, Delhi, that interest on doubtful debts credited to suspense account by the Industrial Finance Corporation of India should not be included in the taxable income. This view was reiterated in the cases of various other financial institutions. The Revenue audit, however, did not agree with the views expressed by the Board and objected to the exclusion of such interest from the total income. (3) The Board have recently received a number of representations from other State Financial Corporations/Institutions, seeking exemption of interest on such accounts from inclusion in the total income. The matter has therefore been re-examined in consultation with the Ministry of Law. The Board have been advised that where accounts are kept on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed keeping in view the said instructions and an immediate review be undertaken and remedial action by way of initiation of proceedings under section 147(b) or section 263 be taken in respect of the assessments which have been completed not including such interest in the taxable income in accordance with the Board's earlier instructions. (2) These instructions have resulted in increased litigation between the Income-tax Department and the banking companies. On a subject like this, it appears futile that two organisations of the Government both functioning under the Ministry of Finance, should resort to litigation over extended periods of time. Obviously, this leads to delays and other consequential difficulties. Hence, the matter ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was satisfied that there was really little possibility of the loans being recovered. It was only in the year 1978 on account of some objections raised by the Revenue audit and also by reason of the judgment delivered by the Kerala High Court in the case of State Bank of Travancore v. CIT [1977] 110 ITR 336 the circular dated October 6, 1952, was withdrawn. But by the circular of the year 1984, from the assessment year 1979-80 onwards, interest on doubtful debts credited to a suspense account by the banking companies was made subject to tax but interest charged in an account, where there had been no recovery for three consecutive accounting years was not to be subjected to tax in the fourth year and onwards. The decision of the Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguished in the case of Keshavji Ravji and Co. v. CIT [1990] 183 ITR 1 (SC), by a Bench of three judges in a similar fashion. It is held only as laying down that a circular cannot alter the provisions of the Act. It being in the nature of a concession, could always be prospectively withdrawn." As regards the applicability of the circular of 1984, the court observed thus : "In the present case, the circulars which have been in force are meant to ensure that while assessing the income accrued by way of interest on a 'sticky' loan, the notional interest which is transferred to a suspense account pertaining to doubtful loans would not be included in the income of the assessee, if for three years such interest is not actually received. The ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest." Thus the rigour of the law may be toned down by notifications issued by the Board from time to time and such circulars are binding on the authorities. The assessee, if found eligible for the benefit of the circular in force, must be given the benefit of that circular. Up to the assessment year 1978-79, the interest accruing on "sticky" loans by banks is not to be treated as taxable income in terms of the circular of the year 1952. Therefore, it is not open to the Assessing Officer to act contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
