9911796707
TMI Blog1988 (9) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred, by necessary implication of hi s decision, to confirm the inclusion of the sum of ₹ 11,67,051 as income of the assessee liable to tax for the asst. year 1979-80. 2. The learned counsel for the assessee explained that this amount represents interest payable by the assessee in respect of earlier years and that in the accounting year in question the liability in respect of this amount was written off by the assessee and the amount was taken as income to the profit and loss account. According to the learned counsel, the writing off of the liability and carrying this amount as income to the profit and loss account was erroneous and that this amount did not represent any actual income and should have been excluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er observed as under :- The facts as they are, to my mind show that the non-providing for all the interest liabilities in the accounts by the company was not merely because the company believed it to be not payable, but also because such conviction or belief in the mind of the company was induced because of a clear understanding between the bank and the company that it would be helped to tide over its financial crisis for certain period and to improve the liquidity of the company. In what specific terms such understanding had been arrived at is not a matter of record because no relevant document in this regard could be placed on record by the learned A.R. In his written submissions only he stated barely and further stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of interest day-to-day from 26-12-1976. For that reason the company even reversed the entry for the interest provisions of ₹ 11,67,05 for A.Y. 1978-79, in the profit and loss appropriation account of asst. year 1979-80 under appeal. I am, therefore, of the view that interest liability did not accrue during the relevant previous year. As observed by the learned CIT(A) the bank never gave up its claim for interest. The assessee's claim for interest in the sum of ₹ 22,15,707 is in terms of its loan agreement with the Union Bank of India and this has never been disputed on behalf of the revenue. The assessee was facing adverse circumstances and, therefore, it appears to have approached the bank for waiver or reduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In our view, none of these two rulings can help the revenue. The liability for consideration before us is not a contingent liability. It is an ascertained liability in terms of legal and binding agreements with the bank which agreements were in force during the relevant accounting year. We may mention that the bank ultimately filed a suit for the recovery of the principal as well as interest at the agreed rate against the assessee and the suit is pending before the District Judge, Faridabad. The liability of the assessee, therefore, did not depend on the occurrence of any contingency and the mere fact that the assessee was pleading for waiver or reduction could not make and otherwise accrued and definite liability a contingent one. As reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to defaulting debtors could not be treated as income accrued to the bank. The Hon'ble Supreme Court observed that the mere fact that the bank had taken the interest to the Interest Suspense Account did not mean that interest income had not accrued to the bank. On the same analogy in the case of a debtor the mere fact that he is in adverse circumstances and is pleading for concession would not prevent interest from becoming due to the bank. We are, therefore, of the opinion that the authorities below were in error in not allowing the assessee's claim for deduction of ₹ 22,15,707 on account of interest payable to the Union Bank of India. We hold that the said amount had become payable to the said bank and was, therefore, an e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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