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1993 (3) TMI 24

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..... l Devkinandan Bagaria ?" The brief facts of the case are that the assessee-company advanced a sum of Rs. 75,000 to Messrs. Ranglal Devkinandan Bagaria on April 2, 1969. The interest was duly adjusted in the account from year to year up to the assessment year 1977-78. While finalising the assessment for the period, that is the year ending on October 20, 1977, i.e., 1978-79, the Incometax Officer found that though the company has maintained the accounts on mercantile basis it has not taken into account the accrued interest of Rs. 22,080. On the amount of Rs. 75,000 which was advanced on April 2, 1969, a sum of Rs. 94,847 has accrued as interest and the balance on the opening day was Rs. 1,69,847. The debtor stopped crediting the accrued int .....

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..... ecoverability of the debt and interest thereon. Since mercantile system of accounting was followed, interest was chargeable on the debt and it was further observed by the Commissioner of Income-tax (Appeals) that the resolution was passed only after the close of the relevant previous year and that, therefore, no benefit can be given on that account and the appeal was dismissed. In the second appeal preferred before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, it was submitted that the interest amount was not debited as the financial position of the debtor-firm was not happy and that there was no chance of recovery of the amount already due. The debtor-firm had already closed its business and had been dissolved consequent on th .....

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..... amount is not likely to be recovered. Learned counsel for the Revenue has submitted that, on account of the system of accounting being mercantile, the accrued interest should have been included in the taxable income and, therefore, the Income-tax Appellate Tribunal was not justified in setting aside the same. We have considered the matter. Primarily, we feel that it is a finding of fact which has been given and more particularly to the facts of the present case where the debtor-firm has already been dissolved and the accounts have been squared up by paying a sum of Rs. 89,000 in November, 1978, which would include Rs. 75,000 towards the principal amount and Rs. 14,000 against the outstanding liability of Rs. 94,847 as interest. It would .....

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