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TMI Blog2022 (5) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... n satisfaction of the necessary conditions, the deduction deserves to be granted to assessee. Assessee is directed to file all requisite information/details in support of its claim. Addition of interest received on loans and advances - HELD THAT:- It is not the case of revenue that the interest is actually received. Admittedly, assessee has shown it as a non-performing asset though it has accrued but not actually received. Respectfully following the above you we direct the Ld.AO to delete the addition made in the hands of assessee. Assessee appeal allowed. - ITA No. 1599/Bang/2014 - - - Dated:- 4-4-2022 - SHRI. CHANDRA POOJARI , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER Assessee by : Shri Suresh Muthukrishnan, CA Revenue by : Shri Priyadarshi Mishra, Addl. CIT (DR) ORDER PER BEENA PILLAI , JUDICIAL MEMBER Present appeal arises out of order dated 27/07/2021 passed by Hon ble Karnataka High Court in ITA No. 791 of 2017. 2. It is submitted that against order dated 09/07/2017 passed by coordinate bench of this Tribunal in ITA No.1599/B/2014, assessee preferred appeal before Hon ble Karnataka High Court wherein following questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said account is not recognized as income till it is actually accrued to the assessee. The tribunal while deciding the aforesaid issue failed to take into account the law laid down by this court in Canfin Homes Ltd supra, which is binding on it. The tribunal has also not dealt with the grounds raised by the assessee in memo of appeal in ground Nos.16 to 20. For the aforementioned reasons, the order passed by the tribunal cannot be sustained in the eye of law, the same is quashed. It is made clear that the tribunal shall decide the claim of the assessee with regard to deduction under Section 36(1)(viii) of the Act afresh. The matter is remitted to the tribunal to decide the appeal afresh. 4. The grounds pertaining to the issues remanded by Hon ble High Court that needs to be considered afresh are as under: 1. The learned Commissioner (Appeals), on facts and in law, erred in sustaining the action of the Assessing Officer in disallowing the deduction under section 36(1)(viii) in respect of the special reserve created and maintained amounting to Rs. 6,30,553 @ 20% of the profits derived from the eligible business of providing long-term finance for development of housi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that, the assessee has not computed the special reserves as per the provisions of the Act. He also submitted that, the assessee has not provided long-term finances to development of housing project, but provided to construct or purchase of residential housing which is not eligible for deduction under section 36 (1) (viii) of the Act. We have perused the submissions advanced by both sides in light of records placed before us. 9. The disallowance was made because of the view expressed by the revenue that assessee he has not provided long-term finance to development of housing projects, but provided only to construct or purchase of residential houses. Axiomatically it means that assessee does provide housing finance for construction of residential purposes. What needs to be established is that the finances provided by assessee is for eligible business as defined under clause (b) to the explanation to section 36 (1) (viii) of the act. 10. Order query being raised by the bench both sides agreed for the issue to be remanded in order to verify the same in accordance with the document/evidence is filed by assessee. 11. In the interest of justice we direct the Ld.AO to ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention, it is necessary to look into the said section as it stands today. 145. Method of accounting.-(1) Income chargeable under the head Profits and gains of business or profession or 'Income from other sources shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified, under sub-section (2), have not been regularly followed by the assessee the Assessing Officer may make an assessment in the manner provided in section 144. 5. A reading of the aforesaid provision makes it very clear that section 145(1) is subject to the provisions of subsection (2). Sub-section (2) provides that the Central Government may notify in the Official Gazette from time to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 31, 1995. In fact this question arose for consideration before the Apex Court in the case of State Bank of Travancore v. CIT [1996] 158 ITR 102 / 24 Taxman 337 where it has been held that, the concept of reality of the income and the actuality of the situation are relevant factors which go to the making up of accrual of income but once accrual takes place and income accrues, the same cannot be defeated by any theory of real income. The concept of real income cannot be so used as to make accrued income non-income simply because after the event of accrual, the assessee neither decides to treat it as a bad debt nor claims deduction under section 36(2) of the Act, but still enters the same with a diminished hope of recovery in the suspense account. Extension of the concept of real income to this field to negate accrual after the amount had become payable is contrary to the postulates of the Act. 7. Again the Apex Court in the case of UCO Bank v. CIT [1999] 237 ITR 889 / 104 Taxman 547 held that, under the accounting practice, interest which is transferred to the suspense account and not brought to the profit and loss account of the company is not treated as income. The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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