9911796707
TMI Blog2008 (1) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... cts giving rise to this question are that the assessee M/s. H. P. Mineral and Industrial Development Corporation, Shimla, is a Government owned Corporation. It had a number of subsidiary companies, i.e., M/s. Fertilizers Ltd., Himachal Wool Processors Ltd. and Himachal Worsted Mills Ltd. It had advanced temporary loans to its subsidiary companies. The assessee was following the mercantile system of accounting. In the assessment year 1982-83, where the year closing was on March 31, 1982, no provision was made for such interest in the books of account of the assessee. According to the assessee, the interest was waived off by a resolution of its board dated June 26, 1983. 3. The Assessing Officer did not accept the contention of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." 6. The Punjab and Haryana High Court in CIT v. Ferozepur Finance P. Ltd. [1980] 124 ITR 619, following the judgment in Shoorji Vallabhdas' case [1962] 46 ITR 144 (SC) held that unless income accrues no tax can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction in compliance with the provisions of the Act should be claimed and allowed. (4) Where the Act applies the concept of real income should not be so read as to defeat the provisions of the Act. (5) If there is any diversion of income at source under any statute or by overriding title then there is no income to the assessee. (6) The conduct of the parties in treating the income in a particular manner is material evidence of the fact whether income has accrued or not. (7) Mere improbability of recovery, where the conduct of the assessee is unequivocal, cannot be treated as evidence of the fact that income has not resulted or accrued to the assessee. After debiting the debtor's account and not reversing that entry-but taking the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of electricity and these rates were being shown in its books of account. However, due to litigation the assessee was prevented by court orders from recovering these amounts and subsequently the assessee-company was taken over by the Government. It was in these circumstances that the apex court held that the amount due on. enhancement of the electricity rate had not accrued. 10. A three-judge Bench of the apex court in UCO Bank v. CIT [1999] 237 ITR 889, has held that the circulars issued by the Department/Board are binding on the Revenue. However, after reading the entire judgment we are of the view that the same has no applicability in the present case since even if the second circular is taken into consideration the interest for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n must be taken immediately after the previous year. In this case the decision to waive off the loan was taken at a much later stage. The resolution to waive off the loan was passed after the income had already accrued. Once the income had accrued the passing of resolution after the close of the accounting year would be of no consequence. The decision to waive off the interest should have been taken during the accounting year or prior thereto. The concept of real income would not apply in such a case. If the debt had become bad the deduction can be claimed only in compliance with the provisions of the Act and the Rules. Once the provisions of the Act were applicable and the income had already accrued the concept of real income cannot be bro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
