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TMI Blog2023 (11) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... - SUPREME COURT] As observed by Coordinate Bench for the preceding assessment years [ 2018 (12) TMI 278 - ITAT BANGALORE] verification needs to be carried out whether the interest is income has arisen or accrued in the present facts. Further the assessee also will have to establish that the interest has become irrecoverable before its accrual. In the event the assessee is able to establish the above fact, the interest income cannot be notionally brought to tax. On the contrary, if the assessee is establishing that the amount has become irrecoverable after accrual, then the same will have to be considered in the year of accrual and appropriate deduction will have to be computed as per section 36(1)(vii) in any years afterwards by writing of its same in its books of account. With the above directions and respectfully following the view taken by this Tribunal in assessee s own case, we remit the issue back to the Ld.AO to verify the interest on ICDs based on the real income theory observed by this Tribunal in para 23 herein above. - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Shri Surya Tejas, Advocate For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully subjected to Tax. Rs. 29,04,03,076/- 10. The entire order of the learned CIT(A) is relying on the judgment of the Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax 6 vs Khyati Realtors Pvt. Ltd. The learned CIT(A) has ignored the basic fact that the relied upon judgment is absolutely not applicable to the facts of the case of the appellant. General 11. The judgment of the Hon'ble Apex Court relied upon by the learned CIT(A) is with regard to provision of bad debts, which is not the case of the appellant. General 12. The learned CIT(A) has incorrectly pointed out that the appellant has not submitted the list of the Inter Corporate Deposits, the appellant has submitted all the details along with all documents including the Court documents to the learned Assessing Officer at the time of Assessment. General 13. The learned CIT(A) erred in sustaining the addition made by the learned AO when the income has not accrued nor was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intentional and it was on account of bona fide reason stated above. 2.3 In view of the above, the assessee could not file the appeal before this Tribunal well in time and by the time the appeal papers were prepared for filing, there arose delay of about 2 days in filing the present appeal before this Tribunal. The reason for the delay in filing the present appeal was due to reason beyond the control of the assessee. He thus prayed for the delay to be condoned. 2.4 The Ld.DR though objected however could not controvert the reasoning given by the Ld.AR for the delay that was caused in filing the present appeal. We have perused the submissions advanced by both sides in the light of records placed before us. 2.5 In our opinion there is a sufficient cause for condoning the delay as observed by Hon ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji Ors., reported in (1987) 167 ITR 471 in support of his contentions. 2.6 It is also submitted by the Ld.AR that there is no malafide intention on behalf of assessee in not filing the present appeal within time. The Ld.DR on the contrary opposed the delay to be condoned. 2.7 Considering the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 3.1 Assessee filed its return of income on 30.09.2015 declaring total income of Rs. 330,33,40,230/-. The case was selected for scrutiny and notices u/s. 143(2) of the act was issued in response to which representative of assessee filed necessary details as called for. The Ld.AO noted that there was a specified domestic transaction between assessee and its AE and accordingly a reference was made to the transfer pricing officer. The Ld.TPO passed u/s. 92CA of the act determining no additions to the arms length price. The Ld.AO thereafter while scrutinising the proceedings and the documents filed, observed that assessee has advanced loans to various individuals and companies as inter corporate deposits. It was noticed by the Ld.AO that interest income accrued to assessee against such ICDs did not reflect in the P L account. The Ld.AO tabulated the details as under: AY Amount of interest income (Rs.) 2009-10 14,72,595 2010-11 28,79,68,656 2011-12 29,73,46,928 2013-14 43,72,04,622 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in nature hence not discussed here. 3.4 The Ld.CIT(A) dismissed the appeal of the assessee by relying on the decision of Hon ble Supreme Court in case of Pr.CIT 6 vs. Khyati Realtors Pvt. Ltd. reported in (2022) 141 taxmann.com 461. 3.5 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal. 4. At the outset, the Ld.AR submitted that all the grounds raised are in respect of one single issue. He also submitted that similar issue was considered by Coordinate Bench of this Tribunal for A.Ys. 2008-09 to 2014-15 in ITA Nos. 928 to 931/Bang/2017 and 174 to 176/Bang/2018 by order dated 27.11.2018. 5. He submitted that all the observations of the Ld.CIT(A) and Ld.AO has been dealt with based on the mercantile system of accounting followed by the assessee in respect of ICDs and regular business activities. He submitted that this Tribunal remanded the issue back to the Ld.AO by observing as under: 20. Now, we decide the issues on merit. First issue on merit is about the addition made by the AO in respect of interest accrued on ICDs. This issue is raised by the assessee in five Assessment Years i.e. Assessment Years 2009-10, 2010-11, 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has changed the accounting policy with regard to accounting of interest income on interest bearing loans other than bank deposits to cash basis due to which the profit for the year has been has been understated by Rs. 14,82,02,244/- Dividend income on investments is accounted for when the right to receive the payment is established. 21. From the above, it is seen that as per the assessee itself, the management in the present year has changed the accounting policy with regard to accounting of interest income on interest bearing loans other than bank deposits and the changed system is cash basis and due to this, the profit for the year ending as on 31.03.2010 has been stated to be underreported by Rs. 14,82,02,244/-. Hence it is seen that the assessee itself has admitted in annual report that from accounting year 2009-10, in respect of interest on ICDs, the assessee is following cash system of accounting and because of that, the profit of the assessee was under reported in that year by an amount of Rs. 14,82,02,244/-. Now we examine the annual report for the year ending as on 31.03.2011. In this year also, it has been stated in Para 6 of significant accounting polici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Hon'ble apex court in the case of State Bank of Travancore vs. CIT as reported in 158 ITR 102. In this case, it was 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 the 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 may have to be given precedence in computation of income in a particular case but accrued income cannot be waived as not having accrued to the assessee. In this case, the issue was decided against the assessee and in favour of the revenue because of the facts of that case. As per the facts of that case, it was seen that the assessee neither decided to treat interest income on sticky advances as bad debt nor claims deductions under s. 36(2) but still enters the same with a diminished hope of recovery in the suspense account. Hence, as per this judgment, it was held that real income theory has to be considered but this has to be examined from the facts of each case as to whether the real income has accrued or not and if the real income has accrued then the same has to be brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered. We have perused the submissions advanced by both sides in the light of records placed before us. 6. We note that the Ld.CIT(A) has disallowed the claim of assessee as bad debts by relying on the decision of Hon ble Supreme Court in case of Pr.CIT 6 vs. Khyati Realtors Pvt. Ltd. (supra). On perusal of the said decision, it is found that Hon ble Supreme Court rejected the claim contention of assessee by observing that the claim of the amount advanced by the assessee therein to a developer for acquiring an immovable property was in the nature of capital expenditure as the assessee had not brought any evidence or material to show that the advance was made in its ordinary course of business. In the present facts of the case, there is no dispute in respect of the accrual of the interest and that assessee had followed mercantile system of accounting for the ICDs. Further the Ld.AO has not questioned that the ICDs was not made in the regular course of the business. We therefore do not find any force in the observations of the Ld.CIT(A) in placing reliance on the above decision for not considering the claim of assessee. 6.1 It is a settled position that the levy of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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