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TMI Blog2009 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... t the additional overdue charges payable by the parties would be collectible with certainty. The terms of the agreements which enable the assessee-company to demand overdue charges is only an enabling provision and that enabling provision does not guarantee the collection of overdue charges. It only gives a cause of action to the assessee. In such cases it is very difficult to recognize income against overdue charges – addition can not be made on deemed accrual basis. - 1087 of 2009 - - - Dated:- 2-11-2009 - K. RAVIRAJA PANDIAN and M.M. SUNDRESH JJ. Mr. T. Ravi Kumar for the Appellant. JUDGMENT The Judgment of the court was delivered by K. RAVIRAJA PANDIAN, J. - The Revenue has come forward with this tax case appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled the details and it is found that the overdue charges on accrual basis in respect of hire charges and lease in respect of the amount of Rs.82,23,892/- and Rs.24,37,922/- respectively aggregating to an amount of Rs.1,06,61,814/- had not been admitted by the assessee on accrual basis. 4. The assessee had submitted that in respect of overdue charges, the assessee Company, keeping in line with the norms of the Reserve Bank of India as well as the credit rating agency, has been recognising income by way of overdue charges only to the extent of actual collection i.e. the assessee is admitting income only on cash basis. The assessee Company has also placed reliance upon the Accounting Standard 9 of ICAI which lays down that when underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 275 ITR 451(cited supra), wherein the third question of law was considered, which is as follows:- "Whether on the facts and circumstances of the case, the Tribunal was right in upholding the action of the assessee in changing the method of accounting of overdue interest alone on a cash basis, when the system of accounting of the assessee was mercantile?" 8. In the said decision, the Division Bench held as follows:- "It is a settled proposition vide the decision of a Division Bench of the Calcutta High Court in Hela Holdings Pvt. Ltd. v. CIT (2003) 263 ITR 129 that the assessee is entitled to change his regular method of accounting by another regular method. It would be open to the assessee to produce records and show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would have to assess, in the facts and circumstances of each case, upon general principles of conscience and justice, whether the arrangement of affairs by the assessee, so as to cause the possibility of a reduction of tax incidence, can fairly be permitted to the assessee, as a genuine and legal means of tax reduction, employed by it in a commercial fair sense, or whether allowing the assessee to earn the reduction, in the facts and circumstances of the particular case, is opposed to the public policy of not encouraging citizens to engage themselves in dealings and transactions designed primarily for the purpose of non-payment of tax only." In the instant case, learned counsel for the Revenue is not in a position to demonstrate or sati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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