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TMI Blog1984 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... the loans on accrual basis and add the same to the total income of the assessee. The particulars of these loans are as follows : Name of the party Loan amount Rs. 1. Balaji Enterprises 3,00,000 2. Smt. Saraswati R. Tanna and Mr. Bhogilal R. Tanna 25,000 3. Shri V.K. Shah and Padmaben 1,75,000 4. Shri Vinodchandra Pandya 14,000 5. Noble Engineering Works 25,000 6. Subhash International 75,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts will appear for hearing and final disposal before the Court after about five or six years and the letter regarding Balaji Enterprises also states that it normally takes eight to ten years before a suit which is transferred to the list of long causes, to appear for hearing and final disposal. He also pointed that the said films had been proved to be flops and so there was hardly any security. The loans to Smt. Saraswati R. Tanna and Bhogilal Tanna was given in 1970 and to Shri V.K. Shah and Shri Vinodchandra in 1972. All these three loans were given on securities of immovable properties. The suits were filed and preliminary decrees obtained. In respect of all the three loans the assessee has filed copies of letters of 1983 from the solici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement of accounts of the parties should be seen and they showed that nothing had been recovered. He submitted that the decisions relied upon by the Commissioner in the case of Laxmipat Singhania v. CIT [1969] 72 ITR 291 (SC) had no application to this case. He further relied upon the decisions in the cases of Shiv Parkash Janakraj Co. (P.) Ltd. v. CIT [1978] 112 ITR 872 (Punj. Har.), CIT v. Ferozepur Finance (P.) Ltd. [1980] 124 ITR 619 (Punj. Har.) at page 623 and CIT v. Motor Credit Co. (P.) Ltd. [1981] 127 ITR 572 (Mad.). He also argued regarding loans to Balaji Enterprises and Subhash International that the interest during the pendency of the suits is subjected to the discretion of the Court and could not be said to accrue as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of accounts had been sent to the debtors not debiting the interest for the relevant periods. 5. We are now faced with a situation where although the debt might not have become bad, the claim of the assessee maintaining accounts on mercantile basis, is that the interest on these debts cannot be said to have accrued. It is to be noted that the debts have not been written off by the assessee. His plea is that the circumstances regarding these debts are such that the interest should not be regarded as having accrued thereon. The position regarding interest is that it becomes bad if the principal amount itself has become bad but it is not necessary in all cases that the principal amount should become bad. The position regarding the recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the solicitors show their readiness to recover the dues by getting the property sold and give no indication of any difficulty in that regard. The decrees have been obtained in 1977 and under section 34 the Court has power to award the interest from the date of decree till the payment or to such earlier date as the Court thinks fit. Under the proviso for commercial transaction the rate of interest can exceed 6 per cent per annum but not the contractual rate and where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transaction. Under Explanation II a transaction is a commercial transaction if it is connected with the industry, trade or business of the party inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t advanced is Rs. 25,000. Therefore, it cannot be said that any substantial part of the total debt had been paid on which any real expectations can be based for recovery of the full amount. The amount was advanced in 1975 and Rs. 5,000 had been paid only in 1981. The fact that it has taken six years to recover one-fifth of the amount shows that there cannot be firm expectations regarding the payment of the full amount. The fact that the amount had been paid in 1981 may prevent the debt from becoming time barred but that is all. In these circumstances it cannot be said that the interest on it has accrued to the assessee. 8. The Supreme Court decision in the case of Laxmipat Singhania on which the learned Commissioner has relied, has no app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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