Ita/183/2004 Of Commnr.of Income Tax v. O.s.f.c

05. 10.04.2017 I.T.A. No.183 of 2004 Heard Mr. S.K. Acharya, learned Senior Standing Counsel for the Income Tax Department. We have perused the impugned order dated 28.04.2004 passed by the Income Tax Appellate Tribunal, Cuttack Branch, Cuttack under Annexure-3. The relevant portions of the said order are quoted hereunder: 5. We have considered the rival contentions and find from record that original assessment was completed u/s.8(2) after scrutiny, verifying figure with the returns and discussion with the assessee. The action of the AO for inclusion of unrealized interest was not a mistake apparent from record which could be rectified by invoking the provisions of section 17 of Interest Tax Act. We also find that chargeability of unrealized interest which is not realized in cash during the year is neither chargeable interest nor liable to tax in view of the method of cash system of accounting adopted by the assessee and which has also been accepted by the Department. The provisions of law read with section 21 of Interest Tax Act and section 145 of Income-tax Act is to be construed simultaneously. 6. The Honble Supreme Court in the case of Kerala State Industrial Development Corpn. Ltd. reported in 259 ITR 51 has observed that profits and gains of business is to be computed in accordance with either cash or Mercantile System of accounting as may be regularly employed by the assessee. Where the assessee has followed cash system of accounting in respect of interest income, section 5 of the Interest-tax Act allows the calculation or computation of the chargeable interest on the basis of interest actually received. Thus, it is clear from the order of the Apex Court that unrealized interest cannot be included in computation of chargeable interest where the assessee has not accounted for such unrealized interest in its income. There is no dispute to the fact that the system of accounting followed by the assesses in the instant case has been accepted by the Department while making assessment under the I.T. Act, therefore we do not see any merit in the action of the lower authorities for including the unrealized interest in the chargeable interest of the assessee. In the light of the aforesaid findings, it is clear that the Tribunal had arrived at a conclusive finding of fact that the assessee (respondent) has followed cash system of accounting in respect of interest income and further came to hold that unrealized interest cannot be included in computation of chargeable interest where the assessee has not accounted for such unrealized interest in its income. In the fact situation as noted hereinabove, we find no question of law that arises for our consideration since the facts as well as the law have been appropriately determined by the Appellate Authority. Accordingly, the appeal stands rejected. Urgent certified copy of this order be granted on proper application. ... I. Maha nty,J. .... ..... Biswajit Mohanty,J.