Calcutta High Court
Commissioner Of Income Tax vs West Bengal Industrial Development ... on 1 April, 2024
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
O-23
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITA/156/2011
COMMISSIONER OF INCOME TAX, KOLKATA II, KOLKATA
VS
WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD.
BEFORE :
THE HON'BLE JUSTICE SURYA PRAKASH KESARWANI
-A N D-
THE HON'BLE JUSTICE RAJARSHI BHARADWAJ
DATED : 1ST APRIL, 2024
Appearance :
Mr. Om Narayan Rai, Adv.
Mr. Prithu Dudheria, Adv.
...for appellant
Mr. J.P. Khaitan, Sr. Adv.
Mr. Sanjay Bhowmik, Adv.
Mrs. Swapna Das, Adv.
....for respondent
1. Heard Mr. Om Narayan Rai, learned senior standing Counsel for the
appellant along with Sri Prithu Dudheria, learned junior standing
counsel for the appellant and Sri J.P. Khaitan, learned senior counsel
assisted by Mr. Sanjay Bhowmik, learned counsel for the
respondent/assessee.
2. This appeal has been admitted on the following substantial question
of law:-
"(i) Whether the learned Tribunal below committed substantial error
of law in reversing the order of the CIT (A) in respect of addition on
account of the accrued interest on loan and advances amounting to
Rs.901/- lakh without appreciating the fact that the assessee cannot
be permitted to adopt mercantile basis for payment of interest by it
and claim benefit of cash system in respect of interest receivable by
him."
3. The respondent/assessee is a Government financial corporation.
4. A Sum of Rs. Nine crore was added in the hands of the
respondent/assessee invoking Section 145 of the Income Tax Act,
1961. The CIT (A) affirmed the order of the assessing officer following
the order of the ITAT in the case of Ms. K.S. Mehta (HUF) Vs.
Commissioner of Income-tax (2005) 278 ITR 59 for the assessment
years 1986-87, 1987-88 and 1988-89 decided on 16.08.1999.
5. The findings recorded by the Tribunal in the impugned order is
reproduced below :-
"4. We have considered the rival submissions and we have carefully
considered the contention of the Ld. D.R. as well as the Ld. Counsel
for the assessee before us. We do find that the assessee is not to be
taxed on income which has not been earned by him. In the
published accounts subject to Govt. Audit, the assessee clearly
indicated its accounting policy with respect to accounting of interest
and advances given to borrowers which is to be taken into
consideration on receipt basis. As per our observation this income
has been accounted for only for the purpose of maintaining control
over the borrowers' account by intimating them the amount of
interest they own to the assessee. With a view to improving the
viability of banks, financial institutions, State Financial Corporation
interest on sticky loans shall be charged to tax only in the year in
which the interest has actually been received or in credited to P/L
A/c whichever is earlier. We, therefore directed the A.O. to tax the
amount of interest only that amount which has been received during
the year following the direction of the Tribunal in the case of the
assessee for earlier years as enumerated by taxing authorities in
view of the guidelines being followed by them in Circulars of CBDT
with respect to treatment of such income from time to time.
5. In the result the appeal is allowed as indicated above."
6. It is not disputed before us by learned Counsel for the appellant that
in earlier assessment years, similar direction has been issued by the
I.T.A.T. as issued in the impugned order, which has been
implemented by the appellant. That apart, we find that the order of
the CIT(A) is based on the order of the I.T.A.T. in the case of K.S.
Mehta, which was set aside by this Court by judgment and order
dated 11.02.2005 in I.T.A. No. 35 of 2000 reported in (2005) 278 ITR
59.
7. In view of the aforesaid, we do not find any merit in this appeal. The
appeal deserves to be dismissed and is hereby dismissed.
8. The substantial question of law as quoted above is answered in
favour of the assessee and against the revenue on the facts of the
present case.
(SURYA PRAKASH KESARWANI, J.)
(RAJARSHI BHARADWAJ, J.)
sg/GH.
