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August 2011

Accrual of income: A.Y. 1997-98: Interest: Waiver of interest before end of accounting year: Interest does not accrue.

By K. B. Bhujle, Advocate
Reading Time 1 mins
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[Bagoria Udyog v. CIT, 334 ITR 280 (Cal.)] The assessee had advanced an amount to a party H. The assessee claimed that it had agreed to waive the interest and therefore no interest accrued for the A.Y. 1997-98. The Assessing Officer held that interest had accrued. Before the Commissioner (Appeals) the assessee produced the agreement dated 28-2-1997, whereby the assessee had agreed not to charge interest to H w.e.f. 1-4-1996. The Commissioner (Appeals) accepted the contention of the assessee and deleted the addition. The Tribunal restored the addition on the ground that the assessee had submitted that there was no business connection with H.

In appeal by the assessee, the assessee clarified that no such concession was made by the assessee. The Calcutta High Court allowed the assessee’s claim and held as under:

“(i) The Tribunal accepted the position of law that a waiver of interest was permissible. It further accepted the finding of the Commissioner (Appeals) that sufficient cause was shown by the assessee for non-production of the agreement before the Assessing Officer.

(ii) The addition of deemed interest was not justified.”

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