Notional interest income credited to the profit and loss account in compliance of Indian Accounting Standard (Ind AS) cannot be considered as real income in absence of contractual obligation of repayment.

12 ACIT vs. Kesar Terminals and Infrastructure Ltd.

TS-193-ITAT-2024(Mum)

A.Y.: 2018–19

Date of Order: 8^th March, 2024

Section 28

Notional interest income credited to the profit and loss account in compliance of Indian Accounting Standard (Ind AS) cannot be considered as real income in absence of contractual obligation of repayment.

FACTS

The assessee, a public limited company, engaged in the business of storage and handling cargo, had given an interest free loan to its wholly owned subsidiary, viz., Kesar Multimodal Logistic Limited. Though no interest was due as per the agreed terms, yet as per the requirement of Indian Accounting Standard, the assessee accounted for a sum of ₹2,76,81,947 as “notional interest” in the books of account and credited the same to its Profit & Loss Account.

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