Tamil Nadu Small Industries Development Corporation Ltd. vs Commissioner of Income Tax

N. V. Balasubramanian, J.—This is a tax case reference at me instance or the assessee and the following question of law has been referred

to us by the Appellate Tribunal for the assessment year 1978-79.

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the accrued interest on hire purchase of machinery on

loans and penal interest are liable to be included in the total income, notwithstanding the fact that the due dates of payment fell after 31st of March

of the relevant previous year ?

The point that arises in the question of law referred to us is whether the accrued interest on hire purchase of machinery as well as the penal

interest is liable to be included in the total income of the assessee for the assessment year 1978-79. A similar question of law came up for

consideration in the assessee''s own case in T. C. No. 1102 of 1983 and this court in its judgment dated February 17, 1998 ( Tamil Nadu Small

Industries Development Corporation Ltd. Vs. Commissioner of Income Tax, ), has held that the accrued interest on hire purchase of machinery

loan as well as the penal interest is liable to be included in the total income of the assessee on the basis that both the amounts became due during''

the previous year relevant for the assessment year.

Mr. P. B. Sampathkumar, learned counsel for the assessee, submitted that he has raised the plea before the Tribunal on an appeal for some

other assessment year that the assessee was maintaining the cash system of accounting and the Tribunal also accepted the case of the assessee for

that year and, therefore, the amounts are not liable to be included in the assesment. However, it seems that the Tribunal in the instant case has

rejected such a plea and held that the assessee was following the mercantile system of accounting and since it was found that the assessee was

following the mercantile system during the assessment year in question, the accrued interest due and the penal interest is liable to be included in the

total income of the assessee for the assessment year 1978-79.

Learned counsel appearing for the assessee also submitted that the matter should be remitted to the Appellate Tribunal. We are unable to

accept the contention of learned counsel for the assessee in view of the clear finding of the Appellate Tribunal in the instant case that the assessee

was following the mercantile system of accounting and hence we are of the opinion that the earlier order made in T. C. No. 1102 of 1983, dated

February 17, 1998 ( Tamil Nadu Small Industries Development Corporation Ltd. Vs. Commissioner of Income Tax, ) would apply to the facts of

this case. Hence, we answer the question of law referred to us in the affirmative and against the assessee. However, there will be no order as to

costs.