LAKSHMI COMMERCIAL BANK Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Nobody has appeared on behalf of the petitioner. Under these circumstances, we had no option but to hear the learned counsel for the respondent -Revenue alone. Vide orders dated 28 -11 -1985 following two questions were framed to fee answered by this Court:

(2.) As is clear from the manner in which the first question of law is framed, the Assessee had taken into consideration interest income of Rs. 3,06,131 and even credited it in the Interest Suspense account. However, the reason for not carrying it forward to the profit and loss account was that there was some doubt about the recovery of the amounts advanced and therefore the interest amount charged on the aforesaid advances was credited to the Interest Suspense account as per the directions of the Reserve Bank of India.

(3.) The assessing authority however included this amount as income in the relevant assessment year on the ground that Assessee was maintaining its accounts on mercantile basis and therefore same hag to be taxed in view of Kerala High Court decision in State Bank of Travancore v/s. CIT [1977] : 110 ITR 336. We find that aforesaid judgment of the Kerala High Court has been affirmed by the Hon'ble Supreme Court which is reported as State Bank of Travancore v/s. CIT [1986] : 158 ITR 102 1. While affirming the judgment the Hon'ble Supreme Court inter alia observed that even if the amount is put in Interest Suspense account on the ground that the interest has accrued on sticky advances, to be treated as income when accruing to the mercantile system of accounting. In view thereof the first question is answered against the Assessee and in favour of Revenue.