GAPPUMAL KANHAIYALAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee-firm carries on money-lending business. It had some time back advanced a sum of Rs. 2 lakhs to Messrs. Kapoor Hosiery Factory (Pvt.) Ltd., Calcutta. In the previous year relevant to the assessment year 1969-70, a sum of Rs. 18,191 accrued as interest due on this loan. THE accounting period of the debtor-company ended on January 31, each year. On January 31, 1968, it credited the account of the assessee with the aforesaid amount of interest. On February 2, 1968, the debtor-company addressed a letter to the assessee stating that the company was undergoing great difficulty and was not in a position to pay the interest. It requested the assessee to forgo the interest charges for that year. On February 8, 1968, the assessee replied :

(2.) ON receiving this reply, the debtor-company made a reverse entry adjusting the amount of interest.

(3.) AT the instance of the assessee, the Tribunal has referred the following questions of law for the opinion of this court: