AO sought to make addition of notional interest income accrued at 17.95% on outstanding loan of Rs. 21,40,00,000 advanced by assessee to group concern. Assessee contended that there were remote chances of recovery of even principal amount. AO rejected this and made addition on the ground that assessee was following mercantile system of accounting. Held: In view of long-drawn litigation between assessee and the ground concern remote chances of recovery of amount advanced, management of assessee company vide Board Resolution, decided to write off principal sum advanced as bad debt and since, principal amount of loan/advance was doubtful of recovery, interest thereon could not be accrued and added to income even under mercantile system of accounting.
IN THE ITAT, DELHI 'F' BENCH, NEW DELHI (THROUGH VIDEO CONFERENCING)
N.K. BILLAIYA, A.M. & SUCHITRA KAMBLE, J.M.
Red Fort Shahjahan Properties (P) Ltd. v. ACIT
ITA No. 742/Del/2020
A.Y. 2016-17
20 August, 2020
Assessee by: Ajay Vohra, Sr. Departmental Representative, Gaurav Jain, Advocate
Revenue by: Jagdish Singh, Sr. Departmental Representative
N.K. Billaiya, A.M.
This appeal by the assessee is preferred against the order of the Commissioner (Appeals)-7, New Delhi dated 10-1-2020 pertaining to the assessment year 2016-17.
2. The solitary grievance of the assessee is that the Commissioner (Appeals) erred in confirming the addition of Rs. 3,84,13,000, being notional interest income, computed @17.95% on loan of Rs. 21.40 crores advanced to group concern M/s. Red Fort Akbar Properties (P) Ltd.
3. The representative of both the sides were heard at length, the case records carefully perused and with the assistance of the learned Counsel, we have considered the relevant documentary evidences brought on record in the light of rule 18(6) of ITAT Rules. Judicial decisions duly considered.