ITAT COCHIN BENCH
Kerala State Industrial Products Trading Corpn. Ltd.
V/s.
Assistant Commissioner of Income-tax,
IT Appeal NOS. 256 & 257 (COCH.) of 2009
[ASSESSMENT YEARS 2003-04 & 2004-05]
JUNE 8, 2012
ORDER
B.R. Baskaran, Accountant Member
The appeals of the assessee are directed against the orders passed by the Ld. CIT(A)-I, Trivandrum and they relate to the assessment years 2003-04 & 2004-05.
2. In both the years, the assessee is assailing the decision of the Ld. CIT(A) in confirming the addition of Rs. 34,65,000/- relating to the estimated accrued interest on certain loans advanced by the assessee to some other Kerala Government industrial undertakings on the direction of the State Government of Kerala.
3. The facts relating to the issue are stated in brief. The assessee-company is wholly owned by the Government of Kerala. The assessee is engaged in the business of marketing of products manufactured by M/s. Travancore Titanium Products Ltd. On the direction of Government of Kerala, the assessee advanced money to various other Government of Kerala undertakings aggregating to Rs. 2,20,50,000/-. Since the said advances have become sick, the assessee did not provide for interest income from such advances. However, the Assessing Officer took the view that the interest accrued on such advances have to be accounted, as the assessee is following the mercantile system of accounting. Accordingly, he estimated the interest income on such advances at Rs. 34,65,000/- and added it in both the years under consideration. Before the Assessing Officer, the assessee placed reliance on the Circulars issued by the Reserve Bank of India with regard to non-performing assets of banking institutions in support of its claim of non-accounting of interest income. However, the Assessing Officer took the view that the said Circulars are applicable only to the commercial banks and hence the assessee cannot take support from them. The addition made by the Assessing Officer in both the years was confirmed by the Ld. CIT(A). Hence, the assessee is in appeal before us.
4. We have heard the rival contentions and perused the record. The details of loans given to the undertakings owned by Government of Kerala are furnished by the assessee in its written submissions and the same is extracted below:-
