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Under Income tax Act any income is taxable at the point of its accrual irrespective of actual receipt. For any non-receipt the only action possible of income recovery would be to claim a write off in the year such debt is proved as irrecoverable to the satisfaction of the assessing officer.

On this crucial question on the time of income accrual the Delhi High Court is the first to apply the Supreme Court ruling in the case of Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746.

The brief relevant facts in the case before the High Court in the Commissioner of Income-tax Vs. Modi Rubber Ltd. (No.1) (230ITR817) were that the assessee had sold goods on credit to a customer. The buyer did not promptly pay the sale price. On the amount outstanding the assessee-company raised a debit note for interest and taken such credit to the profit and loss account. The debtor did not honor the debit notes raised by the assessee-company. In the subsequent year amount was actually waived off by directors and therefore written off in the books.

The assessee claimed exclusion of such income credited in the preceding year in the course of assessment.

Both the Assessing Officer and the Commissioner of Income-tax (Appeals) held that so far as the assessment year in which the debit entry was made is concerned, the amount of interest would be treated as an income accrued and then it could be treated as a bad debt in the year in which it was written off.

Reversing the stand taken earlier the Tribunal held that the mere unilateral act of the assessee debiting the books of account with the amount of interest, the liability for payment whereof was not accepted or agreed to by the debtor, did not amount to income really accrued to the assessee

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