Satish Chandra, J. - (1.) THIS appeal has been filed by the Revenue -Appellant under Section 260 -A of the Income Tax Act, 1961 against the judgment and order dated 31st July, 2007 passed by the Income Tax Appellate Tribunal, Lucknow Bench in ITA No. 293/LUC/2007 for the assessment year 2001 -2002.
(2.) THIS appeal was admitted by a Bench of this Court on 30.08.2011 on the following substantial question of law: Whether the Income Tax Appellate Tribunal has erred in not deciding the issue as raised by the Appellant before it regarding the addition made by the Assessing Officer to the income of the Assessee Society on account of interest accrued on loan given to its Treasurer without making any provision for accrued interest thereon in its books of accounts in violation of Section 13(3) of the Income Tax Act. The brief facts of the case are that the A.O. has denied exemption under Section 11 of the Income Tax Act, 1961 for the original assessment made under Section 143(3) in view of the provision of Section 13(1)(c) & 13(2)(a) of the Income Tax Act, as the Assessee Society gave interest free loan of Rs. 2,37,500/ - to Sri Virendra Singh, Treasurer of the society and no provision for accrued interest was made. The Assessee is following the mercantile system of account. So accrued interest of the loan in question should have been accounted for the relevant assessment year. Finally, the A.O. added the surplus to the total income of Assessee Society. However, in First Appeal, the CIT (A) has deleted the addition.
(3.) THE Tribunal by the impugned order upholds the order of First Appellate Authority by relying upon the ratio laid down in the case of Vijeta Educational Society in I.T.A. No. 425/Luc/05 dated 16.11.2005, wherein it was observed by the Tribunal that the terms, on which the loan was given, were exactly identical as they are in the present case. The relevant observation of the Tribunal is reproduced as under:;