- (1.) This appeal was admitted by an order dated 22.5.2003 on the following substantial questions of law;- i) Whether the Tribunal was justified in law in holding that an enforceable right had accrued to the appellant in respect of late charges/interest for delay in payment of lease rent by the lessees and that the same was liable to tax as income and its purported findings in this behalf are arbitrary, unreasonable and perverse? ii) Whether on a true and proper construction of the lease agreement, between the appellant and Andhra Oxygen (P) Ltd. the Tribunal was justified in holding that lease rent accrued to the appellant even for the period after the expiry of the lease agreement and its purported findings in this behalf are arbitrary, unreasonable and perverse ? iii) Whether the Tribunal was justified in holding that in respect of the fixed deposit made by the appellant on March 16, 1991, interest for the period March 16, 1991 to March 31, 1991 accrued to the appellant even though no interest became due as on March 31, 1991 ?
(2.) This appeal is directed against the judgment and order of the learned Tribunal dated 13.2.2002, whereby and whereunder three appeals in relation to the assessment years 1991-92, 1992-93, 1993-94 and 1994-95 have been disposed of. Number of issues were raised and have been decided by the learned Tribunal, however, appellant has chosen to challenge decision rendered on the issue having nexus to the aforesaid questions.
(3.) The learned Tribunal has held that there has been accrual of income arising out the late charges and/or interest for delayed payment of the lease rent. Therefore, following mercantile system of accounting irrespective of the factum of receipt of the same this delayed payment surcharges has become an accrued income. Therefore, the same was added. Similarly, the learned Tribunal also held that there has been an accrual of income in relation to the payment of user of the equipment by the lessee after expiry of the lease agreement. The learned Tribunal held further that following the mercantile system of accounting the interest income on the fixed deposit before maturity be held to be an accrued income. Mr. Khaitan, appearing for the appellant drawing our attention to Clause 4 of the lease agreement entered into by and between the assessee with Andhra Oxygen Pvt. Ltd. submits that there cannot be any automatic accrual of income under the heading late charges @20% per month. It can only be realised as and when there would be any demand for payment. He also informs this Court his client being the lessor never demanded of the lessee for payment of the late charges in view of default in paying the timely instalment. He referring to a decision of the Supreme Court in case of (Commissioner Of Income Tax v. Shiv Prakash Janak Raj And Co. Pvt. Ltd.) reported in 222 ITR 583 , submits that accrual of income in this case would become matured only when on demand being made because clause 16 of the terms of the lease agreement provides for just realisation of late payment charges irrespective of system of accounting being mentioned. Accrual of income would become matured only on demand and just because realization of late payment charges is provided in terms of Clause 16 this cannot be treated to be income irrespective of system of accounts being maintained.;