IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 10TH JUNE 2008 / 20TH JYAISHTA 1930 ITA.No. 8 of 2005() ------------------- ITA.247/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ASESSEE. ----------------------------------- SHETH BROTHERS, ALAPPUZHA. BY ADV. SRI.A.KRISHNAN RESPONDENTS: ASSESSING OFFICER. ------------------------------- 1. THE DEPUTY COMMISSIONER OF INCOMETAX, CIRCLE I, ALAPPUZHA. 2. THE COMMISSIONER OF INCOME TAX(APPEALS) IV, KOCHI. 3. INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KOCHI. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) FOR R1 SRI.GEORGE K. GEORGE, SC FOR IT FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 10/06/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Appeal No.8 of 2005 .................................................................... Dated this the 10th day of June, 2008. JUDGMENT Ramachandran Nair, J. Heard counsel for the appellant and Standing Counsel for the Income Tax Department. The question raised is whether appellant is liable to pay tax on interest for the loans advanced to sister concerns and wife of one of the partners of a sister concern. We find from the Tribunal's order that the appellant has been consistently following mercantile system in charging interest from 1992-93 onwards. However, appellant claims to have changed the pattern of accounting to cash. On facts, Tribunal found that in view of the amendment to Section 145 with effect from 1.4.1997, appellant's claim is not maintainable. In other words, Tribunal held that having followed mercantile system of accounting for several years, appellant cannot now shift the stand and contend that no interest is being charged on the borrowers. We do not find any ground to interfere with the finding of the Tribunal because originally the advances were treated as loans by the appellant and interest was being charged. The appellant, therefore, cannot contend that appellant discontinued charging of interest without any claim 2 that interest on the loan cannot be recovered. No substantial question of law arises from the finding of the Tribunal. We, therefore, dismiss the appeal. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms