Section 36 of Income Tax Act, 1961—In the instant case, there were two issues raised in the appeal; one with respect to the addition made of interest receivable from Kerala State Horticultural Corporation (Horticorp) and the other, the question of disallowance of brought forward business loss as arrears of depreciation.

Held that—The Board decided no material change during the year, except on two issues one of which is relevant for the consideration in this appeal. The Board had while continuing under the mercantile system, decided to provide no interest accrued on the loan to the Horticorp. Having followed the mercantile system of accounting, a decision of the Board not to show the interest receivable, would not absolve the liability, since under the mercantile system, interest is deemed to have accrued in the previous year to the assessment year. We do not see any reason to interfere with the order of the Income Tax Appellate Tribunal. We, hence, dismiss the appeal.[THE STATE FARMING CORPORATION OF KERALA LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, KOLLAM AND THE COMMISSIONER OF INCOME TAX (APPEALS) , KOCHI] [2018] [7] [ITCD Online] [87] [KERALA HIGH COURT]