Gokal Chand Mittal, J.

1. The Income-tax Appellate Tribunal (Chandigarh Bench) has referred the following question for our opinion:

" Whether, on the facts arid in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 1,24,000 made on account of accrual of interest ? "

2. The assessee used to carry on business of finance and hire purchase, but later on was ordered to be officially wound up under the orders of this court. For the assessment year 1969-70, the assessee filed a return declaring a loss of Rs. 2,60,322. During the course of assessment, the ITO noticed that there was an account in the name of Shri. B.K. Bedi showing a sum of Rs. 10,81,931 due from him as on 1st April, 1968, which was reduced to Rs. 10,17,981 as on 31st March, 1969, but no interest was charged on this account.

3. The ITO called for the explanation of the assessee for not charging any interest on the amount due from Shri B. K. Bedi. The assessees explanation was that the financial position of Shri Bedi was bad and there was no hope of recovery even of the principal amount and, therefore, it was not considered necessary to charge any interest and for that reason