Satish Chandra, J.

1. THE assessee-firm carries on money-lending business. It had some time back advanced a sum of Rs. 2 lakhs to Messrs. Kapoor Hosiery Factory (Pvt.) Ltd., Calcutta. In the previous year relevant to the assessment year 1969-70, a sum of Rs. 18,191 accrued as interest due on this loan. The accounting period of the debtor-company ended on January 31, each year. On January 31, 1968, it credited the account of the assessee with the aforesaid amount of interest. On February 2, 1968, the debtor-company addressed a letter to the assessee stating that the company was undergoing great difficulty and was not in a position to pay the interest. It requested the assessee to forgo the interest charges for that year. On February 8, 1968, the assessee replied :

"We appreciate your difficulty in payment of interest for the year ending January 31, 1968, in view of the continued losses suffered by your firm and considering our old relations we agree to forgo the interest amounting to Rs. 18,191.22 for the year ending January 31, 1968. Please note that it will not be possible to accommodate you in future."

2. ON receiving this reply, the debtor-company made a reverse entry adj