SUHAS CHANDRA SEN, J. ( 1 ) THE Tribunal has referred the following question of law under Section 256 (1) of the Income-tax Act, 1961 :"whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the accrued interest on advances to Brahmachari Research Institute (P.) Ltd. amounting to Rs. 41,534 for the assessment year 1971-72 and Rs. 43,240 for the assessment year 1972-73 was the assessee's income liable to tax under the Income-tax Act, 1961. " ( 2 ) IN this case, the assessment years involved are 1971-72 and 1972-73. The assessee had made various advances to Brahmachari Research Institute (P.) Ltd. at interest payable at the rate of 6 per cent. per annum. No interest on these advances were shown by the assessee in his income-tax return for the relevant assessment years. The case of the assessee is that as and when the interest was received, he disclosed this in his return. As no interest was received in these years, he did not show this as income in his returns. The Income-tax Officer assessed the interest due in the hands of the assessee on accrual basis. There is no finding that the accounts were maintained by the assessee on accrual basis. The only thing that has been held against the assessee is that Brahmachari Research Institute (P.) Ltd. used to maintain its accounts on mercantile basis and had shown this liability to pay interest on accrual basis in its accounts. ( 3 ) IF Brahmachari Research Institute (P.) Ltd. maintained its accounts on mercantile system, it does not follow that the assessee must be assessed on mercantile basis, unless it is shown that he had also maintained his accounts on mercantile basis. The assessee's contention is that in the past years also he had shown receipts on cash basis as and when interest was received and tax was levied accordingly. ( 4 ) THE Appellate Assistant Commissioner directed deletion of the inclusion of the interest on the ground that in the past as and when interest had been received, it had been included as the assessee's income for the relevant assessment year. ( 4 ) THE Appellate Assistant Commissioner directed deletion of the inclusion of the interest on the ground that in the past as and when interest had been received, it had been included as the assessee's income for the relevant assessment year. A factor that had to be taken into consideration was the poor financial state of Brahmachari Research Institute (P.) Ltd. ( 5 ) THE Tribunal, however, took the view that what happened in the earlier assessment years will not act as estoppel against consideration on merits of whether the accrued interest was liable to assessment. It was not under dispute that even during the previous years relevant to the two assessment years under consideration, further advances were made by the assessee to Brahmachari Research Institute (P.) Ltd. The accrued interest on these advances was credited in the account books of Brahmachari Research Institute (P.) Ltd. ( 6 ) IT has not been found by the Tribunal that the assessee did not follow the cash system of accounting. Until and unless it is found that the asses-see maintained his accounts on accrual basis, the interest cannot be added back to the income of the assessee on the basis' of an accrued right to receive the interest. ( 7 ) ON behalf of the Revenue, it was argued that even when an assessee maintains accounts on cash basis, he is liable to pay tax on the accrued interest. In support of his contention, he has relied on the case of CIT v. A. Gajapathy Naidu. There, the scope and effect of Section 4 (1) (b) (i) of the Indian Income-tax Act, 1922, came up for consideration before the Supreme Court. But that was a case where the assessee had kept his accounts on mereantile system. That the assessment will be made on accrual basis was not in dispute in that case. We fail to see the relevance of this case to the controversy now before us. ( 8 ) THE question is, therefore, answered in the negative and in favour of the assessee. The Revenue must pay the costs of this reference assessed at 60 G. Ms.