Tax deduction on NPA interest cannot follow later prudential guideline changes; Rule 6EB remains the controlling tax prescription.

The Delhi HC held that de-recognition of interest on NPAs could not be claimed by automatically applying amended National Housing Bank guidelines, because section 43D(b) and Rule 6EB form a self-contained tax computation scheme. The phrase "having regard to" in section 43D(b) does not incorporate every later amendment to the regulator's guidelines into the income-tax rule. Prudential income-recognition norms for accounting purposes cannot override the statutory basis for computing taxable income, and the real income theory cannot displace that prescription. Deduction was therefore confined to the categories specifically covered by Rule 6EB.

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Issues: Whether the assessee was entitled to de-recognition of interest on NPAs by applying the National Housing Bank guidelines after their amendment, or whether deduction had to be confined to the categories prescribed under Rule 6EB of the Income Tax Rules, 1962 read with section 43D(b) of the Income-tax Act, 1961.

Analysis: Section 43D(b) permits deferment of tax on interest from only such categories of bad or doubtful debts as are prescribed, having regard to the National Housing Bank guidelines. The expression "having regard to" does not mean that every later change in those guidelines is automatically incorporated into Rule 6EB. Rule 6EB and section 43D operate as a self-contained scheme for tax computation, and the non-obstante effect of section 36 of the National Housing Bank Act, 1987 does not override the manner in which taxable income is computed under the Income-tax Act. The distinction between prudential income-recognition norms and deductions for tax purposes was material, and the real income theory could not displace the statutory prescription.

Conclusion: The question was answered against the assessee and in favour of the Revenue; deduction could be claimed only in accordance with Rule 6EB.

Ratio Decidendi: Where a tax provision requires a prescription to be made "having regard to" another regulator's guidelines, later amendments to those guidelines do not automatically amend the prescribed tax rule, and prudential norms cannot override the statutory scheme for computation of taxable income.

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