ITAT upholds deletion of interest on sticky loans, citing mercantile accounting & judicial precedents.

The ITAT affirmed the Ld. CIT(A)'s decision to delete the addition of interest accrued on sticky loans and advances, citing previous judicial precedents and case laws in favor of the Assessee. The ITAT emphasized the importance of adhering to the mercantile system of accounting and reasonable certainty in recognizing income. The Revenue's appeal was dismissed, and the Ld. CIT(A)'s order was upheld.

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Issues:
Appeal against deletion of addition of interest accrued on sticky loans and advances.

Analysis:
The Revenue appealed against the deletion of an addition of interest accrued on sticky loans and advances by the Ld. CIT(A). The Revenue contended that under the mercantile system of accounting, all incomes must be included in the total income on an accrual basis. The Assessee had initially declared NIL income but later revised it, claiming set off of losses and income u/s. 115JB. The case underwent scrutiny, and the AR of the Assessee provided necessary details during the process. The TPO reviewed the international transactions without adverse findings. The Assessee argued that interest on sticky loans was not recognized due to RBI's Prudential Norms. The Assessee cited judicial precedents and a previous ITAT judgment in their favor. The Revenue disallowed the interest on sticky loans, adding it to the taxable income. The Ld. CIT(A) deleted the addition, partly allowing the Assessee's appeal.

The Revenue relied on the AO's order, while the Assessee's counsel supported the Ld. CIT(A)'s decision. The ITAT found the issue favorably settled in the Assessee's previous cases. Referring to a specific ITAT observation, the ITAT highlighted the importance of reasonable certainty for recognizing income under the mercantile system of accounting. The decision cited the Hon'ble Supreme Court's ruling on the treatment of interest income on sticky loans. The ITAT also noted that the Assessee had received favorable decisions in previous years and cited relevant case laws and judicial pronouncements. Consequently, the ITAT upheld the Ld. CIT(A)'s action of deleting the addition of interest accrued on sticky loans, dismissing the Revenue's appeal.

In conclusion, the ITAT affirmed the Ld. CIT(A)'s decision to delete the addition of interest accrued on sticky loans and advances, citing previous judicial precedents and case laws in favor of the Assessee. The ITAT emphasized the importance of adhering to the mercantile system of accounting and reasonable certainty in recognizing income. The Revenue's appeal was dismissed, and the Ld. CIT(A)'s order was upheld.

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