Appeal allowed, Tribunal's order set aside, matter remanded for fresh consideration. Substantial question of law left open. No costs awarded.

The appeal was allowed, the Tribunal's order was set aside, and the matter was remanded to the Assessing Officer for fresh consideration based on the observations and directions provided in the judgment. The substantial question of law was left open, and no costs were awarded.

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Issues:
- Inclusion of interest income on 'non-performing assets' under Accounting Standards AS-9 read with Government Notification on Accounting Standards SO 69 dated 25.01.1996 in pursuance of Section 145(2) of the Income-tax Act.

Analysis:
1. The appellant, a non-banking financial company, filed its return for the assessment year 2004-05 admitting a total income of Rs. 36,63,237. The Assessing Officer, upon scrutiny, noted non-recognition of Rs. 76.44 Lakhs due to market loans being overdue. The assessment was completed disagreeing with the appellant's stand.

2. The appellant's appeal before the Commissioner of Income-tax (Appeals) and subsequently before the Tribunal was dismissed. The Tribunal referred to the CIT(A)'s reliance on a previous decision and the circulars issued by the Reserve Bank of India and the Central Board of Direct Taxes.

3. The circular issued by the Reserve Bank of India in 1998 defined 'non-performing asset' as an asset with overdue interest for six months. The Ministry of Law, Justice, and Company Affairs issued a notification in 2001 defining 'non-performing asset' as an account with unrealized interest or loan installment for 12 months.

4. The Tribunal's decision was influenced by a previous case involving income recognition from non-performing assets. The Tribunal's application of the decision was challenged based on the specific reference to AS-9 in the assessment order and the statutory directions issued by the Reserve Bank of India.

5. The Tribunal's reference to the appellant's previous case for the assessment year 2003-04 and a decision related to Section 36(1)(vii) of the Act was deemed inapplicable to the current case. The Court clarified the nature of directions issued by the Reserve Bank of India under Section 45JA of the Act.

6. The appeal was allowed, the Tribunal's order was set aside, and the matter was remanded to the Assessing Officer for fresh consideration based on the observations and directions provided in the judgment. The substantial question of law was left open, and no costs were awarded.

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