Real income principle excludes interest on sticky advances from tax when credited only to an interest suspense account.

Interest credited on doubtful or sticky advances to an interest suspense account is not taxable where recovery has become doubtful and the amount does not represent real income. The Tribunal applied the real income principle and followed its earlier view that mere credit entries in a suspense account do not create taxable accrual when the underlying loan is not yielding recoverable interest. On that basis, the addition was deleted and the assessee succeeded.

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Issues: Whether interest credited to an interest suspense account on sticky advances constituted taxable income of the assessee.

Analysis: The assessee credited interest on doubtful loans to an interest suspense account and did not treat it as income. The Tribunal accepted the view that only real income can be taxed and relied on its earlier decision holding that interest on sticky advances does not represent real income when recovery has become doubtful.

Conclusion: The interest credited to the interest suspense account was not real income and could not be brought to tax; the additions were deleted in favour of the assessee.

Ratio Decidendi: Interest on doubtful or sticky advances, when credited only to an interest suspense account and not representing real income, is not taxable as income.

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