TaxTMI 
TaxTMI 
2015 (4) TMI 142
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....t it was receivable and was not actually received. (2) That on the facts and circumstances of the case, ld. CIT(A) has erred in law in deleting the addition of Rs. 19,00,000/- received by the assessee as interest from M/s. ISG Traders Ltd. and Rs. 3,00,000/- received from M/s. Davenport & Co. Pvt. Ltd. (3) That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing. 2. Issues involved in grounds 1 & 2 are same. Assessee, a Company registered as a non-banking financial company by Reserve Bank of India, had filed its return for the impugned assessment year declaring income of Rs. 65,352/-. During the course of assess....
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.... the said prudential norms prohibited recognition of interest on loans which remained overdue for more than six months. Even otherwise, as per the assessee, there was no real income or notional interest income, accruing to it. 3. However, Assessing Officer was not impressed by the above explanation. According to him, the two companies had taken loan from the assessee and charged interest in their respective accounts and also deducted tax at source thereon. Such tax at source was credited by them into the Government account. Therefore, as per the Assessing Officer, the concerned parties had confirmed, interests due to the assessee. Assessee was following mercantile system of accounting. Hence, it was bound to show the interest accrued on th....
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....ooks, deducting tax at source thereon, and crediting such tax to the Government account. Assessee had never made any effort for realizing the amounts due from the concerned companies. Assessee had not recalled the loans. Relying on the decision of the Hon'ble Apex Court in the case of Southern Technologies Ltd. -vs.- JCIT (2010) 320 ITR 577, ld. D.R. submitted that Non-Banking Financial Companies Prudential Norms issued by the Reserve Bank of India would not override the provisions of the Income Tax Act, which stipulated recognition of income on accrual based, once mercantile system was followed. Therefore, according to him, ld. CIT(Appeals) fell in error in deleting the addition. 7. Per contra, ld. AR submitted that the decision of th....
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....d that only oral communication was there. What we find from the record is that the loan to M/s. Davenport & Co. Pvt. Ltd. was given prior to financial year 2001-02 and the loan to M/s. ISG Traders Ltd. was given on 16.05.2002. Despite no interest being received by the assessee, it had not taken any legal step for recalling the amounts from the said concerns. 9. Non-Banking Financial Companies Prudential Norms (Reserve Bank) as per the Notification No. DFC.119/DG(SPT)-98 dated 31.01.1998 states at Rule 3 that income including interest/discount shall be recognized only when it is actually realised if a loan is considered as non-performing asset. A non-performing asset has been defined as an asset in respect of which interest has remained ove....
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....; (f) any dues on account of sale of assets or services rendered or reimbursement of expenses incurred, which remained overdue for a period of six months or more; (g) the lease rental and hire purchase instalments, which has become overdue for a period of twelve months or more; (h) in respect of loans, advances and other credit facilities (including bills purchased and discounted), the balance outstanding under the credit facilities (including accrued interest) made available to the same borrower/beneficiary when any of the above credit facilities becomes non-performing asset: Provided that in the case of lease and hire purchase trans....
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....al principle, interest income had definitely accrued to the assessee. The concerned companies were charging interest in their respective accounts, deducting tax at source and also remitting such tax to the Government account. No doubt Hon'ble Delhi High Court in the case of Vasisth Chay Vyapar Limited (supra) had held that, once Inter-Corporate Deposits had become non-performing asset and possibility of realising interest was almost nil, no interest could be treated as accrued to the assessee. However, the loans given here by the assessee, were not Inter-Corporate Deposits. There is nothing on record to show that possibility of realising the interest was nil. Ld. Counsel of the assessee had admitted that the said companies were having s....