TaxTMI 
TaxTMI 
2015 (4) TMI 760
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....ovide such benefit to the assessee bank and as such, the provisions of section 43D amended w.e.f. 1.4.2000 overruled the Court decisions / circulars ? 02. The assessee is a cooperative bank engaged in carrying on the business of banking. In the course of assessment proceedings, the Assessing Officer noticed that the assessee had not credited in the profit and loss account interest receivable to the extent of Rs. 10,49,668/-. The Assessing Officer was of the view that the assessee was following mercantile system of accounting and therefore interest that has accrued on loans and advances had to be accounted as income in the books of account. The assessee was accordingly called upon to explain as to why interest receivable has not been credited to the profit and loss account. The assessee submitted that as per the norms prescribed by RBI interest on non-performing assets need not be recognized as income in the books of account. According to the assessee it was required to follow the norms prescribed by RBI and accordingly not accounted for interest receivables on non-performing assets. The assessee also pointed out that as and when the interest is realized it would be recognized as i....
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....n case of income of public financial institutions, public companies, etc.-Notwithstanding anything to the contrary contained in any other provision of this Act,- (a) in the case of a public financial institution or a scheduled bank or a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts; (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. 09. Section 43D of the Act was b....
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....as an income accrued to the assessee. Contrary to this recognized principle, this section has prescribed that an income by way of interest shall be chargeable to tax in the previous year in which it is credited. The other deviation from the said accepted principle of accountancy is that an income by way of interest shall be chargeable to tax in the previous year in which it is actually received. The Act says that the incidence of 'credit' or "actually received", whichever is earlier is to be taken into account for the purpose of chargeability of income by way of interest. Simultaneously, it is noteworthy that this section is an overriding section because the opening words are "notwithstanding anything to the contrary contained in any other provisions of this Act". Therefore, in spite of anything contained in the Act, the provisions of this section shall override those provisions. Once the statute has categorically made a law in respect of public financial institutions that interest is chargeable to tax either in the year in which credited or actually received, whichever is earlier, then it is compulsory to abide by the said rule. No scope is left with the Revenue authorities to ign....
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....n accrual or on receipt basis is the question before us. Let us first consider the applicability of the decisions relied upon by the learned DR. The Hon'ble Supreme Court in the case of Southern Technologies Ltd was considering the issue of allowability of provisions of NPA u/s 36(1)(vii) of the Income-tax Act while the case before us is with regard to the accrual of interest on NPA's and recognition of the same on receipt basis and not on accrual basis. Further, the Hon'ble Supreme Court, while holding that the RBI directions are only norms and act in a different field as against the Income-tax Act, has also observed that collectability of a receipt is different from accrual and hence in each case, the assessee has to prove that interest is not recognized or taken into account due to uncertainty in calculation of ITA No.257/B/12 the income and it is for the AO accept the claim of the assessee under the IT Act or not to accept it, in which case there will be added- back even under the real income theory. It was also observed that the Income-tax Act is tax on real income i.e the profits arrived at on commercial principles subject to the provisions of Act but a provision for doubtful....