AI Drafter 
TaxTMI 
TaxTMI 
2012 (10) TMI 1118
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....and 2004-05. Both the appeals are heard together and disposed off by this common order as the issue involved in the appeals is common. 2. In both these appeals, the issue involved is common wherein the CIT (A) has deleted the addition made by the Assessing Officer on account of amount debited on reversal of income by changing the method of accounting from accrual to cash basis and also that the amount was not written off in the books of account as irrecoverable. 3. The Assessing Officer made the addition of Rs. 2,09,45,989/- towards the interest on sticky loans and advances. The CIT (A) deleted the addition by holding as under :- "5.15 I have considered the submissions of the appellant and the findings of the AO and the facts on re....
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....er :- "13. Admittedly the assessee is a non-banking financial company governed by the provisions of the RBI Act and the NBFCs Prudential Norms (Reserve Bank) Directions, 1998. Section 45Q of the RBI Act reads as under: - "45Q Chapter III-B to override other laws - The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." Thus, this section takes precedence over any other law and, therefore, section 145 has to be read subject to provisions in the RBI Act. The assessee company being NBFC was bound by the provisions of RBI Act. The RBI has issued a notification, in exercise of its....
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....ing anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." It is not in dispute that on the application of the aforesaid provisions of the RBI and the directions, the ICD advanced to M/s Shaw Wallace by the assessee herein had become NPA. It is also not in dispute that the assessee company being NBFC is bound by the aforesaid provisions. Therefore, under the aforesaid provisions, it was mandatory on the part of the assessee not to recognize the interest on the ICD as income having regard to the recognized accounting principles. The accounting principles which the assessee is indubitably bound to follow are AS-9. The relevant portion of the said....
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....e is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized." In this scenario, we have to examine the strength in the submission of learned counsel for the Revenue that whether it can still be held that income in the form of interest though not received had still accrued to the assessee under the provisions of the Income-tax Act and was, therefore, exigible to tax. Our answer is in the negative and we give then following reasons in support: (1) First of all we would discuss the matter in the light of the provisions of the I.T. Act and to examine as to whether in the given circumstances, interest income has accrued to the assessee. It is stated at the cost of repetiti....
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....the ICD had become NPA and on such NPA where the interest was not received and possibility of recovery was almost nil, it could not be treated to have been accrued in favour of the assessee. As noted above, Mr. Sabharwal, argued that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not the RBI Act which was the accounting method that the assessee was supposed to follow. We have already held that even under the Income-tax Act, interest income had not accrued. Moreover, this submission of Mr. Sabharwal is based entirely on the judgment of the Supreme Court in the case of Southern Technology [2010] 320 ITR 577. No doubt, in first blush, reading of the judgement gives an indicat....