2017 (2) TMI 399

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....11. Since common issue arises for consideration in both the appeals, we heard both the appeals together and disposing of the same by this common order. 2. The only issue arises for consideration in both the appeals is with regard to the assessment of income on the non-performing assets. 3. Shri Supriyo Pal, the learned Departmental representative, submitted that the assessee-co-operative bank has not offered interest to the extent of Rs. 1,49,76,159 for the assessment year 2009-10 and Rs. 3,01,452 for the assessment year 2010-11. The assessee claimed before the Assessing Officer that a sum of Rs. 7,49,25,165 was overdue from the customers and the assessee could not recover the interest. Since the principal amount advanced by the asses....

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....owing mercantile system of accounting, therefore, the interest on the amount advanced has to be recognised on accrual basis. According to the learned Departmental representative, the prudential norms framed by the Reserve Bank of India cannot override the provisions of the Income-tax Act. On the basis of regulations framed by the Reserve Bank of India, the assessee may plead that the interest on the non- performing asset was not accrued to the assessee. However, under the Income-tax Act, the assessee is deemed to have received the income since the same was accrued to the assessee. In other words, the assessee has right to recover the money through court of law. 5. On the contrary, Shri R. Subramanian, the learned representative for the a....

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....ts. It is a well-settled principle of law that the Income-tax Act being a special enactment for assessment of income, levy of tax thereon and collection of tax, the same would prevail over other legislations. In other words, Income-tax Act would prevail over the regulations framed by Reserve Bank of India. In the case before us, the assessee was systematically following the accounting method with regard to the non-performing asset. When the advances are classified as non-performing assets, the assessee was continuously following a practice of recognising the interest on receipt basis. This method of accounting continuously followed by the assessee is not in dispute. When the advances were classified as non-performing assets and the assessee....