2010 (10) TMI 1148

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....r the Assessment Year 2001-02, the respondent assessee had filed its return declaring loss at Rs. 28,55,795. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had not recognized interest on Non-Performing Assets (NPA) amounting to Rs. 19.57 lakhs. According to the AO, since the assessee was following mercantile system of accounting, the loan advanced by it had....

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....l preferred by the Revenue before the Income Tax Appellate Tribunal has been dismissed. Challenging the impugned order passed by the Tribunal, the Revenue has filed the instant appeal under Section 260A of the Income Tax Act. The question, in these circumstances which arises for consideration is as under: Whether the ITAT was correct in law in deleting the addition of Rs. 19,57,000 mad....

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....t, we need to emphasise that the 1998 Directions has nothing to do with the accounting treatment or taxability of Rs. `income'` under the IT Act. The two, viz., IT Act and the 1998 Directions operate in different fields. As stated above, under the mercantile system of accounting, interest / hire charges income accrues with time. In such cases, interest is charged and debited to the account of ....

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....aid case by the Supreme Court, in each case, the assessee has to prove that the interest is not recognized or taken into consideration due to uncertainty in collection of the income. It is for the AO to accept the claim of the assessee under the IT Act or not to accept it, in which case there will be add back even under ?real income? theory. In the present case, however, simply on the basis that t....