2016 (12) TMI 1709

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.... to as NPA) in the assessee's books. Consequent there to, interest receivable to the tune of Rs. 2,58,279/- was also not shown as amount receivable, on accrual basis. According to the A.O. as well as CIT(A), the provisions of Sec. 43D of the Act carves out an exception to the schedule banks: assessee being a non-scheduled Cooperative bank, interest receivable on NPAs is assessable to tax on accrual basis. 3. The case of the assessee before the A.O. as well as the CIT(A) was that interest on performing accounts and non-performing accounts are disclosed in significant accounting policies under revenue recognition and assessee followed consistently the same methods; thus, the interest on non-performing assets is credited during the year to th....

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....he RBI Guidelines are applicable to the assessee. It is the case of the assessee that in view of the RBI Guidelines, it cannot charge interest on accrual basis and that following the theory of the real income, taxabil ity of any notional income like accrued interest on NPAs would not arise. It has also been contended that even otherwise in view of the CBDT Circular bearing F No.201/21/844- ITA-II dated 09-10-1984, interest on accrual basis is not taxable if not received for three years even through credited to the suspense account." The court observed that though RBI Act may not override the provisions of Income Tax Act. Income has to be recognised in terms of prudential norms by applying the real income theory. 6. The revenue contended, ....