2007 (6) TMI 180

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....ber 1, 2003, this court admitted the appeal and formulated the following substantial question of law: "Whether, on the facts and circumstances of the case, the Tribunal was right in deleting the interest accrued on 'non-performing assets'?" 2. The facts leading to the above substantial question of law are as under: The assessee is a company engaged in the business of leasing, finance and hire purchase. The relevant assessment year is 1998-99 and the corresponding accounting year ended on March 31, 1998. The assessee-company filed its return of loss for the said assessment year on November 30, 1998, admitting a loss of Rs. 10,25,985. The return of loss was processed under section 143(1)(a) of the Income-tax Act (....

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....r found that the assessee-company is following the mercantile system of accounting and therefore both the income as well as the expenditure should be accounted on accrual basis. Further, the Assessing Officer was of the opinion that the guidelines issued by the Reserve Bank of India were for the purpose of financial discipline and investor protection and not for any change to be brought in the method of accounting. Finally, the Assessing Officer rejected the contention and completed the assessment under section 143(3) of the Act and determined the total income at Rs. 2,78,83,950. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) dismissed the appeal fil....

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....5. Heard the counsel. There is no dispute that the above issue has already been considered by this court by the unreported judgment-since reported in [2007] 293 ITR 350 (Mad). Further, the Tribunal also considered the issue whether the income has in fact accrued at all or not and held as follows: "In the case of non-performing assets, in the light of the notification issued by the Reserve Bank on classification of assets and the Accounting Standard-9 issued by the Institute of Chartered Accountants of India in the matter of recognising income, and also in the light of the various circulars issued by the Central Board of Direct Taxes, it is to be seen that the question of accrual can be considered only after recognising income from ....