2019 (7) TMI 1740

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....9 & 571(Mds)/2005 and 1118(Mds)/2007 for the assessment year 2001-02, 1999-2000 and 2000-2001. 2.We have heard Mr.Karthik Ranganathan, learned Senior Standing Counsel appearing for the appellant/revenue and Mr.G.Baskar, learned counsel appearing for the respondent/assessee. 3.The appeals have been admitted on the following substantial questions of law : (1) Whether on the facts and circumstances of the case, the Tribunal was right in deleting the addition of Rs. 3,51,917/- being interest accrued on non-performing assets, even though the assessee is following a mercantile system of accounting? (2) Whether on the facts and circumstances of the case, the assessee is entitled to follow a hybrid system of accounting by sh....

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....took note of the decision in the case of Southern Technologies Ltd. which was relied on by the revenue and while interpreting the provisions of the Income Tax Act and the RBI Directions held in favour of the assessee. 7.At this juncture, it would be worthwhile to take note of the following paragraphs of the decision of the High Court of Delhi in the case of Vasisth Chay Vyapar Ltd.: "18. ......................However, when we examine the issue involved therein minutely and deeply in the context in which that had arisen and certain observations of the Apex Court contained in that very judgment, we find that the proposition advanced by Mr. Sabharwal may not be entirely correct. In the case before the Supreme Court, the assessee a ....

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....ion of revenue by NBFC. ............. Therefore, subject to the requirements of the IT Act, profits to be assessed under the IT Act have got to be Real Profits which have to be computed on ordinary principles of commercial accounting. In other words, profits have got to be computed after deducting Losses/ Expenses incurred for business, even though such losses/ expenses may not be admissible under Sections 30 to 43D of the IT Act, unless such Losses/ Expenses are expressly or by necessary implication disallowed by the Act. Therefore, even applying the theory of Real Income, a debit which is expressly disallowed by Explanation to Section 36(1)(vii), if claimed, has got to be added back to the total income of the assessee because the....