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2019 (4) TMI 378 - BOMBAY HIGH COURTAccrual of income - real income theory - Interest on NPAs to be taxed on accrual basis - HELD THAT:- Delhi High Court in case of CIT Vs. Vasisth Chay Vyapar Ltd [2010 (11) TMI 88 - DELHI HIGH COURT] held that interest on NPAs cannot be taxed on accrual basis. It was noted that NBFC would be governed by the directions issued by the Reserve Bank of India and RBI directives provided that under certain circumstances, a loan or advance would be treated as NPA. The Court on the real income theory held that such interest would not be taxable. We notice that the decision of the Delhi High Court in case of Vasisth Chay Vyapar Ltd (supra) was carried in the appeal by the Revenue before the Supreme Court. The Supreme Court in the judgment reported in [2018 (3) TMI 56 - SUPREME COURT OF INDIA] approved the decision of the High Court and dismissed the appeal. Under these circumstances, this question is not entertained. Disallowance u/s 14A r.w.s 8D - HELD THAT:- Sub-section (2) of Section 14A provides that the Assessing Officer shall determine the amount of expenditure incurred in relation to income which is examined for tax if he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. The satisfaction of the Assessing Officer about the correctness of the expenditure offered for disallowance by the assessee therefore is a pre-condition. In the present case, we have perused the order of assessment in which the Assessing Officer had called upon the assessee to justify the limited disallowances voluntarily offered. The assessee made detailed representation inter alia pointed out that the assessee had not made any expenditure in the nature of administrative expenses. However, to avoid proceedings, a suo motu disallowance was made. AO did not in any manner reject this explanation of the assessee but merely proceeded to make disallowance by invoking Section 14A and applied Rule 8D which the Tribunal correctly reversed.
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