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2013 (8) TMI 476 - ITAT CHANDIGARHInterest on outstanding loans - Accrual of interest on NPA - Scheduled Bank - Special provisions u/s 43D - Held that:- loans were advanced since 1999 and they had become NPAs against which suits for recovery were filed by the assessee in various Courts. In view of the assessee having neither received the loans or part thereof nor any interest therefrom, no interest was provided in the books of account as the recovery of the loans itself had become difficult. Admittedly, the assessee was following mercantile system of accounting under which income is to be recognized when the same accrues irrespective of the fact whether the same is received or not. However, in respect of the interest due on NPAs special provisions are provided under section 43D of the Act, which is non obstante clause and in case of NPAs i.e. the debts recovery of which had become bad, interest is to be provided on this recovery, i.e. the year in which it is actually received by the institution or the bank or other body or when it is charged to the Profit & Loss Account whichever is earlier. The provisions of section 43D of the Act override other provisions of the Act and said provisions are applicable in the case of assessee, being Scheduled Bank. Once the loans had become NPAs and the assessee had opted to account for the interest on such NPAs only on recovery of the same, the law recognizes such treatment of interest on NPAs as valid in view of the provisions of section 43D of the Act - No addition - Decided against Revenue.
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