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2014 (10) TMI 740 - HC - Income TaxAccrual of interest on NPAs Mercantile system of accounting followed - Whether the Tribuanl was right in holding that the income from non-performing assets should be assessed on cash basis and not on mercantile basis despite the assesee maintain mercantile system of accounting Held that:- Following the decision in Commissioner of Income-tax, Central Circle, Bangalore Versus Canfin Homes Ltd. [2011 (8) TMI 178 - KARNATAKA HIGH COURT] - if an assessee adopts mercantile system of accounting and in his account he shows a particular income as accruing, whether that amount is really accrued or not is liable to bring the income to tax - As the definition of non-performing asset shows an asset becomes non-performing when it ceases to yield income - once a particular asset is shown to be a non-performing asset, then the assumption is it is not yielding any revenue - when it is not yielding any revenue the question of showing that revenue and paying tax would not arise - the contention of the revenue that in respect of non-performing assets even though it does not yield any income as the assesse has adopted a mercantile system of accounting, he as to pay tax on the revenue which has accrued notionally is without any basis thus, there was no merit in the appeal Decided against revenue.
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