TMI Blog2012 (6) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... is lower is settled position of law – in favour of assessee. Accounting of interest received on loans and advances – to be on receipt basis or accrual basis as per the regular mercantile system of accounting maintained by the assessee – Held that:- The interest on which the tax is levied is an income shown to be due from non-performing asset and once a particular asset is shown to be a non-performing asset then the assumption is that it does not yield any revenue - If it is not yielding any revenue, the question of showing that Revenue and paying tax would not arise - unless that amount is received no tax is payable - in favour of the assessee - IT APPEAL NOS. 575 AND 576 OF 2007 - - - Dated:- 12-3-2012 - N. KUMAR AND RAVI MALIMATH, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as a deduction. Accordingly, the interest due from the non-performing asset was also brought to tax. Aggrieved by the said order the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). He held that the assessing officer was not correct in treating the loss incurred by the assessee in the business of purchase and sale of shares as loss from speculation. Therefore he directed the assessing authority to treat the loss from business of purchase and sale of shares as business loss. The appellate authority held that the appellant has offered for taxation only the interest received and tax deducted on receipt of interest receivable. However credit was claimed in respect of the entire amount of tax deducted at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the assessee is following a mercantile system of accounting, he declined to interfere with the order passed by the appellate authority. Aggrieved by these two orders the Revenue is in appeal. 2. The learned counsel appearing for the Revenue assailing the impugned orders contends that when the assessee was holding the shares as an investment capital and not as stock-in-trade, the appellate authorities committed a serious error in allowing the business loss sustained in the said trading. He also contended that Non-banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, issued by the RBI cannot override the statutory provisions contained in the Income-tax Act and therefore when the assessee was maintaining a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k-in-trade, the assessee suffered a loss in the business and therefore the assessee was entitled to claim business loss. The valuation of stock is cost or market value whichever is lower is settled position of law. On a careful consideration of the entire material on record the two appellate authorities have upheld the order. In that view of the matter, we do not see any justification to interfere with the said order. Accordingly, the first substantial question of law is answered in favour of the assessee and against the Revenue. 5. Insofar as the taxability of the interest income which has accrued but not received is concerned, apart from the directions issued by the RBI, the Circular issued by the Board makes it very clear that accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of showing that revenue and paying tax would not arise". In the instant case, admittedly the interest on which the tax is levied is an income shown to be due from non-performing asset. Once a particular asset is shown to be a non-performing asset then the assumption is that it does not yield any revenue. If it is not yielding any revenue, the question of showing that Revenue and paying tax would not arise. Therefore unless that amount is received no tax is payable. Therefore, without going into the question whether the directions issued by the RBI override the statutory provisions and come to the rescue of the assessee, in view of the aforesaid Board Circular and the law held by this Court the appellate authorities were justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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