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2013 (3) TMI 266 - HC - Income TaxAccrued interest on non-performing assets(NPA) - whether assessable to income-tax or not? - assessee is a Non-Banking Financial Company - Whether ITAT was right in deleting the interest accrued on non performing assets from the computation of the taxable income? - Held that:- Mere characterisation of an account as a NPA would not by itself be sufficient to say that there is uncertainty as regards realizability of income or interest income thereon. Accrual of interest is a matter of fact to be decided separately for each case on the basis of examination of the facts and circumstances. The same would require an assessment of the relevant facts and circumstances of each case. Only by assessment of facts and circumstances, the Authority could arrive at a decision whether there is uncertainity of the interest accrued on NPA. Only when there is uncertainity of realizability of income or interest income then it is not chargeable to tax. The system of accounting followed only recognises it bringing the income to books. The adopted accounting policy i.e., recognising income on NPA accounts only subject to realisation does not serve as a standard category. As in the present case, Assessing Officer has not recorded findings whether there is any uncertainty in collection of income. There is nothing to indicate that the "interest income" is non-recoverable. Individual ledger accounts of the borrower are to be examined. CIT (A) and the Tribunal had not considered the matter in the light of the decision of Southern Technologies Limited(2010 (1) TMI 5 - SUPREME COURT OF INDIA) where liability of income-tax is concerned, the same was governed by the Income-tax Act and merely because for accounting purpose, the assessee was to follow RBI guidelines it would not mean that the assessee was not liable to show the accrued interest income when it had accrued to the assessee under the mercantile system and exigible to tax under the Act. RBI Directions 1998 has nothing to do with the computation or taxability of the provisions for "accrued interest" for NPA under the Income-tax Act. Thus the Orders of the Tribunal are set aside and the matters are remitted back to the Assessing Officer for consideration of the matter afresh in the light of law laid down by the Southern Technologies(supra) and above observation and pass orders.
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