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2013 (12) TMI 413 - AT - Income TaxOrder passed u/s 263 – Whether provision for bad and doubtful debts is allowed to the assessee who is a cooperative bank engaged in banking activities - Held that:- The assesse did not recognise the interest attributable to the Bad and doubtful debts by debiting P&L and crediting the reserve for overdue interest – The assessee transferred the interest to Reserve for overdue interest account - Following CIT v ELGI Finance Ltd [2007 (6) TMI 180 - MADRAS High Court] - The assessee was justified in not recognizing interest income from non-performing assets in consonance with the notification issued by the RBI and AS-9 issued by ICAI - Interest income on bad and doubtful debts does not accrue at all. Whether the interest on bad and doubtful debts, the overdue interest of Rs. 2,40,61,848.00 accounted by the Assessee but transferred to Overdue interest can really said to have accrued and realizable – Held that:- Following Godhra Electricity Co Ltd v CIT [1997 (4) TMI 4 - SUPREME Court] - Income charged to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which assessment is made or on the income that accrues or arises or is deemed to accrue or arise in India during such year - The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. It may be either the cash system where entries are made on the basis of actual receipts and actual outgoings or disbursements or it may be the mercantile system where entries are made on accrual basis - What is to be taxed is only the real income and not on the basis of Book entries – The issue was set aside for determining whether the amount of Rs. 2,40,61,848.00 represented real income of the assessee.
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