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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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