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2015 (4) TMI 760 - AT - Income TaxAddition on account of accrued interest on loan classified as Non performing Assets - RBI prudential norms restricts accrual of interest on NPAs - Cooperative banks are covered under provisions of sec.43D - Held that:- In the case of Karnataka High Court in Canfin Homes Ltd. [2011 (8) TMI 178 - KARNATAKA HIGH COURT], it was held that the definition of non-performing asset shows an asset becomes non-performing when it ceases to yield income. Non-performing asset is an asset in respect of which interest has remained unpaid and has become past due. 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. As is clear from the policy guidelines issued by the National Housing Bank, the income from non-performing asset should be recognised only when it is actually received. That is what, the Tribunal held in the instant case. Therefore, the contention of the revenue that in respect, of non-performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In Karnavati Co-op. Bank Ltd.[2011 (11) TMI 367 - ITAT AHMEDABAD], the ITAT Ahmedabad Bench held that provisions of Sec.43D of the Act are applicable to Cooperative Banks also. In view of the same, respectfully following the decision of the Hon’ble Jurisdictional High Court in Canfin Homes Ltd., the Revenue’s appeal is dismissed. - Decided against the revenue.
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