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2017 (9) TMI 1745 - AT - Income TaxIncome recognition - Accrual of income - Addition on account of interest accrued on non performing assets - year of taxation - Held that:- As decided in assessee's own case the argument of the learned D.R. that the assessee is following the mercantile system of accounting is also dismissed since this aspect has been dealt with by various High Courts referred to above wherein they have categorically held that even following the mercantile system of accounting the interest on NPA account cannot be said to have accrued in the impugned year since the recovery of the same was impossible and even otherwise for the purpose of Income Recognition the RBI Directions, 1998, had to be followed in view of section 45Q of the RBI Act. Applying the "Real Income Theory", the prescribed Accounting Standard issued by ICAI on Revenue Recognition, AS-9, the accounting practise of the asseessee relating to interest on sticky loans and the RBI guidelines relating to accounting for interest on NPA's, it was held that such income was taxable in the year of receipt only, when its realisation becomes reasonably certain. No infirmity in the order of the CIT(A) holding the interest on NPA's as taxable in the year of receipt, so as to warrant interference.
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