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2018 (1) TMI 1702 - AT - Income TaxAccrual of income - Disallowance on account of derecognized interest - HELD THAT:- As regards accrual of interest on sticky loans, the Hon'ble Supreme Court in the case of State Bank of Travancore Vs. CIT [1986 (1) TMI 1 - SUPREME COURT] held that interest accruing on sticky loans is taxable to Income tax on accrual basis. Accordingly, the NBFC, as in the present case, has to follow the directions of the CBDT and as per the decision of various courts, NBFC including banks follow the cash basis of accounting for interest on sticky loans until they are recovered or the loan itself is written off. There is consistency in following the accounting principles by the assessee and therefore, derecognition of interest on NPAs is not something barred by the Income tax law. Thus we find no infirmity in the order of the ld. CIT(A) who has rightly deleted the addition so made by the Assessing Officer. Thus, the sole ground of appeal raised by the Revenue is dismissed.
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