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2022 (8) TMI 1346 - AT - Income TaxInterest on Non performing assets (NPA) - Applicability of provisions of section 43D - asesssee has recognized the amount of interest attributable on sticky advances as NPA for a period of 90 days or more as per the guidelines issued by the RBI in accordance with Sec. 43D - AO was of the view that as per Rule 6E, interest is not to be offered for taxation with respect to advances which become Non Performing Assets for a period of 180 days or more - HELD THAT:- As categorically provided in the provisions of section 43D that income by way of interest in relation to bad and doubtful debts to be prescribed in accordance with guidelines issued by the RBI. The section 43D was introduced by the Finance Act, 1991 as per the section the category of bad and doubtful debts to be prescribed in the Income Tax Rules having regard to the guidelines issued by the RBI in relation to such debts. During the year under consideration the RBI has reduced the period to 90 days for categorization of interest on sticky loan as NPA, however, similar changes was not made to Rule 6EA. After considering the provisions of Sec. 43D and judicial findings as supra we consider that norms for categorization of bad and doubtful debts had to be prescribed considering the guidelines issued by the RBI. CIT(A) is not justified in substituting the limit for recognizing of interest on account of NPA to 180 days from 90 days in view of the clear provisions of Sec. 43D(a) that in the case of public financial institutions or schedule bank or a state financial corporation or a State Industrial Investment Corporation, the income by way of interest in relation to such categories of bad and doubtful debt as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts. Therefore, both the ground of appeals of the assessee are allowed. Revision u/s 263 - interest expenditure u/s 36(1)(iii) - HELD THAT:- As merely that RBI recognizes to treat the said debt instruments as additional Tier/Capital would not change the nature of Innovative Perpetual Debt Instruments which were of the nature of long term borrowings and the interest paid was debited to the profit and loss account. These debt instruments were also redeemed on different dates as discussed therefore, we don’t find any reason to interfere in the decision of ld. CIT(A), accordingly, this ground of appeal of the revenue is dismissed. Rectification u/s 154 - Fees for professional/deduction services accounted under the head “other income” given in schedule 14 of the annual account and it had also filed application u/s 154 - CIT(A) has directed the A.O to dispose off the application u/s 154 filed by the assessee in accordance with law and procedure. After perusal of the fact and findings of the ld. CIT(A) as supra we don’t find any error in the decision of the ld. CIT(A). Therefore, this ground of appeal of the revenue stand dismissed.
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