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2017 (1) TMI 778 - AT - Income TaxAssessment of income - Interest on loans categorized as NPA - accrual basis or receipt basis - Held that:- 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 - Held that:- The undisputed facts in the present case are that the assessee is a cooperative bank registered under the Punjab State Government Cooperative Act. Undeniably, the assessee is following the mercantile system of accounting and as per its Revenue Recognition policy for the impugned year, the income and expenditure were to be accounted for on accrual basis, except interest income from non-performing assets, NPA's, which was to be accounted for on receipt basis. It is also not disputed that this accounting policy, for interest earned on NPAs, was being followed consistently by the assessee in the past also. Further the fact that the assessee has been accounting for this interest as per the RBI guidelines and as per the guidelines prescribed by Punjab State Cooperative Limited, the apex bank of the assessee, is also not disputed. We find that the issue of accounting for interest on sticky loans/NPA's, has been dealt with in a number of decisions both by the Apex Court and various High Courts and Tribunals also, wherein after 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. - Decided in favour of assessee
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