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2015 (9) TMI 744 - ITAT AHMEDABAD

2015 (9) TMI 744 - ITAT AHMEDABAD - TMI - Addition on interest taxed on accrual basis on Non Performing Assets(NPA) - CIT(A) deleted the addition - Held that:- As decided in CIT vs. Coimbatore Lakshmi Inv.& Finance Co.Ltd. [2009 (11) TMI 560 - Madras High Court] the principle of "accrual of income" comes into play only when the income was recognised. In the present case, the assessee has classified its assets on the basis of the notification issued by the Reserve Bank of India and found that the .....

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f assessee - I.T.A. No.872/Ahd/2012 - Dated:- 21-8-2015 - SHRI PRAMOD KUMAR AND SHRI KUL BHARAT, JJ. For The Appellant : Shri Shiva Sewak, Sr.DR For The Respondent : Shri Bharat S.Shah, AR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax(Appeals)-XX, Ahmedabad [ CIT(A) in short] dated 15/02/2012 pertaining to Assessment Year (AY) 2008-09. The Revenue has raised the following grounds of appeal:- 1) The Ld. .....

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may be set-aside and that of the Assessing Officer be restored. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 27/12/2010, thereby the Assessing Officer (AO in short)made addition on account of accrued interest on NPA of ₹ 16,01,362/- and disallowance of bad debts of ₹ 1,71,000/-. Against the said assessment order .....

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the ld. CIT(A) was not justified in deleting the addition. 3.1. On the contrary, ld.counsel for the assessee submitted that the issue is no more res integra has been decided in favour of assessee by the Hon ble High Court of Madras rendered in the case of CIT CIT vs. Coimbatore Lakshmi Inv.& Finance Co.Ltd. reported at [2011] 331 ITR 229 (Mad.). 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the .....

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f interest accrued on NPAs of ₹ 16,01,362/- was being made. The contentions of the learned AR in brief are that appellant was bound to follow the RBI Act and the Prudential Norms there-under; the interest income on NPAs had neither accrued nor received within the meaning of section 5 of the IT Act; the interest was reflected in the balance sheet in accordance with the guidelines of the RBI; however, since the principal amount itself was doubtful of recovery, the interest thereon was not re .....

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realization), he relied on the decisions cited at 331 ITR 229(Mad.), 158 ITR 102(SC), 225 ITR 746(SC) and 259 ITR 51(SC). 5.3 Having considered the issue I am inclined to accept the contentions of the AR. The appellant reflected interest in the balance sheet in accordance with the RBI guidelines. However, it did not recognize or realize the interest in the P & L account. It has been the practice of the appellant over the years that interest on NPAs is being offered in the year of its realiza .....

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under:- 3. We have heard the learned counsel appearing for the Revenue and perused the materials on record. 4. The Tribunal in its order had relied on the two decisions of the Division Bench of this Court in CIT vs. Elgi Finance Ltd. (2007) 293 ITR 357 (Mad) and in CIT vs. India Equipment Leasing Ltd. (2007) 293 ITR 350 (Mad). In the latter decision, in which one of us is a party, has considered the case of the assessee in respect of hire-purchase transactions and leasing of plant and machinery .....

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ed in its income only when it was actually received. The CBDT circular permitted such interest to be excluded from income, if for three years such interest was not actually received. On that basis it granted the relief in favour of the assessee. The said judgement has been subsequently referred to by another Division Bench. If no income was recognised at all from such asset, there was no question of applying the principle of accrual. The principle of "accrual of income" comes into play .....

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