TMI Blog2010 (10) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... n declaring loss at ₹ 28,55,795. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had not recognized interest on Non-Performing Assets (NPA) amounting to ₹ 19.57 lakhs. According to the AO, since the assessee was following mercantile system of accounting, the loan advanced by it had accrued interest, whether it was received or not, the same was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has been dismissed. Challenging the impugned order passed by the Tribunal, the Revenue has filed the instant appeal under Section 260A of the Income Tax Act. The question, in these circumstances which arises for consideration is as under: Whether the ITAT was correct in law in deleting the addition of ₹ 19,57,000 made by the Assessing Officer on account of interest on Non-performing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the accounting treatment or taxability of Rs. `income'` under the IT Act. The two, viz., IT Act and the 1998 Directions operate in different fields. As stated above, under the mercantile system of accounting, interest / hire charges income accrues with time. In such cases, interest is charged and debited to the account of the borrower as Rs. `income'` is recognized under accrual system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the interest is not recognized or taken into consideration due to uncertainty in collection of the income. It is for the AO to accept the claim of the assessee under the IT Act or not to accept it, in which case there will be add back even under ?real income? theory. In the present case, however, simply on the basis that the assessee was following the mercantile system of accounting, the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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