TMI Blog2007 (6) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no accrual of income during the year, we are of the view that the order of the Tribunal is in conformity with law. Learned standing counsel appearing for the Revenue is also unable to give any material or evidence or any compelling reason or brought to our notice any contra judgment, to take a different view. Therefore, we find no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, we answer the question in favour of the assessee and against the Revenue. Accordingly, the tax case is dismissed. - Hon'ble Judges P.D. Dinakaran and P.P.S. Janarthana Raja, JJ. For the Appellant : T. Ravi Kumar, Standing Counsel For the Respondents : R. Venkatraman, Sr. Counsel for T. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ending thereof, the assessee had not admitted the interest accrued on a transaction in respect of hire purchase, leasing, bill discounting, short-term loan etc. So, the Assessing Officer proposed to bring the accrued interest on those items to tax as income of the assessee relating to the assessment year. The assessee offered detailed explanation stating that treating of interest accrued on those items as income is not justified because according to the classification suggested by the Reserve Bank, those assets are to be treated as non-performing assets. The assessee-company being a non-banking finance company, is bound to follow the mandatory guidelines issued by the Reserve Bank of India regarding the classification of assets, recogniti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble income and allowed the appeal filed by the assessee. Hence the present tax case. 3. Learned standing counsel appearing for the Revenue submitted that the assessee is following the mercantile system of accounting and therefore both the income as well as the expenditure should be accounted on accrual basis. Counsel further submitted that the Assessing Officer rightly included the income as total income for the said assessment year. It is his further submission that the guidelines issued by the Reserve Bank of India are only for the purpose of financial discipline and to protect the investor and not for any change to be brought in the method of accounting. 4. Learned senior counsel appearing for the assessee submitted that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income in consonance with the notification issued by the R. B. I. and AS-9 issued by the I.C.A.I. Therefore, the assessee is justified in not recognising the income as such. Once that is the case, there is no occasion to consider whether the principle of accrual would arise or not. In view of the matter, we are of the considered view that the lower authorities have erred in treating the interest on non-performing assets as income of the assessee-company for the assessment year 1998-99. We direct the Assessing Officer to delete the said interest from the computation of taxable income. The interest from such non-performing assets will be taxed in the appropriate assessment years on the basis of actual receipt. The issue of interest from n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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