TMI Blog2021 (6) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical to the issue of taxability of interest on Non-performing Assets. There is no dispute that the interest had not been recognized in the books of account on sticky advances, the claim is in the nature of interest on doubtful debts, there is an uncertainty as to the recovery of advances as well as principal amount of the advances. The Hon ble Supreme Court in the case of UCO Bank [ 1999 (5) TMI 3 - SUPREME COURT] held that no hypothetical income can be brought to tax. Hon ble Supreme Court in the case of CIT vs. Shoorji Vallabhdas And Co., [ 1962 (3) TMI 6 - SUPREME COURT] laid down the principle that what can be taxed is only a real income, in respect of which the right to receive income had accrued, the same principle was reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the fact that since all items of accounts were maintained as per mercantile system of accounting, there was no basis for accounting said accrued interest income on cash basis as section 145(1) of the Income Tax Act, 1961 clearly provides that income should be computed either on cash or on accrual basis as per amendment w.e.f. A.Y. 1997-98. 2. The appellant craves to leave, add, amend or alter the grounds of appeal. 3. Briefly, the facts of the case are as under :- The appellant is an autonomous body set up by the Government of Maharashtra. It is mainly engaged in promoting the industrialization of the Western Region of Maharashtra. The return of income for the assessment year 2012-13 was filed on 30.09.2012 declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decision of the Co-ordinate Bench of the Tribunal in assessee s own case for earlier years. 8. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the taxability or otherwise of the interest on the seed money advances given to the entrepreneurs, which are classified as sticky advances. Admittedly, the respondent-assessee is following the mercantile system of accounting. It is the policy of the respondent-assessee company to account for the interest on such loans under seed money assistance scheme on receipt basis following the uncertainty of the recovery, realization of the interest. This policy is clearly stated in Clause (5) of Note No.23 read with 36 of Notes to Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the Hon ble Jurisdictional High Court in the case of PCIT vs. Solapur District Central Co-op. Bank Ltd., 428 ITR 306 relying on the decision in case of (i) CIT v. Shoorji Vallabahdas Co. [1962] 46 ITR 144 (SC), (ii) Pr. CIT v. Shri Mahila Sewa Sahakari Bank Ltd. [2017] 395 ITR 324/[2016] 242 Taxman 60/72 taxmann.com 117 (Guj.), (iii) Pr. CIT v. Sarangpur Co-operative Bank Ltd. [2018] 406 ITR 302/258 Taxman 230/97 taxmann.com 304 (Guj.) and (iv) Pr. CIT v. Ludhiana Central Co-operative Bank Ltd. [2018] 99 taxmann.com 81 (Punj. Har.) on the issue of taxability of interest on the non-performing assets held as follows :- The issue is squarely covered by the judgments of Gujarat High Court and Punjab Haryana High Courts. The Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reason to entertain these Appeals, since no question of law can be stated to have arisen. [Para 7]. For the reference, it may also be noticed that subsequently, legislature has amended section 43D. Section 43D essentially provides for charging of interest on actual basis in case of certain special circumstances, in the hands of the public financial institutions, public companies etc. Explanation to section 43D defines certain terms for the purpose of said section. Clause (g) was inserted in the said explanation by Finance Act, 2016 which provides that for the purpose of such section, Cooperative Banks, Primary Agricultural Credit Society and Primary Agricultural and Rural Development Bank shall have meanings respectively assigned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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