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TMI Blog2015 (4) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... riding in nature and has to be given primacy. However unless and until an assessee shows that a loan or advance had become a non-performing asset, there can be no question of applying the norms set out for such non-performing asset. We are, therefore, of the opinion that ld. CIT(Appeals) fell in error in deleting the addition made by the Assessing Officer. We, therefore, set aside the order of ld. CIT(Appeal) and the addition made by the Assessing Officer is restored. - Decided against assessee. - I.T.A. No. 1385/Kol./ 2011 - - - Dated:- 27-5-2014 - Abraham P. George And George Mathan, JJ. For the Appellant : Biswanath Das. For the Respondent : P.R. Kothari. ORDER :- PER : Abraham P. Geroge This appeal filed by the Revenue, directed against an order dated 29.06.2011 of ld. Commissioner of Income Tax (Appeals)-IV, Kolkata. It has raised the following three grounds:- (1) That on the facts and circumstances of the case, ld. CIT(A) erred in law in deciding the issues related to the addition of interest taking the ground that it was receivable and was not actually received. (2) That on the facts and circumstances of the case, ld. CIT(A) has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above explanation. According to him, the two companies had taken loan from the assessee and charged interest in their respective accounts and also deducted tax at source thereon. Such tax at source was credited by them into the Government account. Therefore, as per the Assessing Officer, the concerned parties had confirmed, interests due to the assessee. Assessee was following mercantile system of accounting. Hence, it was bound to show the interest accrued on the loans. In this view of the matter, he held that the interest of ₹ 22,00,000/- accrued on the loans given to the two companies was chargeable to tax and an addition was made accordingly. 4. In its appeal before the ld. CIT(Appeals), argument of assessee was that it was bound to follow the guidelines issued by Reserve Bank of India which was mandatory. As per the assessee, no income whatsoever was received from the concerned two companies. Though it was following mercantile system of accounting, assessee submitted that only real income could be taxed. 5. Ld. CIT(Appeals) was appreciative of the above contentions. According to him, Prudential norms prescribed by Reserve Bank of India prohibited recognition of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its income, just because mercantile system of accounting was followed. 8. We have heard the rival contentions and perused the material available on record. During the course of hearing, ld. Counsel for the assessee was asked whether the companies to which loans were given were still functioning or not. To this he replied that the companies were still functioning. Ld. Counsel also stated that the loans were given to the said companies based on promissory note, without any other security. Bench also asked the ld. Counsel whether any efforts were being made by the assessee for recovering the loans, to which ld. Counsel stated that only oral communication was there. What we find from the record is that the loan to M/s. Davenport Co. Pvt. Ltd. was given prior to financial year 2001-02 and the loan to M/s. ISG Traders Ltd. was given on 16.05.2002. Despite no interest being received by the assessee, it had not taken any legal step for recalling the amounts from the said concerns. 9. Non-Banking Financial Companies Prudential Norms (Reserve Bank) as per the Notification No. DFC.119/DG(SPT)-98 dated 31.01.1998 states at Rule 3 that income including interest/discount shall be recogn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest can be considered as overdue only when there is an agreement between the parties wherein a stipulation is there with regard to the date of payment of interest. In the absence of any such stipulation, we can never say that interest has fallen due on a particular date or was overdue. Similarly a loan can be considered as overdue only when it remains unpaid despite lapse of six months from the date of demand of the loan. Assessee here has been unable to produce any document to show that it had made any demand for return of the loan by the concerned creditors. There is no claim by the assessee that the loans given were term loan. This being the situation, the loans given by the assessee to the said two companies will not, in our considered opinion, fall within any of the limb of the definition of non-performing asset. Even otherwise, Hon'ble Apex Court had clearly held in the case of Southern Technologies Ltd. (supra) that prudential norms issued by the Reserve Bank of India cannot override the provisions of the Act. As per Section 5 of the Act, total income shall include all income from whatsoever derived from such person, which accrues or arise to him in a given in previous ..... X X X X Extracts X X X X X X X X Extracts X X X X
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