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TMI Blog2012 (10) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... op, Advocates Revenue by : Shri Satpal Singh, Senior DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER These two appeals filed by the assessee against the order of the CIT (Appeals)-IX, New Delhi dated 29.06.2011 for Assessment Years 2003-04 and 2004-05. Both the appeals are heard together and disposed off by this common order as the issue involved in the appeals is common. 2. In both these appeals, the issue involved is common wherein the CIT (A) has deleted the addition made by the Assessing Officer on account of amount debited on reversal of income by changing the method of accounting from accrual to cash basis and also that the amount was not written off in the books of account as irrecoverable. 3. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3198/Del/2004 for Assessment Year 1999-00 dated 07.09.2012. 5. We have heard both the sides on this issue. This issue is squarely covered by the decision of ITAT in the case of GE Capital Service India, cited supra, wherein the ITAT has decided the issue as under :- 13. Admittedly the assessee is a non-banking financial company governed by the provisions of the RBI Act and the NBFCs Prudential Norms (Reserve Bank) Directions, 1998. Section 45Q of the RBI Act reads as under: - 45Q Chapter III-B to override other laws The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the RBI Act and the NBFCs Prudential Norms (Reserve Bank) Directions, 1998. Section 45Q of the RBI Act, which starts with non obstante clause, reads as under : 45Q Chapter III-B to override other laws The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. It is not in dispute that on the application of the aforesaid provisions of the RBI and the directions, the ICD advanced to M/s Shaw Wallace by the assessee herein had become NPA. It is also not in dispute that the assessee company being NBFC is bound by the aforesaid provisions. Therefore, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration receivable for the sale of goods, the rendering of services or from the use of others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized. In this scenario, we have to examine the strength in the submission of learned counsel for the Revenue that whether it can still be held that income in the form of interest though not received had still accrued to the assessee under the provisions of the Income-tax Act and was, therefore, exigible to tax. Our answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-company being NBFC is governed by the provisions of the RBI Act. In such a case, interest income cannot be said to have accrued to the assessee having regard to the provisions of section 45Q of the RBI Act and Prudential Norms issued by the RBI in exercise of its statutory powers. As per these norms, the ICD had become NPA and on such NPA where the interest was not received and possibility of recovery was almost nil, it could not be treated to have been accrued in favour of the assessee. As noted above, Mr. Sabharwal, argued that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not the RBI Act which was the accounting method that the assessee was supposed to follow. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusions under the Act are concerned, the same are admissible only if such deductions/exclusions satisfy the relevant conditions stipulated therefore under the Act. To that extent, it was observed that the Prudential Norms do not override the provisions of the Act. However, the apex court made a distinction with regard to income recognition and held that income had to be recognized in terms of the Prudential Norms, even though the same deviated from the mercantile system of accounting and/or section 145 of the I.T. Act. It can be said, therefore, that the apex court approved the real income theory which is engrained in the Prudential Norms for recognition of revenue by NBFC. 14. Respectfully following the decision of Hon ble jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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