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TMI Blog2013 (10) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax(Appeals)-IV has upheld the addition made to the returned income by the Assessing Officer being the interest accrued on Non-performing assets following the provisions of section 43D read with Rule 6EB of the Income Tax Act 1961, instead of following the Guidelines issued by National Housing Bank (NHB) on prudential norms for income recognition and for provisioning for bad and doubtful debts in respect of Non Performing Assets (NPA). Due to this the difference amount calculated which is as follows is brought to tax being the interest not covered by the provisions of section 43D of the Income Tax Act 1961. Sl. No. Interest on NPA's (As per section 43D r.w.r Rule 6EB) Interest on NPA's (As per NHB Guidelines) Amounts(Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Bank reduce the period from 6 months to 3 months (90 days) therefore, the income by way of interest relating to the category of bad and doubtful debts should be computed by considering the period of 3 months as per the guidelines of National Housing Bank and not 6 months as provide under Rule 6EB. The Ld. Counsel has fairly conceded that this issue has been decided against the assessee by the Tribunal for the assessment year 2006-07 reported in 45 SOT 318. However, when section 43D has specifically provides the guidelines of National Housing Bank to be considered then the period for the purpose of income by way of interest relating to NPA should be the period as per the guidelines of National Housing Bank. On the other hand, the Ld. D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in our view is therefore contrary to the provisions of Sec.43D and the claim of the Assessee based on real income theory and there being no real accrual of income cannot be accepted. 21. That leaves us with the decision of the Hon'ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd. (supra) and the Hon'ble Madras High Court in the case of Elgi Finance Ltd. (supra). In the case of Vasisth Chay Vyapar Ltd. (supia), the Assessee was a non-banking finance company bound by the provisions of the Reserve Bank of India Act, 1934. In compliance with the Directions issued by the RBI under the RBI Act, 1934, it did not recognise interest on intercorporate deposit as income. The Hon'ble Delhi High Court held that interest income does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of RBI directions issued under the RBI Act, 1934. The Hon'ble Court found that under Explanation to Sec. 36(1)(vii) of the Act, provision for doubtful debt was kept out of the ambit of bad debt written off. It was further held that under the Act, taxis on "real Income" i.e., profits arrived at on commercial principles subject to the provisions of the Act. Real profits can be arrived at only by making the permissible deductions. Since the provision for bad debt was not a permissible deduction under .the Act, the same was V held to be not allowable. The "real income" referred to by the Hon'ble Supreme Court in its judgment in para-35 to 39 is in the context of profits arrived at on commercial principles subject to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to exempt income 1,14,91,616/- 2. Interest accrued on non performing assets 2,77,80,635/- 8. Ground No. 2 regarding the interest accrued of non performing assets is common as in the assessment year 2007-08. However, the Ld. Senior Counsel has pointed out that for the assessment year 2008-09 the A.O has taken the period as 24 months in stead of 6 months taken in the assessment year 2007-08. Thus, the Ld. Senior Counsel has submitted that the A.O has considered the wrong clause under Rule 6EB which is in respect of doubtful assets and not for interest on doubtful or bad debts. The Ld. D.R has relied upon the order of the authorities below. 9. Having considered the rival submissions and carefully perusal of the record we not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O except for the assessment year 2007-08 in which the Tribunal has set aside the matter to the A.O on the issue of applicability of Rule 8D. The Ld. Counsel has submitted that when the Assessing Officer has not disallowed the interest expenditure for the year of investment then the same cannot be disallowed in this year when no investment was made by the assessee. As regards the administrative expenses the Ld. Counsel has submitted that the assessee accepts the disallowance made by the A.O on this account. On the other hand, the Ld. D.R has relied upon the orders of the authorities below and submitted that when Rule 8D is applicable for the assessment year under consideration then there is no fault or error in the order of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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