9911796707
TMI Blog2021 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... the overdue interest partakes the character of uncertain income, it cannot be brought within the purview of taxable income, unless and until it comes to the hands of the assessee. Under mercantile system, interest income accrues with the time. In such cases, interest charged and debited to account as income as recognized under the accrual system but in cash system it is not so. In the present case, it is an overdue interest and it is not collectable from the Financial Year 1996-97 and as a prudent businessman, following AS 9 issued by ICAI the assessee has not recognized the said income. In the present case, there is no question of claiming as a Bad Debt because it is not accountable as there was uncertainty of collection. The same cannot be recognized as income accrued till it is realized by the assessee. It is not correct to say the judgment of Delhi High Court in the case of Vasisth Chai Vyapa [ 2010 (11) TMI 88 - DELHI HIGH COURT] is not applicable. In this judgment, it considered the AS 9 along with other provisions of the Act while deleting the addition. We find no merit in the argument of DR that that judgment is not applicable. Accordingly, we do not find any infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kept on reflecting outstanding interest due from the EIC in the form of 'Notes forming parts of account', indicating that the amount relates to overdue interest due from February 1991, which has not been accounted for in the books of account. Such overdue interest for the year under consideration works out to ₹ 14,46,80.000/-, which is under dispute in the appeal under consideration. 6. Even in the succeeding Assessment Year also no interest received by the assessee and the position remained the same until the Finance Year 2012-13, when the debt settlement was agreed and the assessee received 7% of the outstanding amount as the final settlement of debt and same has been offered to tax by the assessee. There was uncertainty with regard to recovery of interest concerned as a result of precarious position of EIC. Accordingly, the CIT(A) placed reliance on the judgment of Delhi High Court in the case of CIT(A) Vs. Vasisth Chay Vyapar Ltd., 330 ITR 440 (Delhi) and he allowed the appeal of the assessee. Again, the Revenue is in appeal in all these Assessment Years. The learned DR submitted that the judgment relied on by CIT(A) in the case of Vasisth Chay Vyapar Ltd., (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CD 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. 7. She submitted that in view of the above findings of the observation of the High Court, it is applicable only to NBFC. Further, she drew our attention to para 40 of the said judgment which reads as follows and submitted that CIT(A) wrongly placed reliance on said judgment and on the basis of mercantile system of accounting accrued interest should be offered by the assessee for taxation. Para 40 of the above judgment reads as follows: 40. Applicability of section 145.-At the outset, we may state that in essence RBI Directions 1998 are Prudential/Provisioning Norms issued by RBI under Chapter IIIB of the RBI Act, 1934. These Norms deal essentially with Income Recognition. They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFCs to reflect true and correct profits. By virtue of section 45Q, an overriding effect is given to the Directions 1998 vis-a-vis income recognition principles in the Companies Act, 1956. These Directions constitute a code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l principles subject to the provisions of the Act. Therefore, if by the Explanation to section 36(1)(vii) a provision for doubtful debt is kept out of the ambit of bad debt which is written off, then one has to take into account the Explanation in computing the total income under the Income-tax Act failing which one cannot ascertain the real profits. The provision for non-performing assets debited in the profit and loss account under the Reserve Bank Directions of 1998 is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the Income-tax Act. 10. A plain reading the above para reveals that it is a case of Bad Debt. The facts in that case is that the assessee made provision for NPA for the Financial Year ending 31.03.1998 under the direction of RBI and claimed deduction. Accordingly, Profit and Loss account is debited and corresponding amount was shown in the Balance Sheet. The AO disallowed the same and deducted the taxable income. On appeal, the Tribunal held that the assessee was admissible to deduction under section 36(i)(vii) of the Act. In this decision, the Hon ble Supreme Court held that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
