Punjab and Haryana HC
deletes addition towards interest due on Non performing Assets (NPA) of
co-operative bank (assessee) for AY 2009-10; Rejects Revenue’s stand that in
view of specific provisions of Sec 43D which excluded from its purview,
entities like assessee at relevant time, assessee cannot indirectly claim
benefit to Sec 43D and thus, interest on NPA was taxable on accrual
basis u/s 145; Relying on SC decision in Southern Technologies case, notes that
RBI Directions 1998 are essentially income recognition norms and they “..have
nothing to do with the accounting treatment or taxability of income under the
Act and the two, viz. the Act and the RBI Directions, 1998 operate in different
fields”; However also observes that “Assessing Officer has to follow the RBI
Directions 1998 in view of Section 45Q of the 1934 Act. Hence, as far as Income
Recognition is concerned, Section 145 of the Act has no role to play in the
present dispute”; Also takes note of various judicial precedents such as
in case of Southern Technologies, UCO Bank, Vasisth Chay Vyapar Ltd wherein
‘real income theory’ was upheld as per which “notwithstanding that the assessee
may be following the mercantile system of accounting, it can be taxed on real
income and not accrued interest which is hypothetical income.:HC
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