May 2019

Section 43D Public financial institutions, special provisions in case of income of (Interest) Where income on NPA was actually not credited but was shown as receivable in balance sheet of assessee co-operative bank, interest on NPA would be taxable in year when it would be actually received by assessee bank

K. B. Bhujle
Advocate

9. Principal CIT vs. Solapur District Central Co-op. Bank Ltd.; [2019] 102 taxmann.com 440 (Bom):Date of order: 29th January, 2019 A.Y.: 2009-10

 

Section 43D Public financial institutions, special provisions in case of income of (Interest) Where income on NPA was actually not credited but was shown as receivable in balance sheet of assessee co-operative bank, interest on NPA would be taxable in year when it would be actually received by assessee bank

 

During the assessment for A.Y. 2009-10, the Assessing Officer noticed that the assessee co-operative bank had transferred an amount of Rs. 7.80 crore to the Overdue Interest Reserve (OIR) by debiting the interest received in profit and loss account related to Non-Performing Assets. He was of the opinion that the assessee-bank had to offer the interest due to tax on accrual basis. The explanation of the assessee-bank was that the Reserve Bank of India guidelines provide that income on Non-Performing Assets ('NPA') is not to be credited to profit and loss account but instead to be shown as receivable in the balance sheet, and it is to be taken as income in the profit and loss account only when the interest is actual

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