Addition of Interest on NPA on accrual basis not justified as banks to recognise such income on Cash basis

The Suvikas Peoples’ Co-op. Bank Ltd. Vs. ACIT (ITAT Ahemdabad) Essence the RBI Directions, 1998 are prudential/ provisioning norms issued by RBI under Chapter IlI-B 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 45-Q, an overriding effect is given to the RBI Directions, 1998 vis-a-vis “income recognition” principles in the Companies Act, 1956. These Directions constitute a code b...