Interest on NPAs cannot be taxed on accrual basis in case of NBFC

Pr. CIT Vs Bajaj Finance Limited (Bombay High Court) Conclusion: Even if there was a special provision in s. 43D for taxing interest income on NPAs on receipt basis but the same did not apply to NBFCs, therefore, NBFCs had not to offer interest on bad or doubtful debts to tax on accrual basis as as the same was not taxable on basis of real income theory. Held: Assessee was a Non Banking Finance Company (“NBFC”) filed return of income in which it had claimed deduction of interest on advances which had become non performing assets (“NPA”). AO disallowed the claim relying ...