CBDT Circular on method of accounting in case of interest on sticky advances

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Method of accounting in the case of interest on sticky advances – Change from mercantile to cash – Change by some State financial corporations – Whether to be allowed

Circular : No. 491 [F.No. 201/60/867-IT(A-II)], dated 30-6-1987.

1. The Supreme Court has in its judgment in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102 held that the interest accruing on sticky loans is taxable to income-tax on accrual basis where the assessee follows the mercantile system of accounting.

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