JUDGMENT N. Kumar , J.—The main business of the assessee is share transaction. The assessee is a subsidiary Company of R.P.G. Telecom Ltd., which is the holding Company and the assessee is funded by the holding Company which have invested in purchase of shares of its group Companies. Its principal business is of share transactions and advancing of loans. The assessee filed its return of income for the assessment year 2001-02 on 31-10-2001 declaring loss of Rs. 1,70,04,080/-. The case was selected for scrutiny under section 143(2)(i) for the limited purpose of verifying the issue of assessability of income returned whether under the head Business or Speculation. A notice was issued. The assessee entered appearance and put forth his case. After considering the objections of the assessee, the assessing authority held that the loss claimed by the assessee in the return in respect of its business activity is speculation loss under deeming provisions of Explanation to section 73. The assessing authority, in respect of non-performing assets when the assessee had not offered the interest due therefrom for taxation bases on the Guidelines of the RBI, held that the income admitted under interest is interest received and the TDS component in respect of receivable. In view of this the expenditure towards the interest relatable to interest earnings offered for taxation only has to be considered as a deduction. Accordingly, the interest due from the non-performing asset was also brought to tax. Aggrieved by the said order the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). He held that the assessing officer was not correct in treating the loss incurred by the assessee in the business of purchase and sale of shares as loss from speculation. Therefore he directed the assessing authority to treat the loss from business of purchase and sale of shares as business loss. The appellate authority held that the appellant has offered for taxation only the interest received and tax deducted on receipt of interest receivable. However credit was claimed in respect of the entire amount of tax deducted at source in the return of income filed. The assessing officer also gave credit to entries amount of tax deducted at source for the assessment year overlooking the provisions of section 199. However credit was claimed in respect of the entire amount of tax deducted at source in the return of income filed. The assessing officer also gave credit to entries amount of tax deducted at source for the assessment year overlooking the provisions of section 199. Section 199 provides that credit shall be given for the amount of tax deducted at source in the assessment made for the assessment year in which the income is assessable. Therefore, he held that the action of the assessing officer in giving credit to the entire amount of tax deducted at source, though the whole of the income in respect of which such tax was deducted was not offered for taxation and was not assessed for the assessment year 2001-02, is not in accordance with the provisions of section 199 of the Income-tax Act, 1961. Therefore he directed the assessing officer to give credit only to the proportionate amount of tax deducted at source in terms of section 199 of the Act. Aggrieved by the said order the Revenue preferred the appeal to the Tribunal. The Tribunal declined to interfere with the order of the appellate authority in respect of the investment made by the assessee in shares which were not treated as stock-in-trade but as investment in capital assets in view of its earlier judgment on the said point. Insofar as the interest income not brought to tax is concerned it relied on the Judgment of the Tribunal of the Delhi Bench which has held that in the case of non-performing asset the interest income has to be assessed on receipt basis and not on accrual basis. Notwithstanding the fact that the assessee is following a mercantile system of accounting, he declined to interfere with the order passed by the appellate authority. Aggrieved by these two orders the Revenue is in appeal. The learned counsel appearing for the Revenue assailing the impugned orders contends that when the assessee was holding the shares as an investment capital and not as stock-in-trade, the appellate authorities committed a serious error in allowing the business loss sustained in the said trading. Aggrieved by these two orders the Revenue is in appeal. The learned counsel appearing for the Revenue assailing the impugned orders contends that when the assessee was holding the shares as an investment capital and not as stock-in-trade, the appellate authorities committed a serious error in allowing the business loss sustained in the said trading. He also contended that Non-banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, issued by the RBI cannot override the statutory provisions contained in the Income-tax Act and therefore when the assessee was maintaining a mercantile accounting system they are liable to tax on the interest income accrued but not actually paid. 2. Per contra, the learned counsel appearing for the assessee supported the impugned orders. 3. In the light of the aforesaid facts and rival contentions the substantial questions of law that arise for consideration are as follows:- 1. Whether the Appellate Authorities were correct in holding that the shares held by the assessee at the end of the year should be valued as per market rate and the consequential loss should be allowed as a business loss when the assessee was holding these shares as an investment capital and not as stock-in-trade? 2. Whether the finding of the Income Tax Appellate Tribunal reversing the order passed by the Appellate Authority holding that interest received on loans and advances can be accounted on receipt basis and not on accrual basis as per the regular mercantile system of accounting maintained by the assessee by applying Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, issued by the RBI, is perverse and arbitrary? 4. The material on record discloses that the authorities have concurrently held that the assessee was carrying on the business in sale of shares and the shares which are the subject matter of these proceedings are held to be stock-in-trade and it is not by way of investment. Once the value of stock-in-trade is reduced because of market conditions as the said shares were held as stock-in-trade, the assessee suffered a loss in the business and therefore the assessee was entitled to claim business loss. The valuation of stock is cost or market value whichever is lower is settled position of law. On a careful consideration of the entire material on record the two appellate authorities have upheld the order. The valuation of stock is cost or market value whichever is lower is settled position of law. On a careful consideration of the entire material on record the two appellate authorities have upheld the order. In that view of the matter, we do not see any justification to interfere with the said order. Accordingly, the first substantial question of law is answered in favour of the assessee and against the Revenue. Insofar as the taxability of the interest income which has accrued but not received is concerned, apart from the directions issued by the RBI, the Circular issued by the Board makes it very clear that accounting policies adopted by the assessee should be such so as to represent a true and fair view of state of the affairs of the business, profession or avocation in the financial statements procured and presently on the basis of such accounting policies. This Court had an occasion to consider the said question, in the case of CIT v. Canfin Homes Ltd. [2011] 201 Taxman 273 / 13 taxmann.com 43 (Kar.) wherein it was held as under:- Therefore, it is clear, if an assessee adopts mercantile system of accounting and in his accounts he shows a particular income as accruing, whether that amount is really accrued or not is liable to bring the said income to tax. His accounts should reflect true and correct statement of affairs. Merely because the said amount accrued was not realised immediately cannot be a ground to avoid payment of tax. But, if in his account it is clearly stated though a particular income is due to him but it is not possible to recover the same, then it cannot said to have been accrued and the said amount cannot be brought to tax. In the instant case we are concerned with a non-performing asset. As the definition of non-performing asset shows an asset becomes non-performing when it ceases to yield income. Non-performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non-performing asset, then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise". 5. Non-performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non-performing asset, then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise". 5. In the instant case, admittedly the interest on which the tax is levied is an income shown to be due from non-performing asset. Once a particular asset is shown to be a non-performing asset then the assumption is that it does not yield any revenue. If it is not yielding any revenue, the question of showing that Revenue and paying tax would not arise. Therefore unless that amount is received no tax is payable. Therefore, without going into the question whether the directions issued by the RBI override the statutory provisions and come to the rescue of the assessee, in view of the aforesaid Board Circular and the law held by this Court the appellate authorities were justified in holding that no tax is liable to be paid by the assessee for the interest due from non-performing assets which is not actually received. In that view of the matter, we do not see any substance in the said contention also. Accordingly, the second substantial question of law is answered in favour of the assessee and against the revenue. 6. Appeals are accordingly disposed of.