M/S. Southern Technologies Ltd vs Joint Commnr. Of Income Tax, Coimbatore

The Supreme Court addressed whether the 'Provision for NPA' debited to the P&L Account by Non-banking Financial Companies (NBFCs) can be treated as 'income' under Section 2(24) of the Income Tax Act, 1961. The Court held that such provisions, while debited to the P&L Account, do not constitute income and are not allowable under Section 36(1)(vii) as a write-off, but may be considered under Section 37(1) as a trading loss. The judgment clarified the applicability of RBI Directions 1998 in the context of income computation for tax purposes, ultimately ruling in favor of the NBFCs regarding the treatment of the provision for NPA.