During year under consideration, assessee had paid interest on loans borrowed from related parties and other lenders. Assessee had also advanced loans and charged interest on loans advanced until October 2012. At request of parties, interest was waived and a new agreement was established without charging any interest. Assessing Officer invoked section 40A(2)(b) to propose an addition to extent of interest not charged. On appeal the CIT(A) up held the order. On appeal the Tribunal held that the assessee is  following mercantile system of accounting and Accounting Standard-9 (AS-9) issued by Institute of Chartered Accountants of India (ICAI) applied to it.  Under mercantile system of accounting, interest accrual was to be recorded in books of account unless there was a modification of loan agreement and it could not be modified by a Board Resolution. On facts  no such modification of agreement of advancing loans had been done and when assessee decided not to recognize income, it took support from Board Resolution. The  claim of the assessee not based on any sound accounting system or section 145 could not be allowed (AY. 2013-14, 2015-16)