The Real Income Theory cannot be invoked to avoid taxation of accrued interest on NPA loans where the assessee’s conduct indicates a reasonable expectation of recovery. Merely classifying a loan as an NPA under RBI Prudential Norms does not determine its taxability under the Income-tax Act, as such norms are regulatory in nature and do not override statutory provisions governing income accrual. Where the assessee continues to advance fresh loans to the same borrowers, it demonstrates confidence in their financial capacity, thereby negating the contention that the accrued interest is hypothetical or unrealizable. Consequently, such accrued interest constitutes real income chargeable to tax. (AY. 2003-04)