Provision of interest and deduction of tds

This query is : Resolved

CA Shraddha Vora (Querist)
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10 August 2013 Brief Facts: -
A listed company has been declared as a “Non Performing Asset” (NPA), by a Financial Institution (FI), due to absence of timely payments to them because of shortage of funds.
NPA:-
An asset is Non Performing, when Interest and / or installment of principal remain overdue for a period of more than 90 days with effect from March 31, 2004, as per RBI Master circular.
Query:-
Since the account of the company has been declared as NPA, interest is booked by the FI on receipt basis (and not on accrual basis). However, the company has to provide for interest in the books of accounts on accrual basis.

The question is regarding deduction of TDS, while providing the interest expense.

1) Should the interest be provided for in the books?
2) If provided, should TDS be deducted on the same?
-Nidhi