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2014 (10) TMI 613 - AT - Income TaxNature of receipts – Revenue or capital receipts – Character of the grant received by the assessee from the Government of Maharashtra of ₹ 110 crores - Held that:- Even if the grant received by the assessee bank has been used for meeting SLR requirements of RBI, which is relatable to its banking activity, yet the purpose of the payment made by the Government was to safeguard the interest of farmers and small depositors in the district Nande - The strategy of providing financial assistance by way of the grant was a mechanism devised by the Government of Maharashtra with the purpose of safeguarding the interest of farmers and depositors from the Nanded district, and the same clearly emerges from the Government decision dated 10.08.2009 - Following the decision in Commissioner of Income Tax, Madras Versus Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] – thus, the grants received are not in the course of any trade but is of capital nature, which is not chargeable to tax – Decided in favour of assessee. Denial of claim of deduction u/s 36(1)(viia) – Restriction of claim of provision for bad debts - Held that:- Creation of provision for bad and doubtful debts equal to the amount mentioned in section 36(1)(viia) is a must for claiming such deduction - As the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, Following the decision in Shri Mahalaxmi Co-op Bank Ltd. Versus ITO, Ward 1 (1), Kolhapur [2014 (1) TMI 1366 - ITAT PUNE] - the claim of the assessee for deduction u/s 36(1)(viia) of the Act is liable to be restricted to the actual amount of Provision for bad and doubtful debts made in the books of account - the income-tax authorities have rightly allowed the deduction u/s 36(1)(viia) of the Act – Decided against assessee. Addition of interest income on sticky advances/Non- Performing Asset advances – Held that:- The assessee is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India - the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act – as decided in M/s Southern Technologies Ltd. Versus Joint Commnr. of Income Tax, Coimbatore [2010 (1) TMI 5 - SUPREME COURT OF INDIA] - the provision of 45Q of Reserve Bank of India Act has an overriding effect vis-à-vis income recognition principle under the Companies Act - Hence Sec.45 Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks also - the AO has to follow the Reserve Bank of India directions 1998. The assessee did not admit the interest relatable to NPA advances in its total income – in Commissioner of Income tax Versus Vasisth Chay Vyapar Ltd. & others [2010 (11) TMI 88 - Delhi High Court] it has been held that the interest on NPA assets cannot be said to have accrued to the assessee – there is no reasons to interfere with the ultimate conclusion of the CIT(A) in deleting the addition relating to interest income in respect of NPAs – Decided against revenue.
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