Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 598 - AT - Income TaxAccrual of income - addition made in the case of interest income on non performing assets on account of method of accounting followed by the assessee - assessee has neither followed mercantile nor cash system but followed hybrid system - assessee is a cooperative society engaged in the business of banking and providing credit facilities to its members - CIT(A) delted theaddition - Held that:- In light of the pronouncement of Hon’ble High Court of Karnataka in the case of Canfin Homes (2011 (8) TMI 178 - KARNATAKA HIGH COURT) there can be no question of accrual of income on NPA and therefore even under the mercantile system of accounting, it cannot be said that income has accrued or arisen to the assessee. The fact that the Revenue has preferred SLP against the decision of the Hon’ble High Court cannot be a ground to take any different view on the issue. We therefore uphold the order of CIT(Appeals) - Decided in favour of assessee. Accrual of liability - disallowance of expenses relating to earlier years - Held that:- It is clear from the facts as it emanates from the record that announcement of schemes by NABARD happened during the previous year. Therefore accrual of liability as far as assessee is concerned is only when subvention percentage is announced by NABARD. Till such time, the assessee’s liability cannot be said to have accrued. Since liability relates to the previous year in which subvention is announced by NABARD, we are of the view that accrual of liability occurs only when the subvention percentage is announced by NABARD and it is only thereafter that the Assessee can know what is the liability on account of sub-vention that it has to bear. In that view of the matter we find no infirmity in the order of the CIT(A). We therefore confirm the order of the CIT(Appeals) - Decided in favour of assessee. Additions made on account of non-business expenditure - whether expenditure is incurred as per the directions of its controlling authority and no documentary evidence was furnished before the A.O. to prove to his satisfaction that on account of this expenditure, the assessee derived certain income or benefits? - CIT(Appeals) observed that though the expenditure is made on account of directive from NABARD, there is also commercial exigency, and the assessee could fairly establish that there was sufficient mobilization of loans and advances and deposits directly relatable to this expenditure and directed AO to delete the expenditure - Held that:- The key aspect to be seen is relationship between the expenses incurred and carrying on of the business of the assessee. If there is a benefit to the assessee, then the expenditure has to be regarded as incurred for the purpose of business of the assessee and allowed as a deduction. The Hon’ble Rajasthan High Court followed the decision of the Hon’ble Supreme Court in the case of Sasoon J. David & Co. P. Ltd. v. CIT, (1979 (5) TMI 3 - SUPREME Court ) wherein reference was made to the expression “wholly or exclusively” used in section 37(1) of the Act and was of the view that the expression used is not “necessarily”. In light of the legal position as explained in the judicial pronouncements and keeping in view the facts of the present case, we are of the view that the order of CIT(Appeals) does not call for any interference - Decided in favour of assessee. Amortization of premium paid on government securities - CIT(A) deleted the addition - Held that:- Assessee is entitled to claim this deduction and hence we allow the grounds of the assessee relating to this issue. See Catholic Syrian Bank Ltd., v. ACIT [2009 (8) TMI 858 - ITAT COCHIN ] Addition made on account of interest accrued on investments - CIT(A) deleted the addition - Held that:- In the present case, the assessee has been following the method of offering interest on securities to tax on receipt basis on maturity and the same has been accepted by the revenue in the past. In view of the aforesaid decision, we are of the view that the order of the CIT(A) does not call for any interference. Consequently, the relevant grounds of appeal raised by the revenue are dismissed.
|