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2015 (4) TMI 672 - ITAT AHMEDABADAccrual of interest - Addition being interest on N.P.A. accounts not credited to P&L account - whether provisions of section 43D would not be applicable to the appellant if it is not a scheduled bank? - Co-operative Bank not being a scheduled bank - assessee submitted that as per the RBI guidelines, the interest accrued on Non-performing Assets (NPA) cannot be subjected to tax - assessee also submitted that on the principles of “income recognition” as per guidelines of the RBI, the interest income is required to be offered for taxation on cash basis and not on accrual basis. Held that:- the assesses herein is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India. Hence the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assesses as it is applicable to the companies registered under the Companies Act. The Hon'ble Supreme Court has held in the case of Southern Technologies Ltd (2010 (1) TMI 5 - SUPREME COURT OF INDIA), that the provision of 45Q of Reserve Bank of India Act has an overriding effect vis-a-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. Hence the Assessing Officer has to follow the Reserve Bank of India directions 1998, as held by the Hon'ble Supreme Court. Thus no reasons to interfere with the ultimate conclusion of the CIT(A) in deleting the impugned addition relating to interest income in respect of NPAs. The Hon’ble Coordinate Bench in the case of ACIT vs. Solapur Siddheshwar Sahakari Bank Ltd. [2015 (3) TMI 603 - ITAT PUNE] has noted that there is a divergent view between the Hon’ble Delhi High Court in the case of M/s.Vasisth Chay Vyapar Ltd. [2010 (11) TMI 88 - Delhi High Court] and the Hon’ble Madras High Court in the case of CIT vs. Sakthi Finance Ltd. [2013 (3) TMI 266 - MADRAS HIGH COURT] in respect of application of the judgement of the Hon’ble Apex Court rendered in the case of Southern Technology Ltd.(supra) on income recognition norms prescribed by R.B.I. - AO directed to delete the addition. - Decied in favour of assessee.
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