2018 (1) TMI 1625 - AT - Income Tax

Accrual of income - Interest accrued on NPAs - HELD THAT - As decided in own 2016 (7) TMI 1605 - ITAT PUNE no addition is warranted on account of interest accrued on NPAs. Accordingly we uphold the order of CIT(A) in deleting the addition made on account of interest accrued on NPAs. The grounds of appeal raised by the Revenue are thus dismissed.

Summary

Issues:
- Taxability of interest on NPAs for assessment years 2007-08, 2009-10, and 2012-13.

Analysis:
1. The appeals filed by the Revenue concerned the taxability of interest on NPAs for three different assessment years. The facts and issues were found to be identical across all appeals, leading to a consolidated hearing. The primary contention revolved around the treatment of accrued interest on NPAs as income.

2. The Assessing Officer (AO) contended that interest accrued on NPAs should be computed as per Sec.43D r.w.r 6EA and included as income. The AO relied on a Pune Tribunal decision supporting this view. However, the Commissioner of Income Tax (Appeals) [CIT(A)] granted relief to the assessee, citing various precedents and the Reserve Bank of India's Prudential Norms of Recognition of Income.

3. The CIT(A) held that the interest on NPAs, though accrued as per accounting norms, did not result in real income for the assessee. The CIT(A) referred to multiple cases where similar issues were decided in favor of banks, highlighting the divergent views of different High Courts on the matter.

4. The Revenue challenged the CIT(A)'s decision, arguing for the taxability of accrued interest on NPAs. However, the Tribunal, considering previous decisions and the Bombay High Court's ruling, upheld the CIT(A)'s order. The Tribunal found no distinguishing features in the present case to warrant a different outcome.

5. The Tribunal noted that the issue had been consistently decided in favor of the assessee by both the Tribunal and the Bombay High Court in similar cases. The Revenue failed to provide any new evidence or legal basis to overturn the CIT(A)'s decision. Consequently, the Tribunal dismissed the Revenue's appeals for all three assessment years.

6. In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the consistent legal stance on the taxability of interest on NPAs. The appeals of the Revenue for all three assessment years were dismissed on January 25, 2018.