TMI Blog2015 (1) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 9(1) of the Maharashtra Cooperative Societies Act, 1960. The assessee banks are engaged in the Banking business by following Mercantile system of accounting. The assessee Cooperative banks have furnished its return of income for the year under consideration declaring their total income. The Assessing Officer passed the order under section 143 (3) of the Income Tax Act on different dates by making additions on various issues. The same is showed below in a tabular form. Tax Appeal Nos. Name of the Assessee/Cooperative Bank. Assessment Year Total income as per computation Deletions of additions which is challenged in the writ petition by the revenue 53 of 2014 M/s Devgiri Nagari Sahakari Bank Ltd., Aurangabad 2009-2010 Rs.9,39,57,223/- Rs.1,06,36,000/- 54 of 2014 M/s Peoples Cooperative Bank Ltd.,Hingoli 2009-2010 Rs.5,15,43,200/- Rs.1,19,77,000/- 57 of 2014 58 of 2014 The Nanded District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w either Mercantile system of accounting or Cash system. They cannot have mix system of account. The learned counsel also submits that, the RBI directions under the RBI Act are prudential norms, but have nothing to do with the computation or taxability of the provision of the NPA under the IT Act. Learned counsel further submits that though the RBI directions deviate from the accounting practice as provided by the Companies Act, but they do not override the provisions of the IT Act and they are operating in different fields. The learned counsel for appellants/revenue lastly submits that, the learned Tribunal ought to have held that the assessee cooperative bank does not satisfy the conditions of CBDT circular No.F.201/81/84/ITAII dated 09.10.1984 and therefore could not avail the benefits of the circular. On the basis of aforesaid submissions, the learned counsel further submits that substantial question of law involved in the above appeals and thus order passed by the Assessing Officer under section 143 (3) of the Income Tax Act, 1961 are required to be confirmed. Learned counsel for the appellants submits that, the Tribunal ought to have allowed the appeal by relying on the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Further a similar issue was raised about interest accrued on a sticky loan which was not recovered by the assessee bank for the last three years and transferred to the suspense account, would or would not be included in the income of the assessee for the particular assessment year. Hon'ble Apex Court has observed that : The method of accounting which is followed by the assesseebank is Mercantile system of accounting. However, the assessee considers income by way of interest pertaining to doubtful loans as not real income in the year in which it accrues, but only when it is realized. A mixed method of accounting is thus followed by the assessee-bank. This method of accounting adopted by the assessee is in accordance with accounting practice. The assessee s method of accounting, transferring the doubtful debt to an interest suspense account and not treating it as profit until actually received, is in accordance with accounting practice up to assessment year 1978-79 the taxability of interest on doubtful debts credited to suspense account will be decided in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived. Looking to the method of accounting so adopted by the assessee in such cases, the circulars which have been issued are consistent with the provisions of section 145 and are meant to ensure that assessees of the kind specified who have to account for all such amounts of interest on doubtful loans are uniformly given the benefit under the circular and such interest amounts are not included in the income of the assessee until actually received if the conditions of the circular are satisfied. The Circular of 9-10-1984, also serves another practical purpose of laying down a uniform test for the assessing authority to decide whether the interest income which is transferred to the suspense account is, in fact, arising in respect of a doubtful or sticky loan. This is done by providing that non-receipt of interest for the first three years will not be treated as interest on a doubtful loan. But if after three years the payment of interest is not received, from the fourth year onwards it will be treated as interest on a doubtful loan and will be added to the income only when it is actually received. There is no inconsistency or contradiction between the circular so issued and secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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