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TMI Blog2013 (12) TMI 1546X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law the judgment of the other co-ordinated Benches of the Tribunal and also other High Court judgments were not binding on the authorities below? Whether the Ld. CIT(A) breached the principles of judicial propriety in not following the various judicial verdicts relied upon before him and also included in the written submissions placed before him? 3) Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was correct in not discussing the issue in his appeal order and simply relying on an appeal order in the case of this appellant pertaining to A. Y. 2010-11? Whether his appellate order breached the provisions of S. 250(6) of the Act? 4) On the facts and circumstances of the case and in law and in view of the ground Nos. 1 to 3 above the addition made by A.O. of Rs. 5,79,83,090/- and confirmed by Ld. CIT(A) is unsustainable in law and therefore be deleted. 5) On the facts and circumstances of the case and in law the Ld. CIT(A)-Kolhapur was not justified in confirming the disallowance of Rs. 5,67,456/- claimed as deduction of amortization expenses of premium paid on purchase of Govt. Securities ignoring the jurisdictional Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in the case of Southern Technologies Ltd. [320 ITR 577 (SC)]. The Tribunal finally held that the interest income relatable to NPA advances did not accrue to the assessee. 6. An identical view has been taken by the ITAT, Ahmedabad Bench in the case of Karnavati Cooperative Bank Ltd. Vs. Dy.CIT [134 ITD 486 (Ahmedabad)]. In the case of Karnavati Cooperative Bank Ltd. (supra), the Tribunal has considered the provisions of section 43D and its application to the nonscheduled banks. The reasons given by the Tribunal in the case of Karnavati Cooperative Bank Ltd. (supra) for holding that interest on the sticky advances/NPA advances cannot be brought to tax by following the decision in the case of UCO Bank (supra), which is as under: "15.1. On careful analysis of this section our first observation is that Section 43D is in contrast with the fundamental principle of accountancy. The cardinal principle of mercantile system of accountancy is that an income is to be shown in the books of account on accrual basis. The principle is that it is immaterial whether it was actually received or not, but if an income is expected to be received, then it should be brought to books of account as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspense account, it need not be included in assessee's taxable income, provided the Income tax Officer is satisfied that recovery is practically improbable. The CBDT u/s.119 of the I.T.Act has power to issue Circulars in exercise of its statutory powers. If the Board consider it necessary to lay down certain Rules and then direct the sub-ordinate authorities, such directions are required to be followed and such Circular would be binding on the Department unless and until held as ultra vires by a court of law. The Board has powers to relax the severity or the strictness of law and the authorities are required to follow those instructions as held in the case of C.B. Gautam vs. Union of India 108 CTR 304 (SC) & 110 CTR 179 (SC); Navnitlal C.Zaveri 56 ITR 198(SC) and K.P.Varghese 131 ITR 597 (SC). In the land-mark decision, the Hon'ble Supreme Court in the case of UCO Bank vs. CIT (1999) 237 ITR 889 (SC) has therefore held, first, that a beneficial circular is not to be treated as inconsistent with the provisions of statute and binding on the authorities. Second, that in respect of interest on "sticky advances" interest income is to be taxed only when actually received as prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held as under: "As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is other-wise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature. When words acquire a particular meaning or sense because of their authoritative construction by superior courts, they are presumed to have been used in the same sense when used in subsequent legislation in the same or similar context. To say that the court could not resort to the so-called "equitable construction" of a taxing statute is not to say that, where a strict literal construction leads to a result not intended to subserve the object of the legislation, another construction, permissible in the context, should not be adopted. In this respect, taxing statutes are not different from other statutes." We can therefore safely draw a conclusion that by the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegories of bad or doubtful debts as may be prescribed having regard to the Guidelines issued by the RBI in relation to such debts'. This expression continues to exist in the newly substituted section 43D applicable with effect from 1-4-2000. This shows that the RBI Guidelines in respect of scheduled banks, public financial institutions etc., were not sufficient for recognition of income on cash basis for the purposes of income-tax. The income of such assessees was determined as per circular dated 9-10-1984. Because of this reason, section 43Dwas inserted in the statute. RBI Guidelines in case of NBFC are for the purpose of control and supervision with respect to public interest and viability of the NBFC. The Guidelines never intended for taking the interest income accrued as per section 5 out of the scope of the Act. If the contention of assessee was accepted, it would amount to insertion of 'NBFC' in section 43D, that too by a Guideline issued for different purposes by an authority other than the Parliament In other words, the doctrine of 'Casus Omissus' will deem to have been applied which is contrary to law of land."Unquote. The basic reason for directing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful debts. (vi ) Concept of real income approved in the case of banking business: Before us, the theory of "real income" has also been argued and in support a decision of Hon'ble Court pronounced in the case of CIT vs. Godhra Electricity Co. 225 ITR 746 (SC). In short, the view expressed was that if income does not result at all, there cannot be any tax and that if an income has not materialized, then merely an entry made about a hypothetical income by following book keeping methods, the liability to tax cannot be attracted. Now at present the situation is that the Hon'ble Madras High Court in the case of CIT vs. Elgi Finance Ltd. 293 ITR 357 (Mad.) has taken a view that the assessee is a company engaged in the business of lease, finance and hire purchase and that the principle of accrual comes into play without income was recognized and that the assessee had classified its assets on the basis of notification issued by R.B.I. and found that certain assets came under the category of NPA and that from such NPA the assessee had not recognized any income in consonance with the notification issued by RBI and AS-9 issued by ICAI and that the assessee was justified in not recogniz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the assessee. We have also considered the various decisions cited before us. We find an identical issue had come up before the Tribunal in the case of Nahsik Merchant Cooperative Bank Ltd. (Supra). We find the Tribunal has discussed the issue and dismissed the grounds raised by the Revenue by holding as under : "4. After going through rival submissions and material on record we find that with the advent of section 80P(4) w.e.f. A.Y. 2007-08 has closed the doors for cooperative banks for claiming the benefit of deduction u/s.80P(2)(a)(i) from this total income. However, the cooperative society should now be entitled to be assessed as normal banking company. The clause (4) inserted in section 80P has taken away the benefit of the erstwhile deduction available to cooperative society in carrying on business of banking or providing credit facility to its members. The new clause (4) inserted by the Finance Act, 2006 w.e.f. 01- 04-2007 reads as under : " The provision of the section was not in relation to any cooperative bank other than agricultural credit society or primary cooperative agricultural and rural development bank". 5. The intention of the provision may be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -trade of a bank and therefore are to be valued at cost or NRV, whichever is less. Fall in value below cost, therefore, is to be provided immediately, however any net appreciation in value is ignored and not recognized as income on the basis of conservatism. 3. HFT The individual scrips in the Held for Trading category will be marked to market at monthly or at more frequent intervals and provided for as in the case of those in the Available for Sale category. 7. In para (vii) of the CBDT Instruction No.17 of 2008 dated 26.11.2008, on 'Assessment of Bank - check list for deduction, states as under: "As per RBI guidelines dated i6th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/ appreciation is to be aggregat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds : "1) Whether on the facts and circumstances of the case and in law the Ld. CIT(A)-Kolhapur was justified in confirming the addition made of Rs. 5,38,53,061/- by the A.O. being the estimated accrued interest on NPAs? Even ignoring the jurisdictional judgment of the Tribunal? Whether the CIT(A) ought to have followed the jurisdictional Tribunal judgment which was binding on him in view of Apex courts judgment? 2) Whether on the facts and circumstances of the case and in law the judgment of the other coordinated Benches of the Tribunal and also other High Court judgments were not binding on the authorities below? Whether the Ld. CIT(A) breached the principles of judicial propriety in not following the various judicial verdicts relied upon before him and also included in the written submissions placed before him? 3) On the facts and circumstances of the case and in law and in view of the ground Nos. 1 to 3 above the addition made by A.I. of Rs. 5,38,53,601/- and confirmed by Ld.CIT(A) is unsustainable in law and therefore be deleted. 4) Whether on the facts and circumstances of the case and in law the Ld. CIT(A)-Kolhapur was correct in his appeal order saying that the Reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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