TMI Blog2016 (3) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... PN/2015, ITA No.615/PN/2015 - - - Dated:- 10-2-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Dheeraj Kumar Jain For The Respondent : Shri Sunil Ganoo, Shri S.N. Puranik ORDER PER SUSHMA CHOWLA, JM: Both the appeals filed by Revenue relating to different assessee s are against separate orders of CIT(A)-7, Pune, dated 24.03.2015 and 10.02.2015 relating to assessment year 2011-12 against respective orders passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue in ITA No.934/PN/2015 has raised the following grounds of appeal:- 1. The learned Commissioner Income-Tax (Appeals) grossly erred in deleting the addition on account of accrued interest on Non Performing Assets u/s 43D of the Income-Tax Act, 1961 of Rs .45,89,499/- instead of confirming the same. 2. The learned Commissioner of Income-Tax (Appeals) has grossly erred in appreciating the fact that provisions of section 43D are only applicable to Financial Institutions and a Scheduled Bank. The assessee being a non-scheduled bank provision of section 43D would not apply. 3. The learned Commissioner of Income-Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of premium as deduction either in the year of acquisition of HTM securities or cover the period of maturity on deferred basis. 9. For the facts and such other reasons as may be urged at the time of hearing, the order of the Ld. Commissioner of Income-Tax (Appeals)-Ill, Pune may be vacated and that of the Assessing Officer be restored. 10. The appellant craves leaves to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon ble Tribunal. 3. The issues arising in both the appeals are identical. However, we proceed to adjudicate the issues by making reference to the facts in ITA No.934/PN/2015. 4. The issue in grounds of appeal No.1 to 5 raised by the Revenue is in relation to the order of CIT(A) in deleting the addition made on account of accrued interest on Non-Performing Assets (NPAs) . 5. Briefly, in the facts of the present case, the assessee is a cooperative bank engaged in the business of banking. The Assessing Officer during the course of assessment proceedings noted that the assessee had not credited the interest receivable or accrued on Non-Performing Assets (referred to as NPAs) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the purpose of section 43D were not extended to a co-operative bank and (ii) the assessee was following mercantile system of accounting and not cash system. Ultimately the Assessing Officer taxed on accrued interest of ₹ 25,20,022/- advance claimed to be NPA account. The matter was carried before the first appellate authority wherein, following the Osmanabad Janta Sahakari Bank Ltd. in ITA No.795/PN/2011, the CIT(A) has decided the issue in favour of the assessee and the same has been opposed before us on behalf of revenue. 2.1 After going through the rival submissions and material on record, we find that in Osmanabad Janta Sahakari Bank Ltd. (supra) the Tribunal has decided the issue in favour of assessee by observing as under: 7. In the case before us, admittedly, assessee has directly taken the interest to the Balance Sheet and it is not routed through the Profit Loss Account. Moreover, the issue of the taxability of the interest on the sticky losses/advances, is covered in favour of the assessee by the decision of the coordinate Benches in the case of The Durga Cooperative Urban Bank Ltd., Vijayawada (supra) and Karnavati Cooperative Bank Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the Revenue and therefore, accordingly answered the question in favour of the Assessee. On going through the order of the CIT(Appeals) dated 28th March 2005 as well as the impugned order, we do not find that the CIT(Appeals) or the ITAT erred in holding in favour of the Assessee. In this regard, the submission of Mr Mistry, the learned Senior Counsel appearing on behalf of the Assessee, that this issue is squarely covered by a judgment of this Court in the case of Commissioner of Income Tax v/s Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Bom) is well founded. The facts of that case were that the Assessee viz. M/s Reliance Utilities and Power Ltd. had invested certain amounts in Reliance Gas Ltd. and Reliance Strategic Investments Ltd. It was the case of the Assessee that they themselves were in the business of generation of power and they had earned regular business income therefrom. The investments made by the Assessee in M/s Reliance Gas Ltd. and M/s Reliance Strategic Investments Ltd. were done out of their own funds and were in the regular course of business and therefore no part of the interest could be disallowed. It was also pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1982) 134 ITR 219 the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. (emphasis supplied) 5. We find that the facts of the present case are squarely covered by the judgment in the case of Reliance Utilities and Power Ltd. (supra). The finding of fact given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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