Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (9) TMI 54 - ITAT AHMEDABAD

2016 (9) TMI 54 - ITAT AHMEDABAD - TMI - Addition on account of accrued interest on NPAs - Held that:- We find that the ld.CIT(A) by a well-reasoned order and following the decision rendered by the Honíble Bombay High Court in the case of CIT vs. M/s.Deogiri Nagari Sahakari Bank Ltd [2015 (1) TMI 1218 - BOMBAY HIGH COURT] has held that notional interest income on accrual basis on the NPA accounts cannot be brought to tax. Before us, Revenue has not brought any contrary binding decision in its su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

separate orders of the Commissioner of Income Tax(Appeals)-5, Ahmedabad identically dated 16/11/2015 for Assessment Years (AYs) 2007-08, 2009-10 & 2011-12. Since common issues (except quantum) and facts are involved in these appeals, these are being disposed of by way of this consolidated order for the sake of convenience. We thus proceed with the facts with the Assessee s appeal in ITA No.173/Ahd/2016 for AY 2007-08 as a lead case. 2. The relevant facts as culled out from the materials on r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e AO, assessee carried the matter before the ld.CIT(A), who vide order dated 12/08/2010 (in Appeal No.CIT(A)-XVI/DCIT.Cir.11/182/09-10), confirmed the addition on account of interest accrued on NPA. Thereafter, assessee carried the matter before the Hon ble Tribunal who vide order dated 25/01/2011 in ITA No.2338/Ahd/2010 set aside the case to the file of ld.CIT(A) to redecide the issue as per the directions contained therein. Pursuant to the directions of the ITAT, ld.CIT(A) vide his order dated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e directions contained in the order. Pursuant to the directions of Hon ble Tribunal, AO vide order dated 29/02/2015, passed u/s.143(3) r.w.s.254 of the Act, determined the total income at ₹ 1,10,45,510/-. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A) who vide order dated 16/11/2015 (in Appeal No.CIT(A)-5/DCIT Cir.5(3)/109/2014-15) decided the issue in favour of assessee. Aggrieved by the order of ld.CIT(A), Revenue is now in appeal before us and has raised .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for taxing of real income was not applicable to the assessee because section 145 of the Act prescribes only two methods of accounting, i.e. cash method and accrual method. He noticed that since the assessee was following mercantile method of accounting and reflecting all the expenditure by following accrual method, assessee should have also followed the same method for calculating the income. He also noted that assessee was not able to effectively establish that there was uncertainty with regar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssue in favour of assessee by holding as under:- Decision: 3.3. I have considered the facts of the case and submission made by the appellant. In this case original assessment u/s.143(3) was made on 29.12.2009 after making addition of ₹ 85,36,517/- on account of accrued interest on non-performing assets. The CIT(A) has confirmed this said addition. The ITAT vide its order dated 25.1.2011 has restored the matter to the file of CIT(A). The CIT(A) has passed order on 24.1.2013 upholding the ad .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

te have remained unanswered. First question which is yet to be addressed is whether the assessee is a scheduled bank or not. In this regard, the assessee is expected to place on record the requisite evidence, through which it can be ascertained that the assessee falls under any of the category as prescribed in Explanation to section 43D of the Act. Because of this reason, we hereby direct the assessee to obtain the requisite certificate from the concerned authority clearly mentioning the status .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ituation where a cooperative bank had followed mercantile system of accounting, but neither credited interest in the profit & loss account nor offered for taxation, the amount of interest of "NPA ", in terms of CBDT Circular dated 6.10.1952 need not to be included in the assessee's taxable income, provided the 1TO is satisfied that non such doubtful debts, the recovery of interest is practically improbable. In addition to this judgment, few other judgments have also been cited .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dividual case". Unquote. Further, the Hon'ble Court vide para 18 has held as under: "18, Mere characterization of an account as a NPA would not by itself be sufficient to say that there is uncertainty as regards realizability of income or interest income thereon. Accrual of interest is a matter of act to be decided separately for each case on the basis of examination of the facts and circumstances." Respectfully following this decision of the Hon 'ble Madras High Court, we .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

3.4. In the set-aside proceedings, the Assessing Officer has passed assessment order dated 20.2.2015 and made addition of ₹ 1,16,77,000/- on account of accrued interest on non-performing assets. The Assessing Officer has made addition on the ground that the appellant being a scheduled bank, the provision of Section 43D were not applicable, the real income theory was not applicable in view of mercantile method of accounting and the uncertainty of income was not established. 3.5. The AO has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant was following the mercantile system of accounting in general, but so far as interest on NPA is concerned, it has booked the income on receipt basis only. The AO further observed that since the NPAs have not been written off by the appellant bank and it had the right to recover the principal amount as well as the interest thereupon on accrual basis as per the mercantile system of accounting followed by it. Thus, the interest income ought to have been recognized as income assessable for the ye .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Court in the case of State Bank of Travancore Vs. CIT (supra). 3.7. On the other side, the appellant has claimed that the interest on the NPA has not accrued at all for the reason that the recovery of the principal amount itself was in doubt, when the NPA account was doubtful and sticky as per the categorization prescribed by the RBI then the interest is not required to be provided at all in the P & L Account. It also relied upon the RBI Circular of July 02, 2012. As per the circular, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he case of NPA, the recovery of principal amount itself was in doubt. Therefore, interest on such doubtful amount cannot be said to have been accrued as per the provisions of section 145 of I. T. Act. It has also relied upon the judgment of Bombay High Court in the' case of State Bank of India (supra), ITAT, Ahmedabad in the case of Mahila Seva Sahakari Bank Ltd. and Sardarganj Mercantile Co-op, Bank Ltd. (supra). Further, reliance was also placed on the recent judgment of Hon'ble Bombay .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d the NPA out of its loans and advances as per the norms prescribed in the RBI Circular which is mandatory to be done. It is needless to mention that such sticky loans have been treated as NPA only for the reason that the repayments of the principal and interest thereupon was not being paid by the borrowers to the appellant bank. Thus, it cannot be said that the interest pertaining to those NPAs would certainly be realized from such defaulting customers. On such NPAs, even the recovery of dues w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rved that the notional interest upon the sticky loans cannot be taxed. For ready reference, the head notes of the judgment is reproduced as under :- "Section 5, read with section 119 and 145, of the Income Tax Act, 1961 - Income -Accrual of- Assessment Year 1981-82 - Whether in view of CBDT circular, dated 9-10-1984, interest on a loan whose recovery is doubtful and which has not been recovered by assessee-bank for last three years but has been kept in a suspense account and has not been br .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not forming part of income of assessee until realized, this direction by way of a circular cannot be considered as travelling beyond powers of Board under section 119 and such a circular is binding under section 119 - Held, yes. Circulars and Notifications - CBDT Circular No. 41(V-6), dated 6-10-1952, CBDT Circular dated 30/06/195, CBDT Circular No. 1186, dated 20/06/1978 and CBDT Circular No. F_ 201/21/84/TTA-II dated 9-10-1984." 3.10. Subsequently, the Hon'ble ITAT 'B' Bench, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eet directly and also not received actually. Relevant portion of the decision is reproduced as under. "4. Now the assessee is before us. Ld. Counsel for the appellant contended that the assessee is a Cooperative bank engaged in carrying on banking business. During A. Y. 2009-10, the assessee passed book entry for interest of ₹ 1,58,897/-on NPA account by debiting to time barred interest receivable account and crediting to provision for time barred interest. Both the accounts are refle .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e page no. 5 of the paper book which is balance sheet for A. Y. 09-10 which shows that the appellant had shown this interest provision NPA in asset side and liability side and not credited in the P&L account. The appellant further argued that UCO Bank v. CIT, 237ITR 889, wherein it was held that the question whether interest earned what have come to be known as "sticky " loans, can be considered as income or not until actual realization, is a question which may arise before several .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ied upon the order of the CIT (A) and A. O. 5. We have heard the rival contentions and perused the material on record. The appellant is making the provision of interest as per the guidelines issued by the R.B.I. However, same has not been credited in the P&L account as it was notional had not received actually by it. Section 43 is also not applicable as assessee has not credited in the P&L account but shown in the assets and liability side in the balance sheet directly and also not recei .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e relevant portion of the decision is reproduced as under:- "5.1. However, we find that under the identical facts, the Coordinate Bench of this Tribunal in the case of ACIT vs. Solapur Siddheshwar Sahakari Bank Ltd. in ITA NOS.222Q&221/PN/2013 for AYs 2009-10 & 2010-11 (supra) has examined the issue thoroughly by holding as under:- 4. The learned CIT(A) disagreed with the Assessing Officer, and thus the Revenue is in appeal before us. At the time of hearing, it was a common point be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

305 (Madras), which had expressed divergent views with respect to the issue of accrual of interest income on NPA advances; and, following the proposition that in the absence of any judgement of the Jurisdictional High Court, there being contrary judgements of the non-jurisdictional High Courts, a decision which was favourable to the assessee was to be followed in view of the reasoning laid down by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., (1973) 88 ITR 192 (S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

carrying on banking business in terms of a license granted by RBI and is not a 'scheduled bank' included in second schedule of RBI so as to fall within the scope of section 43D of the Act. Notably, section 43D of the Act prescribes that interest income on such categories of bad and doubtful debts as prescribed by the RBI guidelines shall be chargeable to tax in the year in which such interest income is credited by the assessee in the Profit and Loss account or in the year of actual rece .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an identical controversy. The assessee before the Visakhapatnam Bench was a Cooperative Bank operating under a license issued by RBI but was not a 'scheduled bank' so as to fall within the scope of section 43D of the Act. The issue related to taxability of interest income relating to NPAs, which as per the Revenue was liable to be taxed on accrual basis in line with mercantile system of accounting adopted by the assessee therein. The assessee, on the other hand, contended that having re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

it was held that interest income relatable to NPAs was not includible in total income on accrual basis since the same did not accrue to the assessee. The following discussion by the Visakhapatnam Bench of the Tribunal in the case of The Durga Cooperative Urban Bank Ltd. (supra) is worthy of notice:- "8. We have heard the rival contentions and carefully perused the record. The question of taxability of interest on NPAs has been considered by the Hon'ble Delhi High Court in the case of M/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me relatable to NPA assets in its total income. The Assessing Officer, however, added the said interest as the income of the assessee by holding that it had "accrued" to the assessee even it was not realized as the assessee was following mercantile system of accounting. The learned CIT (A) affirmed the order of the Assessing Officer. However, the IT AT deleted the aforesaid income. Hence the revenue preferred appeal before the Hon 'ble Delhi High Court. 8.1 After hearing the rival .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny other law. Then the Hon'ble High Court also considered accounting standard "AS-9" on "Revenue recognition" and also extracted following relevant portion from the said accounting standard: 9. Effect of uncertainties on Revenue Recognition 9.1 Recognition of revenue requires that revenue is a measurable and that at , the time of sale or the rendering of the service, it would not be unreasonable to expect ultimate collection. 9.2 Where the ability to assess the ultimate c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e made by installments. 9.3 When the uncertainty relating to collectability arises subsequent to the time of sale or the rendering of the service, It is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. 9.4 An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use of others of enterprise resources is reasonably d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

i) CIT vs. Motor Credit Co (P) Ltd., 127 ITR 572 (Mad) iv) UCO Bank vs. CIT 237 ITR 889 (SC) v) CIT vs. Shoorji Valiabhdas & Co 46 (TR 144 (SC) vi) Godhra Electricity Co. Ltd., Vs. CIT 225 ITR 746 vii) CIT vs. Goyal M G Gases (P) Ltd., 303 ITR 159 (Del) viii) CIT vs. Richer Ltd., ITANo.431/2009 dated 15.7.2009 (Del) 8.3 After considering the Accounting Standard 9 and the various case law listed above, the Hon'ble Delhi High Court held that the interest on NPA advance cannot be treated as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urt in the case of Southern Technology (Supra). No doubt, in first blush, reading of the judgment gives an indication that the Court has held that Reserve Bank of India Act does not override the provisions of the income Tax Act. However, when we examine the issue involved therein minutely and deeply in the context in which that had arisen and certain observations of the Apex Court contained in that very judgment, we find that the proposition advanced by Mr. Sabharwal may not be entirely correct. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

serve, and thus not deductible under section 36(i)(vii) of the Act. The Assessing Officer, however, did not bring to tax ₹ 20,34,605/- as income (being income accrued under the mercantile system of accounting). The dispute before the Apex Court centered around deducibility of provision for NPA. After analyzing the provisions of the Reserve Bank of India Act, their Lordships of the Apex Court observed that in so far as the permissible deductions or exclusions under the Act are concerned, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Tax Act. It can be said, therefore, that the Apex Court approved the 'real income' theory which is engrained in fie Prudential Norms for recognition of revenue by NBFC". 9. The Hon'ble Supreme Court in the case of M/s Southern Technologies Ltd (Supra) dissected the matter into two parts viz., a) Income Recognition and b) permissible deduction/exclusions under the Income tax Act. In so far as income recognition is concerned, the Hon'ble Supreme Court held that Section 145 of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s shall be governed by the provisions of the Income Tax Act. The relevant observations of the Hon'ble Supreme Court are extracted below: "Applicability of Section 145. 40. At the outset, we may state that in essence RBI Directions 1998 are Prudential/Provisioning Norms issued by RBI under Chapter IIIB of the RBI Act, 1934. These Norms deal essentially with Income Recognition. They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFCs to reflect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the IT Act. The inconsistency between these Directions and Companies Act is only in the matter of Income Recognition and presentation of Financial Statements. The Accounting policies adopted by an NBFC cannot determine the taxable income. It is well settled that the Accounting Policies followed by a company can be changed unless the AO comes to the conclusion that such change would result in understatement of profits. However, here is the case where the AO has to follow the Reserve Bank of Ind .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 (Supra), 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.45Q 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 I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nterest, even the principle amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not "accrued". The said decision of the Hon'ble Delhi High Court is equally applicable to the issue in our hands. Accordingly we do not find any infirmity with the decision of the learned CIT (A) in holding that the interest income relatable on NPA advances did not accrue to the assessee. Accordingly we uphold his order." .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Hon'ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd. (supra) on a similar issue, i.e. relating to interest income on NPAs. The learned Departmental Representative further pointed out that the Hon'ble Madras High Court followed the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd. (supra) in holding that interest on NPAs was assessable to tax on accrual basis. We have carefully considered the submissions put-forth by the learned Departmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ore it held the .interest income on NPAs is liable to be taxed on accrual basis and not in terms of RBI's guidelines. But the Hon'ble Delhi High Court in the case ofM/s Vasisth Chay Vyapar Ltd. (supra) has taken a view that Southern Technologies Ltd. (supra) case did not apply to the Income Recognition Norms prescribed by RBI. Ostensibly, there is divergence of opinion between the Hon'ble Delhi High Court and the Hon'ble Madras High Court as noted by the Hon'ble Madras High C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of our co-ordinate Bench in the case of The Durga Cooperative Urban Bank Ltd. (supra) and accordingly the order of the CIT(A) is liable to the affirmed. We hold so. 14. In the result, the appeal of the Revenue is dismissed." 5. Since it was a common point between the parties that the facts and circumstances in the present case are identical to those considered by us in the case of The Omerga Janta Sahakari Bank Ltd. (supra), following the said precedent the present claim of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r the guidelines issued by the R.B.I. However, same has not been credited in the p&l account as it was notional had not received actually by it. Section 43 is also not applicable a assessee has not credited in the p&l account but shown in the assets and liability side in the balance sheet directly and also not received actually. Thus, we have considered view that the CIT(A) was not justifying in confirming the addition. Accordingly, the assessee's appeal is allowed. 6. In the result, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income recognition norms prescribed by R.B.I. The Hon 'ble Coordinate Bench in view (of the fact that there were divergent views of Hon'ble Delhi High Court and Hon 'ble Madras High Court, applied the ratio of the Hon 'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported at (1973) 88ITR 192 (SC). In the present case also, there is no judgement by the Hon'ble Jurisdictional High Court, therefore for the same reasoning, we decide this issue in favour of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enue by confirming the order passed by the CIT(A). There is no substantial question of law involved in these appeals and thus all the appeals are liable to be dismissed. 9. The Income Tax Appellate Tribunal has referred the case of M/s. Vasisth Chay Vyapar Limited 330 ITR 440(Delhi). In this case, the revenue re lied upon the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd. supra. The learned Income Tax Appellate Tribunal has reproduced the observations made by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ect vis-a-vis income recognition principle under the Companies Act. Hence, Section 45Q of the RBI Act shall have overriding effect over the income recognition principle followed by corporative banks,. Hence, the Assessing Officer has to follow the Reserve Bank of India directions 1998, as held by the Hon 'ble Supreme Court. 10. The Honourable Apex Court in the case of Uco Bank case (supra) had an occasion to consider the nature of CBDT circular and Hon'ble Apex Court has thus held that B .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

st 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 assessee bank is Mercantile system of accounting. However, the assessee considers income by way of interest pertaining to doubtful loans as not real income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

credited to suspense account will be decided in the light of the Board's earlier Circular dated 6-10-1952, as the said circular was withdrawn only in June, 1978. The new procedure under the Circular of 9-10-1984 will be applicable for and from the assessment year, 1979-80. All pending disputes on the issue should be settled in the light of these instructions. Therefore, up to the assessment year 1978-79, the CBDT's Circular of 6-10-1952 would be applicable; while from the assessment year .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee until realized, this direction by way of a circular cannot be considered as traveling beyond the powers of the Board under section 119 of the Income Tax Act. Such a circular is binding under section 119. The Circular of 9-10-1984, therefore, provides a test for recognizing whether a claim for interest can be treated as a doubtful claim unlikely to be recovered or not. The test provided by the said circular is to see whether, at the end of three years, the amount of interest has, in fact, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pertaining to doubtful loans would not be included in the income of the assessee, if for three years such interest is not actually received. The very fact that the assessee, although generally using a mercantile system of accounting, keeps such interest amounts in a suspense account and does not bring these amounts to the P&L a/c goes to show that the assessee is following a mixed system of accounting by which such interest is included in its income only when it is actually received. Lookin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rm administration of law by all the Income-tax authorities in a specific situation and, therefore, validly issued under section 119 of the Income Tax Act. As such, the Bombay High Court circular would be binding on the department. The relevant circulars of CBDT cannot be ignored. The question is not whether a circular can override or detract from the provisions of the Act; the question is whether the circular seeks to mitigate the rigour of a particular section for the benefit of the assessee in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e question was whether the assessee is liable to be taxed under Income Tax Act, 1961 in respect of the interest on doubtful advances credited to the interest on doubtful advances credited to the interest suspense account. In this case, the Uco Bank's case (supra) was also referred and the Hon'ble Apex Court has allowed the appeal to the extent of question raised as aforesaid. Furthermore, the respondent Cooperative banks, as understood by Section 43 of the Income Tax Act on the Scheduled .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

old that no substantial question of law arises in these appeals. 13. So far as income Tax Appeal Nos. 53/2014 and 54/2014 are concerned, the issue was also raised in the appeals before the Tribunal with regard to the addition made by the Assessing Officer representing the forfeited dividend. The learned Tribunal has rightly dealt with this issue and observed that, unclaimed dividend in question amounts to excess provisions for dividend made by the Assessee on an earlier occasion which has been r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of various authorities in favour of the Co-operative banks stating that interest on NPA is not chargeable on accrual basis in the case of Co-operative banks. Few of such decisions are cited as under:- • DCIT Vs. Surat National Co-Op. Bank Ltd [ITA No. 2793/Ahd/2012 dated 23/08/2013 by Hon'ble ITAT B'Bench, Ahmedabad] • ACIT Vs. The Omerga Janta Sahakari Bank Ltd. [ITA No. 350/PN/2013 dated 31/10/2013 by Hon'ble ITAT 'A' Bench, Pune] • ACIT Vs. Punjab State Co- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

banks. It was also observed that as per the RBI guidelines dated 02/07/2012 of which relevant para is reproduced for ready reference as under also states that it was mandatory upon the appellant to not to charge the interest on accrual basis. "3. INCOME RECOGNITION 3.1. Income Recognition Policy 3.1.1. The policy of income recognition has to be objective and based on the record of recovery. Internationally income from non-performing assets (NPA) is not recognized on accrual basis but is bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

irculars issued earlier were not applicable in view of section 43D substituted w.e.f. 01/04/2000 and the said section requires to follow RBI guidelines and to tax interest on NPA Account only when realized. Further, the Hon'ble Bombay High Court in the case of CIT Vs. Devgiri Nagrik Sahakari Bank Ltd. (supra) has treated the Cooperative Banks as scheduled banks. In para - 11 of the judgment, they have observed as under:- "Furthermore, the respondent Co-operative Banks as understood by s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

claim of the assessee on the ground that the assessee failed to effectively demonstrate with cogent evidences that the income has not been resulted or accrued to the assessee. 3.17. The appellant has contended that the appellant had furnished a chart showing complete particulars relating to the NPAs such as date of NPA, date of suite file, status of court proceedings, the position as to realization etc. It is further submitted that in most of the cases there is no realization of dues inspite of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and in some cases got decree also for recovery. Even after obtaining decree the appellant bank is not able to recover the dues from parties. The AO failed to appreciate this fact and simply held that the assessee has not failed to effectively demonstrate with legal evidences that the income h snot been resulted or accrued to the assessee. The appellant has furnished details and evidences before the AO regarding the efforts made by it. Considering the overall facts of the case, I am inclined to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ides recent judgment of Hon'ble Bombay High Court in the case of Devgiri Nagri Sahakari Bank Ltd. and decisions of various other authorities, the addition made by the AO is found unjustified, and hence, the same is deleted. 3. Aggrieved by the order of ld.CIT()A, now the Revenue is in appeal before us. 3.1. Before us, the ld.Sr.DR supported the order of the AO. On the other hand, ld.AR reiterated the submissions made before the AO and supported the order of the ld.CIT(A). He further submitte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version