Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

DCIT, Circle-5 (3) , Ahmedabad and ACIT, Circle-11, Ahmedabad Versus The Sarangpur Coop. Bank Ltd.

2016 (9) TMI 54 - ITAT AHMEDABAD

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 Hon’ble 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 support. In view of the aforesaid set of fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come 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 record are as under:- 2.1. Assessee is Ban .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 24/01/2013 in Appeal Order No.CIT(A)XVI/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uant 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 following effective ground:- (1) The Ld.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

able 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 regard to the realisability and interest from .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 addition by enhancing it to ₹ 1,16,77 .....

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 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 of the assessee bank, and place the same .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lowed 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 by the learned AR passed by this very Tri .....

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 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 are also of considered opinion that 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

sessing 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 made the addition in the nature of accrue .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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 year under consideration. Thus, 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

ancore 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 appellant bank was not required to make p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 High Court in the case of CIT Vs. Devgir .....

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 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 was doubtful and in such circumstances, it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 brought to profit and loss account of asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

til 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, Ahmedabad in the case of Sardarganj Merca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly. 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 reflected in the balance sheet on the assets 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

alance 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 income tax officer exercising jurisdicti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 received actually. Thus, we have considered vi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roduced 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 between the parties that an identical contr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent 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 (SCCG and, thus the Tribunal decided the is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 receipt, whichever is earlier. Since 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

efore 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 regard to the guidelines issued by RBI rega .....

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 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/s Vasisth Chay Vyapar Ltd (Supra); wherei .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncome. 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 submissions, the Hon'ble Delhi 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

ourt 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 collection with reasonable certainty is la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rtainty 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 determinable. When such consideration is n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 "accrued" to the assesses, 8.4 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

upra). 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. In the case before the Supreme Court, 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

ion 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, the same are admissible only if such deduct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 the Income Tax Act has no role to play a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 "true and correct" profits. 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

hese 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 India Directions 1998 in view of Section 45Q .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tered 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 India directions 1998, as held by the Hon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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." 10. Following the aforesaid discussion, .....

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 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 Departmental Representative based on the judgment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Court in its order. 12. In so far as, pres .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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 deserves to be upheld. Thus, the order 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

ever, 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, the assessee's appeal is allowed. &q .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.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 the assessee and the AO is hereby directed .....

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 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 the Delhi High Court while referring 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

e 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 Board has power, inter alia, to tone down .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch 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 in the year in which it accrues, but only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ded 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 1979-80, the CBDT's Circular of 9- 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, been recovered by the bank or not. If it .....

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 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. Looking to the method of accounting so adopted .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cal 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 .....

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-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 certain specified circumstances. So long .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able 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 Bank. 12. Learned counsel for the appell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rises 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 reversed by the Assessee in the year under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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-op. Bank Ltd. [2013] 34 taxmann. Com 128 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 booked as income only when it is actually 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

le 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 section 43D of the Act are the scheduled 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

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 decree for last many years. The appellan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

covery. 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 accept the views of the appellant that 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

y 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 submitted that on identical facts, the Coordinate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| 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