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The Commissioner of Income Tax, The Deputy Commissioner of Income Tax Versus M/s Basaveshwara Sahakari Bank Niyamith

TDS u/s 194A - Whether the interest paid to members of a Co-operative Bank above ₹ 10,000/- should be added to tax or not?? - Held that:- The provisions of the section 194(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co- operative society under Section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to .....

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ssee would be quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible if the actual payment is made and these sections are mutually exclusive and therefore, the Karnataka Electricity Board case is no longer relevant, by virtue of the amendment to Section 40-A(7). Under Section 43-B, the assessee had not merely made a provision but payment was actually made and therefore, was entitle .....

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as placed as a non-performing asset and therefore, the decision of this court in Canfin Homes [2011 (8) TMI 178 - KARNATAKA HIGH COURT ]would squarely apply. Accordingly, the above question of law also stands answered - I.T.A. No. 100131/2014 - Dated:- 16-8-2016 - H. Billappa And K. N. Phaneendra, JJ. For the Petitioner : Sri Y.V.Raviraj, Advocate For the Respondent : Sri G.Venkatesh, Advocate for Sri A.Shankar and Sri Shashank Hegde, Advocates JUDGMENT Heard the learned counsel for the parties. .....

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ned counsel for the parties submit that the matter is covered by a decision of this Court in ITA No.200002/2015 and connected appeals. 4. This Court in ITA No.200002/2015 and connected appeals has raised the following substantial questions of law; i) Whether the interest paid to members of a Co-operative Bank above ₹ 10,000/- should be added to tax or not? ii) Whether the gratuity payable to its employees is available for deduction? iii) Whether interest receivable from non-performing asse .....

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ence to a circular of the Government of India bearing No.19/2015 in F.No.142/14/2015 TPL, it has been held as follows: 42.5 In view of this, the provisions of the section 194(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co- operative society under Section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its .....

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e second question is answered at paragraphs 3 and 4 as follows: 3. …………………The Tribunal having held that it is so deductible, is sought to be questioned in the light of Section 36(1)(v) of the Income Tax Act, 1961. However, even this has been answered by a Division Bench judgment of this Court as early as in the case of Chief Commissioner (Admn) and Another vs. Karnataka Electricity Board in 1991 ITR 197 page 48, wherein it was held that the mere f .....

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y was incurred by the assessee and the provision made to meet this liability was claimed as a deduction under Section 37, and reasonable amount was allowed as a deduction by the Income-tax officer. The High Court held that a prudent estimate of the liability was entitled to deduction under Section 37; the contention that gratuity is a subject covered by section 36(1) and hence deduction could be claimed only on satisfying its provisions, was not accepted. Similar was the view of the Gujarat High .....

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sufficient to make a deduction. However, the learned counsel for the revenue would point out that the said sub-section has been substituted with effect from the 1.4.2000 and therefore, even merely making a provision for payment of gratuity would not entitle the assessee to make a deduction. The counsel for the assessee would be quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible .....

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llip;……………………In this regard, the learned counsel for the assessee has produced a judgment of this Court in Commissioner of Income-Tax and another vs. Canfin Homes Ltd. (2012) 347 ITR 382 (Karn) with reference to non-performing assets. The Division Bench of this Court has held as follows: Therefore, it is clear, if an assessee adopts the mercantile system of accounting and in his accounts he shows a particular income as accruing, whether tha .....

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are concerned with a non-performing asset. As the definition of non-performing asset shows an asset becomes non-performing when it ceases to yield income. Non-performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non-performing asset then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise. As is clear fr .....

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ter, the second substantial question framed is answered against, the Revenue and in favour of the assessee. At this, the learned counsel for the revenue would submit that the decision only refers to non- performing assets and it is not evident that non- performing assets would also cover other classification of loans and advances. In this regard, the learned counsel for the assessee would point out that non- performing assets would include the other categories of substandard assets, doubtful ass .....

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ced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of the Banks so as to move towards greater consistency and transparency in the published accounts. The definition of non-performing assets is as follows: 1. Non-performing assets: An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A non-performing asset (NPA) is a loan or an advance where: (i) the interest and / .....

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