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The Commissioner of Income Tax, Belgaum and Joint Commissioner of Income Tax, Bijapur Versus Shri Siddeshwar

2016 (6) TMI 1129 - KARNATAKA HIGH COURT

Interest paid to members of a Co-operative Bank - whether added to tax or not? - TDS liability - Held that:- As decided in Commissioner of Income Tax and another vs. The Bagalkot District Central Co-operative Bank [2016 (7) TMI 748 - KARNATAKA HIGH COURT ] the Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015- TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits of its members paid or credited on or before 1.7.201 .....

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irtue 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 entitled to deduction, would also answer this question as to whether the payment made towards a gratuity fund could be deducted. - Whether interest receivable from non-performing as sets, bad and doubtful debts though the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted? - Hel .....

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enue, the question of showing that revenue and paying tax would not arise. As is clear from the policy guidelines issued by the National Housing Bank, the income from non-performing asset should be recognised only when it is actually received. That is what the Tribunal held in the instant case. Therefore, the contention of the Revenue that in respect of non- performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax .....

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NARAYANA SWAMY,J. For The Appellant : Shri Ameet Kumar Deshpande, and Shri Y.V. Raviraj, Advocates For The Respondent : Shri G. Venkatesh, Advocate for Shri A. Shankar, Advocate JUDGMENT These appeals are heard and disposed of together. 2. There is one substantial question of law which i s common in all the appeals namely, Whether the interest paid to members of a Co-operative Bank above ₹ 10,000/- should be added to tax or not? The point is squarely covered by a Division Bench judgment o .....

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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 members. As this amendment is effective from the prospective dated of 1st June, 2015, the co- operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on t .....

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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 fact that the contribution would not come within the ambit of the provisions of section 36(1)(iv) would not disentitle the assessee to claim the benefit under Section 37(1) if the requirements thereunder were satisfied. Reference in the said judgment i .....

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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 Court in CIT vs. Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. (1981) 128 ITR 702 4. The learned counsel for the respondent would submit that notwithstanding that such deduction was permissible only in respect of an approved gratuity fund a .....

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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 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 .....

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produced a judgment of this Court in Commissioner of Income-Tax and another vs. Canfin Homes Ltd. (2012) 347 ITR 38 2 (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 that amount is really accrued or not is liable to bring the said income to tax. His accounts should reflect true and correct sta .....

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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 from the policy guidelines issued by the National Housing Bank, the income from non-performing asset should be recognised onl .....

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earned 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 assets, loss assets, etc., all of which would come within the purview of non-performing assets. In this regard, he would draw at .....

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