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TMI Blog2015 (2) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Karnataka Co-operative Societies Act, 1939 and the Banking Regulation Act, 1949. For Assessment Year 2009-10, the assessee filed its return of income on 7.10.2009 declaring total income of Rs. 6,28,54,130. The case was taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer observed that the assessee is following hybrid system of accounting or mixed system of accounting; viz. 'Mercantile System of Accounting & Income recognition as per RBI Rules, which is in contravention of the provisions of section 145 of the Income Tax Act, 1961 (herein after referred to as 'the Act'). The Assessing Officer observed that the assessee accounts for interest income on receipt basis and all other income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A), however, upheld the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act amounting to Rs. 1,29,19,176. 3. Aggrieved by the order of the CIT (Appeals), Belgaum for Assessment Year 2009-10 dt.16.9.2013, the Revenue has preferred this appeal, raising the following grounds :- "1. The CIT (Appeals) erred in law and on facts, in deleting the addition of Rs. 2,15,18,000 on account of accrued interest on loans which are classified as "Nonperforming Assets" relying on the Karnataka High Court decision in Canfin Homes Ltd. (2011) 5 Tax Corp (DT) 49593, ignoring the provisions of section 43D of the I.T. Act, 1961 ? 2. On the facts and in law the CIT (Appeals) erred in holding that income accrued to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Canfin Homes Ltd., in ITA No.801 of 2006 and the decision of the co-ordinate bench of this Tribunal in the case of ITO V Shiva Sahakari Bank Niyamitha in ITA No.257/Bang/2012 dt.21.12.2012. It was further submitted by the learned Authorised Representative that the learned CIT(A), following the decision of the ITAT, Ahmedabad Bench in the case of Karnavati Co-op. Bank Ltd. V DCIT (2012) 14 ITR (Trib.) 175 held that co-operative banks are governed by RBI Guidelines and hence the provisions of section 43D of the Act are also applicable to co-operative banks and that there is nothing in the phraseology of section 43D of the Act which makes the interest income of co-operative banks from NPA's taxable on accrual / receivable basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act are also applicable to cooperative banks like the assessee and that there is nothing in section 43D of the Act which makes the interest income of the co-operative bank from NPA's taxable on accrual basis. Before us, Revenue has not been able to controvert these findings of the learned CIT(A) in the impugned order. 4.3.2 Coming to the judicial pronouncements relied on by the assessee, we find that coordinate bench in the case of Shiva Sahakari Bank Niyamitha (supra) at paras 8 and 9 thereof has held as under :- " 8......... We find that the decision of the Jurisdictional High Court in the case of Canfin Homes Ltd., is also on the same set facts as before us and is binding on this Tribunal. In the said decision, at para 8 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In that view of the matter, the second substantial question framed is answered against the revenue and in favour of the assessee." 9. In view of the same, respectfully following the decision of the Hon'ble jurisdictional High Court (cited supra), the Revenue's appeal is dismissed." 4.3.3 Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Canfin Homes Ltd. (supra) and of the co-ordinate bench of this Tribunal in the case of Shiva Sahakari Bank Niyamitha (supra), we hold that the learned CIT(A) has rightly delete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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