TMI Blog2017 (2) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Tribunal , for short) on 31.12.2013, deleting the addition made in the hands of the petitioner-assessee, which is the Co-operative Bank, under Section 41(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act, for short), to the extent of ₹ 73,58,708/- for A.Y.2007-08. 2. The learned Assessing Authority has made the said addition in the income of the petitioner-assessee on the ground of Demand Drafts and Pay Orders payable as on the last date of the Financial Year, which were not so far encashed by the concerned customers. Therefore treating the same as cessation of liability under Section 41(1) of the Act, the learned Assessing Authority added back the said amount to the declared income of the assessee. 3. The learned Tribunal s findings in this regard as recorded in para 8.5.1. are quoted below for ready reference: 8.5.1 We have heard both parties and perused and carefully considered the material on record including the judicial decisions cited on either side. The Assessing Officer has invoked the provisions of Section 41(1) of the Act to bring the amount of ₹ 73,58,708 received for making drafts and pay orders to tax in the hands of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, the liability would not become the income of the assessee bank. 8.5.3 In the case on hand, the fact that the assessee has not credited the amount of ₹ 73,58,708 received for making of Drafts and Pay Orders to its profit and loss account in the period under consideration, is not in dispute. In fact, the said amount admittedly appeared as an outstanding liability towards drafts and pay orders in the Balance Sheet of the assessee as on 31.3.2007. We, therefore find merit in the arguments put forth by the learned Authorised Representative which is further fortified by the decisions rendered by the co-ordinate bench of this Tribunal in the cases of Canara Bank (ITA No.390/Bang/2011 dt.8.6.2012) and Vijay Bank (ITA No.455/Bang/2011 dt.22.4.2012). Following, the aforesaid decisions of the co- ordinate bench of the Tribunal (supra), we delete this addition of ₹ 73,58,708 made by the Assessing Officer under Section 41(1) of the Act as being unsustainable. 4. The learned counsels at bar submitted before the Court that this controversy is no longer res integra and the Division Bench of this Court in The Commissioner of Income Tax Vs. Karnataka Vikas Grameen Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added by the assessing authority by holding it as unsustainable in law. 5. Having perused the record, we are in respectful agreement with the aforesaid decision of the Division Bench of this Court and we do not find any reason to take a different view of the matter and in view of the aforesaid, we do not find any substantial question of law arising in the present case. 6. Further, the learned counsel for the Revenue also pointed out that with regard to another substantial question of law as stated in the memorandum of appeal filed by the Revenue about the taxability of the accrued interest on the non-performing assets of the borrowers, this Court in the case of The Commissioner of Income Tax Vs. Shri. Siddeshwar Co-operative Bank Limited (ITA No.200002/2015 along with other connected appeals, decided on 22.06.2016, following the previous decisions of this Court in the case of Commissioner of Income Tax and another Vs. Canfin Homes Ltd., reported in (2012) 347 ITR 382 (Karn), has held that such accrued interest on non-performing assets cannot be brought to tax in the hands of the assessee. The relevant portion of the judgment of the Division bench of this Court in Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue 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 assets, loss assets, etc., all of which would come within the purview of non-performing assets. In this regard, he would draw attention to the prudential norms for income recognition, asset classification and provisioning pertaining to advances. Volume I of Tannan s Banking Law and Practice in India , has extracted these prudential norms in line with the international practices and as per the recommendations of the Narasimham Committee on the financial system, the Reserve Bank of India has introduced, 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-perform ..... X X X X Extracts X X X X X X X X Extracts X X X X
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