TMI Blog2014 (1) TMI 1892X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 (Asstt.Year: 2007-08) - - - Dated:- 15-1-2014 - Shri Shailendra Kumar Yadav, Judicial Member And Shri R.K. Panda, Accountant Member Assessee by: Shri Sunil Ganoo Revenue by: Sri S.P. Walimbe ORDER Per R.K. Panda, AM : This appeal filed by the Revenue is directed against the order dated 06-11-2012 of the CIT(A), Aurangabad relating to Assessment Year 2007- 08. 2. The grounds raised by the Revenue are as under : 1. The CIT(A) is not justified in deleting the addition on account of Sticky Advances/NP.A at ₹ 11,16,282/- for the following reasons: i) The provisions of Section 145 .43D are applicable to Interest on Sticky Advances/NPA. ii) The provisions of Section 45Q of RBI Act cannot override Section 43D of the Income tax Act. Since both the Acts operate in different fields. iii) The assessee Bank is adopting Hybrid method of accounting (Cash and Mercantile) which is not allowable simultaneously in the case of Non-Schedule Banks contrary to the provisions of the Income-tax Act. iv) The decision in the case of UCO Bank Vs. CIT (1993) 237 ITR 889 (SC) Southern Technologies Vs. JCIT 320 ITR 577 (SC) is applicable in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on account of interest on sticky advances. The operative part of the order of the Tribunal reads as under : 5. We heard the rival submissions of the parties and perused the record. We find that the identical issue has been considered by the ITAT, Visakhapatnam Bench, in the case of DCIT, Vijayawada vs. The Durga Cooperative Urban Bank Ltd., Vijayawada, in ITA.No.511/Vizag/2010 dated 10.03.2011. In the said case also, it was noticed by the Assessing Officer that assessee did not include the interest of ₹ 18,26,306/- on the NPA advances. Again the issue of applicability of section 43D was considered to the non-scheduled banks. The Tribunal placed its heavy reliance on the decision of the Hon ble High Court of Delhi in the case of Vashist Chay Vyapar Ltd. [330 ITR 440 (Del.)], in which the Hon ble Delhi High Court has considered the decision in the case of Southern Technologies Ltd. [320 ITR 577 (SC)]. The Tribunal finally held that the interest income relatable to NPA advances did not accrue to the assessee. 6. An identical view has been taken by the ITAT, Ahmedabad Bench in the case of Karnavati Cooperative Bank Ltd. Vs. Dy.CIT [134 ITD 486 (Ahmedabad)]. In the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has stated that the assessee-bank is a co-operative bank. Undisputedly, the assessee is also governed by the RBI guidelines. Vide an explanation (d) r.w.s. 36(1)(viia) annexed to section 43-D the definition of the entities incorporated by the section have been defined and in the absence of any contrary material, we hereby hold that the assessee is covered by one of the entities, hence the provisions of section 43-D are to be applied. (iii) Applicability of CBDT Circular. Next issue is that whether a Circular having effect of relaxing rigour of law can be treated as inconsistent with the provisions of a statute. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes has issued a Circular dated October 6, 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, it need not be included in assessee s taxable income, provided the Income tax Officer is satisfied that recovery is practically improbable. The CBDT u/s.119 of the I.T.Act has power to issue Circulars in exercise of its statutory powers. If the Board consider it necessary to lay down certain Rules an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supra. We, therefore summarize that as of now the law as laid down in UCO Bank is that in terms of CBDT Circular the interest is to be added as income only when actually received or credited in respect of the sticky advances while making assessment for a financial institution. (iv) Interpretation of the language of the statute : We have reproduced verbatim the provisions of section 43-D of the I.T.Act and expressed an opinion that if the statute has used the terminology for the chargeability of interest on the basis when credited or actually received , then in our opinion no ambiguity has been left by the Statute. If the statute is so clear that an interpretation can easily be made, then that exact meaning should be given to the language of the Section. For this legal proposition we place reliance on Keshavji Ravji and Company vs. CIT 183 ITR 01 (SC), wherein it was held as under: As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is other-wise un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessed for first three years on accrual basis, provisions of section 43D were inserted in the Act. Circular No.621, dated 19-12-1991 gives the legislative intention stating that section 43D was inserted with a view to improving the viability of banks, public financial institutions etc., so as to provide that interest on sticky loans shall be charged to tax only in the year in which the interest is actually received or credited to the profit and loss account. This benefit was extended with effect from 1-4-2000 in the case of public companies engaged in long-term financing of housing projects approved by National Housing Banks. The Legislature in their wisdom did not extend the same benefit to NBFCs which has been given to scheduled banks, public financial institutions, etc. The provisions of section 43D as stood at relevant time contained an expression 'the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the Guidelines issued by the RBI in relation to such debts'. This expression continues to exist in the newly substituted section 43D applicable with effect from 1-4-2000. This shows that the RBI Guid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on real income , i.e., the profits arrived at on commercial principles subject to the provisions of the Act. Therefore, if by the Explanation to section 36(1)(vii) a provision for doubtful debt is kept out of the ambit of bad debt which is written off, then one has to take into account the Explanation in computing the total income under the Income-tax Act failing which one cannot ascertain the real profits. The provision for nonperforming assets debited in the profit and loss account under the Reserve Bank Directions of 1998 is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the Income-tax Act. Therefore the distinction can easily be drawn that in the appeal before us the question is accrual of interest income on sticky loan but in this cited decision the question before he Apex court was about the admissibility of provision made in respect of doubtful debts. (vi) Concept of real income approved in the case of banking business: Before us, the theory of real income has also been argued and in support a decision of Hon'ble Court pronounced in the case of CIT vs. Godhra Electricity Co. 225 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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