TMI Blog2021 (10) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... o Accounts forming part of Audited Financial Statements. Thus, material on record clearly indicates that there is uncertainty as to the recovery of the principal amount and interest on such advances. Therefore, the issue that comes up for our consideration is that whether can it be said that the interest had accrued on such advances when the assessee is following mercantile system of accounting. As decided in own case WESTERN MAHARASHTRA DEVELOPMENT CORPORATION LIMITED [ 2021 (6) TMI 1068 - ITAT PUNE] we do not find any merit in the grounds of appeal raised by the Revenue. Accordingly, the appeal filed by the Revenue stands dismissed. - ITA No.899/PUN/2018 - - - Dated:- 26-10-2021 - SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 29.01.2016 passed u/s 143(3) of the Income Tax Act, 1961 ( the Act ) at a total income of ₹ 4,44,77,629/- before setting off of the same against the brought forward losses. While doing do, the Assessing Officer made an addition of ₹ 4,12,93,000/- being the interest accrued on the seed money advances which became sticky. The Assessing Officer was of the opinion that the respondent-assessee company was following mercantile system of accounting and, therefore, the interest on the seed money advances had accrued to the assessee and, accordingly, brought to tax rejecting the claim of appellant that, no income had accrued on such advances. 4. Being aggrieved, an appeal was preferred before the ld. CIT(A), who vide impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can it be said that the interest had accrued on such advances when the assessee is following mercantile system of accounting. An identical issue was decided by the Co-ordinate Bench of this Tribunal by the very same combination in assessee s own case for A.Y. 2012-13 in ITA No.2250/PUN/2017, dated 24.06.2021, wherein it was held as under: 8 This issue is identical to the issue of taxability of interest on Non-performing Assets. There is no dispute that the interest had not been recognized in the books of account on sticky advances, the claim is in the nature of interest on doubtful debts, there is an uncertainty as to the recovery of advances as well as principal amount of the advances. The Hon ble Supreme Court in the case of UCO Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la Sewa Sahakari Bank Ltd. [2017] 395 ITR 324/[2016] 242 Taxman 60/72 taxmann.com 117 had undertaken the detailed exercises to examine an identical situation. The Court held that the Cooperative Banks were acting under the directives of the Reserve Bank of India with regard to the prudential norms set out. The Court was of the opinion that taxing interest on NPA cannot be justified on the real income theory. The decision of the Gujarat High Court in Shri Mahila Sewa Sahakari Bank Ltd., (supra) was carried in Appeal by the Revenue to the Supreme Court and such appeal was dismissed. [Para 5]. The Court concluded in case of Pr. CIT v. Ludhina Central Co-operative Bank Ltd. [2018] 99 taxmann.com 81 concluded that the Tribunal while relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of such insertion, the Cooperative Banks would get the benefit of section 43D. One way of looking at this amendment, can be that, the same is curative in nature and would, therefore, apply to pending proceedings, notwithstanding the fact that, the legislature has not made the provision retrospective. [Para 7]. As per the Memorandum explaining the provision, the insertion of clause (g) to the Explanation was to provide for a level playing field to the Cooperative Banks. This may be one more indication to hold a belief that, the legislature in order to address a piquent situation and to obviate unintended hardship to the assessee, has introduced the amendment. However, in the present case, there is no need to conclude this issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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