TMI Blog2023 (7) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... at being the case, we hold that the CBDT s circular issued in tune with the foregoing Income Computation and Disclosure Standards ICDS also would not apply once the assessee is not required to recognize its accrued interest on NPAs as income on accrual basis. PCIT has erred in law and on facts in terming the Assessing Officer s sec. 143(3) regular assessment as an erroneous one causing prejudice to interest of the Revenue Thus we reverse the PCIT s impugned revision directions once the assessee s interest income on NPAs is not assessable to tax on accrual basis. Decided in favour of assessee. - ITA.No.544/PUN./2023 - - - Dated:- 23-5-2023 - SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For the Assessee : Mr. Nikhil Mutha For the Revenue : Shri J.P. Chandraker ORDER PER SATBEER SINGH GODARA, J.M. : This assessee s appeal for assessment year 2018- 2019, arises against the PCIT, Pune-3, Pune s Din and Order No. ITBA/REV/F/REV5 /2022-23/1050786721(1), dated 15.03.2023, involving proceedings u/s. 263 of the Income Tax Act, 1961 (in short the Act ). Heard both the parties. Case file perused. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CM APL 23467/2017], in relation to the Interest on NPA vis-a-vis ICDS IV, wherein the Department has accepted that interest on NPA cannot be taxed basis the well-established principles of real income theory, even after introduction of ICDS IV. 2.6. Without prejudice to the above, if the interest on NPA is held to be taxable, the learned PCIT erred in not directing the learned AO to correspondingly allow deduction for the interest so taxed as bad debts under the proviso to section 36(1)(vii) in accordance with the amendments brought in light of ICDS-IV in the said provision. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon ble Tribunal to decide this appeal according to law. 3. Suffice to say, it emerges during the course of hearing that the sole substantive issue which arises for our apt adjudication is regarding assessment of assessee s notional interest income on non-performing assets NPAs on accrual basis as per provisions of the Act vis- -vis applicability of the newly introduced ICDS-IV read with CBDT s circular no. 10/2017 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As) on accrual basis involving Rs. 9,29,57,036/-. It emerges during the course of hearing that the same is also no more res integra in light of hon ble jurisdictional high court s recent common order involving assessment years 2009-10 to 2011-12 in assessee s case(s) itself dated 02-04-2019 declining the Revenue s Income Tax Appeal Nos. 237 and 485/2017 as follows : 2. The appeal is filed by the Revenue to challenge the judgment of the Income Tax Appellate Tribunal ( the Tribunal for short) raising following questions for our consideration:- (i) Whether on the facts and circumstances of the case and in law, the Tribunal was correct in disregarding the judgment of the Hon'ble Supreme Court given in the case of Southern Technologies Ltd Vs. JCIT 320 ITR 577 (SC) which says that provisions of RBI Act cannot override the provision of Section 145 of the Income Tax Act, 1961, since both the Acts operate in different fields and therefore, assessee cannot recognize interest income on NPA and yet not offer it in Profit and Loss account? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We may further clarify that in the said case, the Court was concerned with a similar claim raised by the co-operative bank and the Court did record that the assessee was a cooperative bank and not NBFC. However, this distinction may not have much significance now in view of the fact that this Court in case of CIT Vs. M/s. KEC Holdings Ltd (Income Tax Appeal No. 221 of 2012 decided on 11.6.2014) held and observed as under:- 8. The assessee had credited only an amount of Rs.38,57,933/- as interest on loans. The Assessing Officer was of the view that the interest accrued on the entire loans should have been shown as income. The details as to how the interest income on accrual basis should have been disclosed are, therefore, referred to by the Tribunal. The Tribunal held that the said income was not realized. It held that the assessee follows the mercantile system of accounting. The Tribunal held that the loan advanced by the assessee which was in NBFC had become non-performing asset. That is how following judgments rendered by the Hon'ble Supreme Court and the Delhi High Court, the Tribunal has eventually held that once there is no dispute that the interest considered as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the decision of the Delhi High Court in case of Vasisth Chay Vyapar Ltd (supra) was carried in the appeal by the Revenue before the Supreme Court. The Supreme Court in the judgment reported in [2018] 253 Taxman 401 (SC) approved the decision of the High Court and dismissed the appeal. Under these circumstances, this question is not entertained. 8. Learned DR could hardly pinpoint any distinction on facts or law, as the case may be, in the assessment year under consideration. Faced with this situation, we adopt judicial consistency to affirm the CIT(A) s detailed discussion relating to the impugned sole disallowance of accrued interest income on NPAs. Ordered accordingly. This Revenue s cross appeal ITA No.1722/PUN./2018 fails therefore. 6. Learned DR is fair enough in not disputing all the foregoing intervening developments. He has strongly supported the PCIT s above extracted revision directions on two counts i.e., the Assessing Officer had failed to carry-out detailed enquiries for the purpose of assessing the assessee s interest income on NPAs on accrual basis in light of the recently introduced Income Computation and Disclosure Standards [in short ICDS ] appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... niformly contain this uniform clause thereby paving way for applicability of the provisions of the Act wherein the assessee has already succeeded on the instant issue of accrual of interest on NPAs right up to hon ble jurisdictional high court having attained finality (supra). That being the case, we hold that the CBDT s circular issued in tune with the foregoing Income Computation and Disclosure Standards ICDS also would not apply once the assessee is not required to recognize its accrued interest on NPAs as income on accrual basis. Faced with the situation, we conclude that the PCIT has erred in law and on facts in terming the Assessing Officer s sec. 143(3) regular assessment dated 27.12.2019 as an erroneous one causing prejudice to interest of the Revenue. Ordered accordingly. 8.1. We make it clear before parting that both the learned representatives had thrown sufficient light on the issue of applicability of sec. 145(2) of the Act as well as The Chamber of Tax Consultants Anr. vs., Union of India Ors. [2018] 400 ITR 178 (Del.). We find that once the foregoing exclusion clause in the Income Computation and Disclosure Standards ICDS itself is clear enough yi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
