2015 (6) TMI 1100 - AT - Income Tax

Interest accrued on non performing assets - Applicability of section 43D - Held that - The perusal of section 43D clearly shows that it applies only to the Scheduled Banks and this fact was admitted by Ld. Counsel also that the same applies only in case of Financial institution or Scheduled Bank. Admittedly the assessee is not a Scheduled Bank and therefore the provisions of section 43D were not applicable. In the case of ACIT v Punjab State Cooperative Bank Ltd. (2013 (8) TMI 476 - ITAT CHANDIGARH ) the relief was granted mainly on the basis of section 43D and therefore that decision could not have been relied on for dismissing the Revenue s appeal in the present case. In our opinion the Tribunal has inadvertently not noticed that decision of ACIT v Punjab State Cooperative Bank Ltd (supra) was rendered because of provisions of section 43D. Therefore clearly an error has crept into the order of the Tribunal. Accordingly we recall the order for the purpose of re-adjudication of only one issue i.e regarding relief granted by CIT(A) against interest in respect of non- performing loans which has been raised through ground No.1 by the Revenue

Summary

Issues: Rectification of error in the order of Tribunal regarding relief allowed on interest accrued on non-performing assets.

Analysis:
The Appellate Tribunal received a Misc. Application from the Revenue seeking rectification of an error in the order of Tribunal dated 25.02.2014 in ITA No. 526/Chd/2013. The issue pertained to the relief granted by CIT(A) on interest accrued on non-performing assets. The Ld. DR highlighted that the Tribunal had decided against the Revenue on this issue, citing the case of ACIT Vs. Punjab State Cooperative Bank Ltd. The Ld. DR argued that the decision was based on section 43D of the Act, applicable to Public Financial Institutions or Scheduled banks, which was not relevant to the present case as the assessee was not a Scheduled Bank. The Ld. Counsel of the assessee, however, contended that the Tribunal had correctly followed the decision of ACIT v Punjab State Cooperative Bank Ltd and the decision of Ahmadabad Bench of the Tribunal in a similar case.

Upon careful consideration, the Tribunal observed that the Assessing Officer had discussed the issue in detail in the assessment order, referring to the decision of the Hon'ble Supreme Court in another case. It was noted that section 43D applied only to Scheduled Banks, which was acknowledged by the Ld. Counsel. As the assessee was not a Scheduled Bank, the provisions of section 43D were not applicable. The Tribunal found that the decision in ACIT v Punjab State Cooperative Bank Ltd was based on section 43D, which was not relevant to the present case. The Tribunal acknowledged the error in not recognizing that the decision was rendered based on section 43D and, therefore, decided to recall the order in ITA No. 526/Chd/2013 for the limited purpose of re-adjudicating the issue of relief granted by CIT(A) on interest in non-performing loans raised by the Revenue.

As a result, the Misc. Application was allowed, and the Registry was directed to schedule a fresh hearing date for the appeal, focusing on the specific issue identified for re-adjudication. The order was pronounced in the open court on 05/06/2015.