2017 (4) TMI 1266 - AT - Income Tax

Provision of overdue interest on NPA accounts - Held that - As in assessee s own case relevant to AYs 2007-08 to 2009-10 held that it is an undisputed fact that assessee is a co-operative bank and is governed by the Reserve Bank of India guidelines. We find that ld.CIT(A) after considering the CBDT Circular provisions of Act and various decisions cited in the order has held that A.O. was not justified in disallowing the claim of deduction on the issue of interest on overdue loans. We find that Hon ble Bombay High Court in the case of CIT vs. Deogiri Nagar Sahakari Bank Ltd. & Ors. (2015 (1) TMI 1218 - BOMBAY HIGH COURT ) has held that prudential norms issued by Reserve Bank of India are equally applicable to co-operative banks and that interest on sticky advances is not taxable. Before us Revenue has not brought on record any contrary binding decision in its support. In view of the aforesaid facts we find no reason to interfere with the order of ld.CIT(A). Thus the ground of Revenue is dismissed

Summary

Issues:
Taxability of interest on non-performing assets.

Analysis:
The appeal by the Revenue was against the order of the Commissioner of Income Tax(Appeals) for the Assessment Year 2010-11. The grounds of appeal included the deletion of the addition made by the Assessing Officer on account of interest accrued on Non-Performing Assets (NPA) and the failure to apply a specific circular and judgment. The issue at hand was the taxability of interest on NPAs. The Appellate Tribunal noted that a similar issue had been decided in favor of the assessee in previous years by a Co-ordinate Bench of the Tribunal. The Tribunal reviewed the orders of the authorities below and the decision in the assessee's own case for previous years. The Tribunal referred to the relevant operative paragraph of the previous decision, which highlighted that the assessee, a cooperative bank governed by RBI guidelines, was entitled to deduction on interest on overdue loans. The Tribunal also cited a judgment of the Bombay High Court which supported the non-taxability of interest on sticky advances for cooperative banks. As no contrary binding decision was presented by the Revenue, the Tribunal declined to interfere with the order of the CIT(A) and dismissed the appeal of the Revenue.

In conclusion, the Appellate Tribunal upheld the order of the CIT(A) regarding the taxability of interest on non-performing assets, based on the previous decision in the assessee's own case and the supportive legal principles. The appeal by the Revenue was dismissed, and the decision was pronounced in court on a specified date in Ahmedabad.