2015 (1) TMI 514 - AT - Income Tax

Addition on account of interest on non-performing assets - Held that - Following the precedent in the assessee s own case for the assessment year 2008-09, we set aside the impugned order of the Commissioner (Appeals) and direct the Assessing Officer to delete the addition of ₹ 7,88,22,858/- as the lower authorities have misguided themselves in rejecting the claim of the assessee for non-recognition of interest income on NPAs. - Decided in favour of assessee. Interest on agricultural credit stabilization fund disallowed - Held that - As noticed the assessee had suo-motu disallowed the said amount in the computation of income filed along with the revised return of income filed on 31st March 2011. In this background, it is also noticeable that before the learned Commissioner (Appeals) also, no specific ground was raised in this regard. Furthermore, the learned Authorised Representative submitted at the time of hearing that similar issue has been decided against the assessee by the Tribunal in the assessee s own case for the assessment year 2008-09. - Decided against assessee. Claim of deduction under section 36(1)(viia)denied - Held that - Tthe orders of the lower authorities deserve to be upheld inasmuch as the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, and therefore, in our view, the lower authorities were justified in restricting the deduction to ₹ 50,00,000/- , being the amount of Provision actually made in the books of account. - Decided Against assessee.

Summary

Issues Involved:
1. Addition of Rs. 7,68,22,858/- on account of overdue/NPA interest.
2. Addition of Rs. 54,38,535/- in respect of interest on agricultural credit stabilization fund.
3. Restriction of deduction under section 36(1)(viia) to Rs. 15,37,76,000/- against Rs. 65,35,21,900/-.
4. Consideration of provision of Rs. 7,68,22,858/- for the purpose of section 36(1)(viia).
5. Exclusion of interest of NPA A/c recovered/received during the year.
6. Charging of interest under section 234B of the Act.

Detailed Analysis:

1. Addition of Rs. 7,68,22,858/- on account of overdue/NPA interest:
The assessee, a co-operative bank, did not recognize interest income on NPAs as per RBI guidelines. The Tribunal had previously ruled in favor of the assessee for the assessment year 2008-09, stating that interest income on NPAs should not be recognized on an accrual basis. The Tribunal reiterated that the presentation of gross interest in the Profit & Loss Account, including NPAs, does not imply accrual of income. The Tribunal directed the deletion of the addition of Rs. 7,68,22,858/- following the precedent set in the assessee's own case for the previous year.

2. Addition of Rs. 54,38,535/- in respect of interest on agricultural credit stabilization fund:
The assessee had suo-motu disallowed Rs. 54,38,535/- in its revised return. The Tribunal noted that the assessee did not raise a specific ground before the Commissioner (Appeals) and that a similar issue was decided against the assessee for the assessment year 2008-09. Consequently, the Tribunal found no merit in the ground raised by the assessee and dismissed it.

3. Restriction of deduction under section 36(1)(viia) to Rs. 15,37,76,000/- against Rs. 65,35,21,900/-:
The assessee claimed a deduction of Rs. 65,35,21,900/- under section 36(1)(viia) but had only made a provision of Rs. 15,37,76,000/- in the books. The Tribunal upheld the restriction of the deduction to the actual provision made, citing the decision in Mahalaxmi Co-Operative Bank Ltd. v/s ACIT, which emphasized that the deduction is limited to the provision made in the books. The Tribunal dismissed the ground raised by the assessee.

4. Consideration of provision of Rs. 7,68,22,858/- for the purpose of section 36(1)(viia):
This ground was not pressed by the assessee during the hearing and was accordingly dismissed by the Tribunal.

5. Exclusion of interest of NPA A/c recovered/received during the year:
This ground was an alternative to the first ground, where the assessee had already succeeded. Therefore, it was not pressed during the hearing and was dismissed.

6. Charging of interest under section 234B:
This ground was consequential in nature. The Tribunal directed the Assessing Officer to give consequential effect based on the findings given above.

Conclusion:
The Tribunal partly allowed the assessee's appeal, granting relief on the first issue and dismissing the remaining grounds. The order was pronounced in the open Court on 30th December 2014.