2015 (4) TMI 366 - AT - Income Tax

Accrued interest not credited to P&L account - CIT(A) deleted the addition - Held that - Issue in question is covered in favour of the assessee by the order of the Tribunal in the case of ACIT Vs. The Jhajjar Central Coop. Bank Ltd 2013 (10) TMI 1291 - ITAT DELHI wherein held that the submission of the assessee which is well supported by RBI/NABARD circular dated 17.8.2002 vide para No. 3.1 clearly states that the policy of income recognition should be based on record of recovery and therefore unrealized income should not be taken into profit and loss account by State Co-op Bank / Central Co-op Banks and that the provisions of Section 43D of the Act are clear regarding the recognition of interest income on NPA. The Ld. CIT(A) in our view has thus rightly held that overdue interest not realized during the year and credited to suspense interest account cannot be taken to be the income of the assessee. - Decided in favour of assessee. Disallowance of expenses - CIT(A) deleted the addition - Held that - The expenditure which are disallowed as prior period were expenses relatable to month of March, 2006 for which the payments were made in the month of April, 2006. These expenses become due only after the management examines the expenses and authorizes the payment of the same. Therefore, these expenditures become due in the current assessment year and same is to be allowed as deduction. Hence, the order of CIT(A) is correct and no interference is called for.- Decided in favour of assessee. Addition on account of suspense individual and societies - CIT(A) deleted the addition - Held that - If the amount deposited in the said account belong to the various depositors, who intended to open the bank account with the assessee, then the said amount cannot attain the character of income in the hands of the assessee unless it is shown that the said amount has become the income of the assessee. If the said amount does not belong to the assessee and the assessee has utilized the same until the said amount is refunded back, no notional interest can be added to that amount as either the assessee has to pay interest if the said amount is credited to the saving account or the amount itself has to be refunded back in case the account is not opened. There is no question of assessing any notional interest on the said amount. Therefore, we find no fault or infirmity in the findings recorded by the ld. CIT (Appeals) vide which the impugned addition and interest thereon is deleted, we decline to interfere.- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - non deduction of TDS on interest payment - CIT(A) deleted part addiion - Held that - The interest payment of ₹ 2,12,600/- is to an education institution, whose income is exempt u/s 10(23C) of the Act. Therefore, as per Circular No.4/2002 no TDS is required to be made on such interest payment. Hence, we uphold the order of the CIT(A) - Decided in favour of assessee. Addition on account of printing and stationary supplied to branches by the head office - CIT(A) deleted the addition - Held that - Revenue has not been able to controvert the finding of the CIT(A) by placing on record any material/documents as the net amount charged to P&L a/c under this head is only ₹ 2,37,966/- and closing stock of ₹ 4,47,310/- has already been shown. The AO worked out the said disallowances without appreciating the facts properly.- Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 45,01,255/- on account of accrued interest not credited to P&L account.
2. Disallowance of expenses amounting to Rs. 5,42,759/-.
3. Addition of Rs. 7,77,838/- on account of suspense individual and societies.
4. Addition of Rs. 2,12,600/- out of the total addition of Rs. 12,78,047/- under Section 40(a)(ia) for non-deduction of TDS.
5. Addition of Rs. 3,09,152/- on account of printing and stationery supplied to branches by the head office.

Issue-wise Detailed Analysis:

1. Addition of Rs. 45,01,255/- on account of accrued interest not credited to P&L account:
The AO added Rs. 45,01,255/- as accrued interest not credited to the P&L account, arguing it pertained to NPA accounts. The CIT(A) deleted this addition based on a prior order for AY 2008-09, which was upheld by the Tribunal in the case of ACIT Vs. The Jhajjar Central Coop. Bank Ltd. The Tribunal noted that unrealized income should not be taken into the P&L account as per RBI/NABARD circular and Section 43D of the Act. Therefore, the Tribunal rejected the Revenue's ground and upheld the CIT(A)'s deletion.

2. Disallowance of expenses amounting to Rs. 5,42,759/-:
The AO disallowed Rs. 5,42,759/- for expenses not pertaining to the year under consideration, stating they should have been provided for in the year of accrual under the mercantile system. The CIT(A) deleted this addition, noting that the payments pertained to March 2006 and became due in April 2006, thus allowable in the current year. The Tribunal upheld the CIT(A)'s order, agreeing that the expenses were due in the current assessment year and should be allowed as deductions.

3. Addition of Rs. 7,77,838/- on account of suspense individual and societies:
The AO added Rs. 7,77,838/- related to suspense payable to societies and individuals. The CIT(A) deleted this addition, following a prior order for AY 2008-09. The Tribunal upheld this decision, noting that the amounts represented deposits by individuals intending to open accounts and were not income unless shown otherwise. The Tribunal found no fault in the CIT(A)'s findings and rejected the Revenue's ground.

4. Addition of Rs. 2,12,600/- out of the total addition of Rs. 12,78,047/- under Section 40(a)(ia) for non-deduction of TDS:
The AO made an addition of Rs. 12,78,047/- for non-deduction of TDS on certain payments. The CIT(A) deleted Rs. 2,12,600/- related to interest payments to educational institutions exempt under Section 10(23C). The Tribunal upheld this deletion, referencing Circular No.4/2002 which exempts such payments from TDS, and dismissed the Revenue's ground.

5. Addition of Rs. 3,09,152/- on account of printing and stationery supplied to branches by the head office:
The AO added Rs. 3,09,152/- for under-valuation of closing stock and uncredited incidental charges. The CIT(A) deleted this addition, noting the net amount charged to P&L was only Rs. 2,37,966/- with a closing stock of Rs. 4,47,310/- already shown. The Tribunal upheld the CIT(A)'s findings, as the Revenue failed to provide any material to counter the CIT(A)'s decision, and rejected the Revenue's ground.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s deletions and findings. The decision was pronounced in the open Court on 13th February, 2015.