2018 (7) TMI 1891 - HC - Income Tax

Addition being the interest accrued on NPA (bad and doubtful debts) - HELD THAT - CIT(A) as well as the learned Tribunal have relied upon a binding decision of this Court in the case of Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd. 2016 (8) TMI 377 - GUJARAT HIGH COURT in similar set of facts and circumstances, the Division Bench of this Court has observed and held that in view of mandate of the RBI guidelines, it is permissible for the assessee to recognize income from nonperforming assets on accrued basis and can book such income only when it is actually received. As observed that the assessee being bound by the RBI guidelines, which are issued under the provisions of the RBI Act, 1934, had rightly not shown the interest on the non-performing assets as income. That thereafter, considering various other decisions on the point, the Division Bench of this Court in the aforesaid decision, has confirmed such a deletion of the addition made by the Assessing Officer in respect of interest accrued on bad and doubtful assets. Therefore, the issue involved in the present appeal is now not res integra in view of the binding decision of the Division Bench of this Court in the case of Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd. (supra) - no question of law arises

Summary

Issues involved:
- Appeal against the judgment and order passed by the Income Tax Appellate Tribunal regarding the addition of interest accrued on NPA
- Interpretation of RBI guidelines and their impact on the taxation of interest accrued on non-performing assets

Analysis:

1. The appellant, the Revenue, challenged the judgment of the Income Tax Appellate Tribunal regarding the addition of interest accrued on bad and doubtful debts for the Assessment Year 2012-13. The Tribunal had dismissed the appeal and confirmed the order of the CIT (Appeals) deleting the addition. The proposed question of law was whether the interest accrued on NPAs is taxable considering the RBI guidelines.

2. The Court noted that the CIT (Appeals) and the Tribunal had relied on a previous decision of the Court in a similar case involving the Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd. The Court in that case held that as per RBI guidelines, the assessee can recognize income from non-performing assets on an accrued basis but can only book such income when actually received. The Court upheld the decision that the assessee, bound by RBI guidelines, correctly did not show interest on non-performing assets as income.

3. The Court emphasized that the issue in the present appeal is not new or undecided due to the binding decision of the Court in the case of Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd. The Court concluded that no question of law arises in the current appeal based on the previous ruling, and therefore, the appeal was dismissed.

This judgment clarifies the application of RBI guidelines in recognizing income from non-performing assets and highlights the importance of adhering to such guidelines in determining the taxability of interest accrued on NPAs. The decision underscores the significance of precedent in similar cases and the impact it has on subsequent appeals involving similar legal issues.