2018 (7) TMI 2014 - AT - Income Tax

Interest claimed as deduction under the One Time Settlement Scheme (OTS Scheme) for loan defaulters - AO disallowed the assessee s claim at the threshold itself without examining the details in this regard and also without examining as to whether the provisions of the afire mentioned Circular, as being relied upon by the assessee, were applicable in the assessee s case or not - HELD THAT - AO has also not examined whether the assessee had claimed the deduction of one time interest waiver as per the provisions of the aforesaid circular or not. CIT (Appeals), while dismissing the assessee s appeal, has dismissed the assessee s appeal on the ground that no follow up action had been taken up by the assessee bank to recover the outstanding amount. Therefore, it is very much apparent that none of the lower authorities have examined the deduction claimed by the assessee in light of the terms of the aforesaid Circular issued by the Registrar of Cooperative Societies, Haryana. It is our considered opinion that in the interest of justice, the matter should be re-examined by the Assessing Officer. Accordingly, we restore the issue to the file of the AO to be examined afresh after taking into account the provisions of the Circular as well as after duly examining whether the assessee has claimed the waiver of interest in terms of the aforesaid Circular or not. Needless to say, the assessee will be afforded due opportunity by the AO in this regard. - Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues: Confirmation of addition of interest claimed as deduction under the One Time Settlement Scheme for loan defaulters.

Analysis:
1. Background: The assessee, a cooperative bank, filed a return of income at ?95,12,238. During scrutiny, the Assessing Officer noted an amount of ?1,39,64,857 debited in the Profit/Loss Account as one-time scheme interest relief, significantly higher than the interest income earned.

2. Assessing Officer's Disallowance: The Assessing Officer disallowed the entire claimed amount, stating that the bank had waived off interest without making efforts to recover it, without examining the Circular's applicability or if the deduction was claimed as per Circular provisions.

3. Appeal to CIT (Appeals): The Ld. CIT (Appeals) upheld the disallowance, emphasizing the lack of follow-up action by the bank to recover outstanding amounts.

4. Arguments Before ITAT: The assessee contended that expenses were incurred as per Registrar of Societies' guidelines and submitted Circular copy and borrower ledger accounts. The Assessing Officer disregarded these details.

5. ITAT Decision: ITAT observed that lower authorities didn't examine the deduction in light of the Circular's terms. They directed re-examination by the Assessing Officer, considering Circular provisions and verifying if the waiver was claimed as per Circular.

6. Conclusion: The appeal was allowed for statistical purposes, emphasizing the need for a fresh examination by the Assessing Officer in line with Circular provisions, ensuring the assessee's opportunity for explanation.

This detailed analysis highlights the issues, background, arguments, and the ITAT's decision for the confirmation of the addition of interest claimed as a deduction under the One Time Settlement Scheme for loan defaulters.