2018 (3) TMI 1861 - AT - Income Tax

Addition u/s 43D - Accrued interest on loans which are classified as Non-performing Assets - CIT-A deleted the addition - HELD THAT - CIT(A) has adjudicated the impugned issue following the judgment of the jurisdictional High Court in Canfin Homes Ltd. - 2011 (8) TMI 178 - KARNATAKA HIGH COURT . Unless and until the operation of the order of the judgment of the Hon ble High Court is stayed by the Hon ble Apex Court, it holds the field and all subordinate judicial authorities are supposed to follow the judgment of the jurisdictional High Court. Mere filing of SLP does not amount to stay of the operation of the judgment of the Hon ble High Court. Under these circumstances, we are of the view that CIT(A) has rightly adjudicated the issue in the light of the judgment of the jurisdictional High Court and we find no infirmity therein. Accordingly, we confirm his order. - Decided against revenue.

Summary

Issues:
1. Deletion of additions on account of accrued interest on loans classified as non-performing assets.
2. Treatment of income accrued to the assessee.
3. Acceptance of jurisdictional High Court's judgment by the Department.

Analysis:

Issue 1:
The appeal by the revenue challenged the deletion of additions on accrued interest on loans classified as non-performing assets by the ld.CIT(A). The revenue contended that the provisions of section 43D of the I.T. Act, 1961 were ignored. The ld.CIT(A) justified the deletion relying on the Karnataka High Court decision in Canfin Homes Ltd and Bilagi Pattiha Sahakari Bank Niyamit. During the hearing, the assessee's counsel pointed out that the issue was covered by the jurisdictional High Court's judgment, and no interference in the CIT(A)'s order was warranted. The Tribunal concurred, emphasizing that unless the operation of the High Court's judgment is stayed by the Supreme Court, all subordinate authorities must adhere to it. The Tribunal upheld the CIT(A)'s decision, citing the jurisdictional High Court's ruling.

Issue 2:
The revenue also contested the holding that income accrued to the assessee cannot be recognized in the year, contrary to the amended provisions of section 43D of the I.T. Act, 1961. The revenue argued that the amended provisions did not extend benefits to the assessee bank following the mercantile system of accounting. The Tribunal, however, upheld the CIT(A)'s decision based on the jurisdictional High Court's judgment, emphasizing that the mere filing of an SLP by the Department did not suspend the High Court's ruling. The Tribunal found no fault in the CIT(A)'s adjudication and confirmed the order.

Issue 3:
Regarding the Department's non-acceptance of the High Court's judgment in the cases of Canfin Homes Ltd and Bilagi Pattiha Sahakari Bank Niyamit, the Tribunal reiterated that unless the Supreme Court stays the High Court's judgment, it must be followed by subordinate authorities. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision in light of the jurisdictional High Court's rulings.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision based on the jurisdictional High Court's judgments. The Tribunal emphasized the importance of following High Court rulings unless stayed by the Supreme Court, and found no grounds to interfere with the CIT(A)'s order.