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2018 (4) TMI 1360 - AT - Income TaxAddition on account of interest on nonperforming assets u/s. 43D - Held that - This issue is now squarely covered in favour of the assessee and against the revenue by the decision in the case of Shri Mahila Sewa Sahakari Mandli Ltd. 2016 (8) TMI 377 - GUJARAT HIGH COURT notwithstanding the provisions of section 43D of the Act, since the provisions of section 45Q of the RBI Act have an overriding effect vis-a-vis income recognition principles in the Companies Act, the Assessing Officer is bound to follow the RBI Directions so far as income recognition is concerned. The contention that the assessee cannot indirectly claim the benefit which would amount to a benefit similar to that under section 43D of the Act, therefore, does not merit acceptance.
Issues:
Appeal against addition of interest on nonperforming assets u/s. 43D of the Income Tax Act for A.Y. 2012-13. Analysis: The appellant, a bank, contested the addition of ?19,27,060 as interest on nonperforming assets by the Assessing Officer (A.O.), upheld by the CIT(A). The A.O. added the amount to the appellant's income after the appellant failed to account for it in their books. However, the High Court's decision in a similar case favored the appellant, stating that the circular issued by the CBDT is still in force. The appellant's compliance with RBI Guidelines, which take precedence over the Income-tax Act, was highlighted. The A.O. disregarded the appellant's reliance on a 1984 circular, claiming it only applied to banking companies, not cooperative banks. The Tribunal found the A.O. and CIT(A)'s views contrary to the High Court's decision, leading to the allowance of the appeal and the deletion of the addition. This detailed judgment provides a comprehensive analysis of the issues involved, including the appellant's banking business, the A.O.'s decision, the High Court's ruling, the significance of RBI Guidelines, and the interpretation of circulars vis-a-vis statutory provisions. The Tribunal's decision was based on the precedence set by the High Court, emphasizing the importance of following regulatory guidelines and legal interpretations in tax matters.
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