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2018 (6) TMI 824 - AT - Income TaxEligibility to deduction u/s 80P(2)(a)(i) - assessee bank getting the deposit from non members - Held that - As in earlier A.Y.2009-10 2012 (7) TMI 1067 - ITAT DELHI , the Tribunal decide this issue in favour of the assessee Assessing Officer in the present assessment year also not pointed out how income would generate to the assessee by taking deposits from non-members. The direct source of income is ultimately from the credit facility provided to its members or from sale of seeds agricultural implements etc. contemplated in section 80P(2)(a)(iv). The calculation made by the AO is on hypothesis only - The net income generated to the assessee is only from its members. On the deposits, it will pay interest which would be its expenses and would be set off against the total income generated from the credit facility. It has not income on the deposits from the non-members rather it must have paid interest on such deposits. Accrued Interest on NPA - shown in balance sheet as accumulated balance of previous years and also such income was not earned by the bank since the borrower account was defined as NPA account and interest on such account cannot be accounted for as income - Held that - As decided in ACIT vs. The Rohtak Central Cooperative bank 2015 (4) TMI 366 - ITAT DELHI overdue interest not realized during the year and credited to suspense interest account cannot be taken to be the income of the assessee. CIT(A) has thus rightly deleted the addition in question. The same is upheld. There is no substance in the contention of the Ld. DR that the assessee was having no objection to this addition, since we find that it was an alternative submission of the assessee before the AO. - Decided against revenue
Issues:
1. Eligibility for deduction under section 80P(2)(a)(i) of the Income Tax Act. 2. Treatment of accrued interest on NPA accounts. 3. Applicability of Supreme Court decision in the case of UCO bank. 4. Admissibility of deduction claimed under section 80P(2)(a)(i) by the assessee. Issue 1: Eligibility for deduction under section 80P(2)(a)(i) of the Income Tax Act: The appeal was filed by the assessee against the order passed by CIT(A)- Rohtak. The dispute revolved around the assessee admitting to accepting deposits from non-members, which was deemed to contravene section 80P(2)(a)(i) of the IT Act. The Assessing Officer disallowed the claim of deduction under this section, leading to the appeal. The CIT(A) allowed the appeal of the assessee, stating that the Assessing Officer's additions were made on mere suspicion without proper appreciation of facts and explanations provided by the appellant. The CIT(A) highlighted that the necessary requirements for claiming the deduction under section 80P(2)(a)(i) were fulfilled by the assessee, and hence, the claim was valid. The Tribunal also referred to a previous decision in the assessee's favor for A.Y. 2009-10, reinforcing the allowance of the deduction. Issue 2: Treatment of accrued interest on NPA accounts: Regarding the addition of accrued interest on NPA accounts, the Assessing Officer contended that the interest income on NPA accounts could not be accounted for as income. However, the assessee argued that such interest was not earned by the bank due to the NPA classification of borrower accounts. The CIT(A) and the Tribunal found in favor of the assessee, citing previous decisions that supported the non-recognition of unrealized income from NPA accounts as actual income. The Tribunal dismissed the revenue's appeal, upholding the decision to delete the addition related to accrued interest on NPA accounts. Issue 3: Applicability of Supreme Court decision in the case of UCO bank: The assessee referenced a Supreme Court decision in the case of UCO bank, which was delivered before the amendment of section 43D. The Tribunal noted that the decision's relevance to cooperative banks like the assessee was debatable, as cooperative banks were not explicitly covered by the provisions applicable to scheduled banks. The Tribunal emphasized that RBI guidelines did not dictate the tax treatment of income under the IT Act, indicating a distinction between banking regulations and tax laws. Issue 4: Admissibility of deduction claimed under section 80P(2)(a)(i) by the assessee: The assessee, a Cooperative Bank registered under the Cooperative Society Act, claimed deduction under section 80P(2)(a)(i) of the IT Act for providing credit facilities to its members. The Assessing Officer disallowed the deduction due to the acceptance of deposits from non-members. However, the CIT(A) and the Tribunal ruled in favor of the assessee, emphasizing that the bank's activities aligned with the requirements of section 80P(2)(a)(i) and that the Assessing Officer's additions lacked substantive support. The Tribunal upheld the CIT(A)'s decision to delete the addition, citing previous favorable decisions in the assessee's case. In conclusion, the judgment addressed multiple issues concerning the eligibility for deductions under specific sections of the Income Tax Act and the treatment of income related to NPA accounts. The Tribunal's decision favored the assessee, highlighting compliance with statutory provisions and past precedents to support the allowance of deductions and the deletion of additions made by the Assessing Officer.
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