2021 (3) TMI 781 - AT - Income Tax

Addition with regard to accrued interest on standard assets - HELD THAT - AR before the Assessing Officer had agreed to the addition stating that accrued interest to the extent of ₹ 9,90,000 is on standard assets and not on nonperforming assets (NPA s). Therefore, see no reason to interfere with the orders of the Income Tax Authorities and confirm the addition. Disallowance invoking the provisions of section 40(a)(ia) - failure on the part of the assessee to deduct tax at source with regard to interest payment to the assessee s members and cooperative societies - HELD THAT - The issue raised in this appeal is squarely covered by the order of the Bangalore Bench of the Tribunal in the case of M/s.Chikmangalur Jilla Mahila Sahakara Bank Niyamitha 2018 (7) TMI 292 - ITAT BANGALORE . No details with regard to payment of interest whether it is to members or to other cooperative societies have been furnished. Therefore, the matter needs to be examined by the A.O. de novo. The assessee is directed to furnish the necessary details with regard to the payment of interest whether it is paid to the members / other cooperative societies or to non-members. A.O. is directed not to make disallowance with regard to the interest paid to assessee s members and other cooperative societies. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Addition of accrued interest on standard assets
2. Disallowance of interest payment to members and cooperative societies for failure to deduct tax at source

Issue 1: Addition of Accrued Interest on Standard Assets

The Assessing Officer added ?9,99,439 to the total income of the assessee, representing accrued interest on standard assets. The authorized representative agreed to this addition, stating that the accrued interest was on standard assets and not on non-performing assets. The CIT(A) confirmed this addition, and upon appeal to the Tribunal, the AR reiterated the submissions made earlier. The Tribunal, after hearing both sides, upheld the addition, stating that since the AR had agreed to the addition previously, there was no reason to interfere with the orders of the Income Tax Authorities. Therefore, Ground No. 2 was dismissed.

Issue 2: Disallowance of Interest Payment to Members and Cooperative Societies

The second issue revolved around the disallowance of ?1,03,98,959 under section 40(a)(ia) of the Income Tax Act due to the failure of the assessee to deduct tax at source on interest payments to members and cooperative societies. The assessee contended that it was not liable for TDS as the interest was paid to its members and cooperative societies. The Assessing Officer held that a specific provision, section 194A(3)(i)(b) of the IT Act, applied rather than section 194A(3)(v) as contended by the assessee. The CIT(A) upheld the assessment order, leading to an appeal before the Tribunal. The Tribunal referenced a previous case and found that the specific provision, 194A(3)(v), should override the general provision, 194A(3)(i)(b), in cases of conflict. However, as no details regarding the payment of interest were provided, the matter was directed to be examined afresh by the Assessing Officer. The AO was instructed not to disallow interest paid to members and cooperative societies until further details were furnished. Consequently, the appeal was allowed for statistical purposes.

In conclusion, the Tribunal upheld the addition of accrued interest on standard assets and directed a fresh examination of the disallowance of interest payment to members and cooperative societies due to the failure to deduct tax at source. The detailed analysis and application of relevant provisions ensured a fair and thorough consideration of the issues raised in the appeal.