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2016 (11) TMI 665 - AT - Income TaxAddition on account of interest income in relation to advances classified as Non-Performing Advances (NPAs) - Held that - When the account becoming NPA is not disputed by the revenue the recognition of income is to be done only on receipt basis which is in consonance with the real income theory. In these circumstances and respectfully following the decisions of Hon ble Delhi High Court in 2010 (11) TMI 88 - Delhi High Court and various other decisions referred to supra we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly the grounds raised by the assessee are allowed. Addition on account of deemed short term capital gains - Held that - It is not in dispute before us that the renovations work carried out by the assessee in the subject mentioned building (which was sold in the year under appeal and dispute before us) was added in the 10% block by the assessee in the earlier years and depreciation claimed accordingly. We find that this depreciation had been granted by the revenue all along. Going by the principle of consistency there is no need to disturb the said stand of the revenue. But since the entire building ( including the renovated portion) was sold during the year under appeal for 9.55 crores we find that the assessee bank had rightly allocated the sale consideration towards 5% an 10% block on the basis of their values and computed short term capital gains u/ 50 of the Act for the 5% block and claimed depreciation u/s 32 of the Act for the 10% block. It is not in dispute that the 10% block continues to exist as on 31.3.2010. MAT applicability to assessee bank - applicability of provisions of section 115JB - Held that - The provisions of section 115JB of the Act are not applicable to an assessee unless it is registered as a company under the Companies Act 1956 and prepares its financial statements in accordance with the provisions of section 211 and Part II and Part III of Schedule VI of the Companies Act 1956. We place reliance on the recent decision of the co-ordinate bench of this tribunal in the case of UCO Bank vs DCIT (2015 (12) TMI 300 - ITAT KOLKATA ) wherein held that the amendment brought in by the Finance Act 2012 in section 115JB of the Act is applicable only from Asst Year 2013-14 onwards and not earlier. Respectfully following the said judicial precedent we hold that the provisions of section 115JB of the Act are not applicable to the assessee bank for the year under appeal. Disallowance on account of provision for gratuity - Held that - We find that assessee had actually paid the amount of 2, 18, 00, 000/- in the earlier year i.e in Asst Year 2009-10 itself along with other amounts. However deduction for the same has not been claimed in that year i.e in Asst Year 2009-10 and the same has been claimed in the year under appeal i.e the year in which it had become due. We agree with the argument of the ld AR that the spirit of section 43B of the Act has been satisfied by the assessee in full TDS credit - Held that - The circumstances in which the said TDS has been remitted to the account of the Central Government and the circumstances based on which the refund of the same is claimed by the assessee is not disputed by the revenue before us. We find that the revenue is unjustly enriched by the TDS amount paid by the assessee and since the said TDS is duly reflected in the Form 26AS of the assessee the assessee is entitled for the credit of the said TDS in his assessment which the revenue has got no authority to deny as per law. Accordingly we find that the direction given by the ld DRP to the ld AO to grant credit of TDS is in order and does not call for any interference.
Issues Involved:
1. Addition of ?14,57,051/- on account of interest income related to Non-Performing Advances (NPAs). 2. Addition of ?1,02,54,946/- on account of deemed short-term capital gains. 3. Applicability of provisions of section 115JB of the Income Tax Act. 4. Disallowance on account of provision for gratuity amounting to ?2,18,00,000/-. 5. Adjustments in the computation of book profits under section 115JB. 6. Granting of TDS credit amounting to ?10,19,31,487/-. Issue-Wise Detailed Analysis: 1. Addition of ?14,57,051/- on Account of Interest Income Related to NPAs: The first issue pertains to the addition of ?14,57,051/- due to interest income on NPAs. The assessee, a bank incorporated in the Netherlands, argued that interest income on NPAs should be recognized only on receipt basis as per RBI guidelines and Accounting Standard -9 (AS 9). The AO contended that unless advances were overdue for more than six months as per Rule 6EA, interest should be recognized on an accrual basis. The assessee cited various judicial precedents and CBDT instructions to support its stance. The tribunal, following the Hon'ble Delhi High Court's decision in CIT vs Vasisth Chay Vyapar Ltd, ruled that interest income on NPAs should not be assessed on a mercantile basis and should be taxed only on receipt basis. Thus, the assessee's appeal on this ground was allowed. 2. Addition of ?1,02,54,946/- on Account of Deemed Short-Term Capital Gains: The second issue involves the addition of ?1,02,54,946/- as deemed short-term capital gains from the sale of a residential building. The assessee had allocated the sale consideration between 5% and 10% blocks of assets and computed the gains accordingly. The AO, however, adjusted the entire sale consideration against the 5% block, resulting in a higher STCG. The tribunal upheld the assessee's method of allocation based on the principle of consistency and allowed the appeal, stating that the allocation and computation were correctly done by the assessee. 3. Applicability of Provisions of Section 115JB of the Income Tax Act: The third issue concerns the applicability of section 115JB (Minimum Alternate Tax) to the assessee bank. The tribunal referred to several decisions, including UCO Bank vs DCIT, which held that section 115JB does not apply to entities not registered under the Companies Act, 1956. The tribunal concluded that section 115JB was not applicable to the assessee bank for the year under appeal, and the ground raised by the assessee was allowed. 4. Disallowance on Account of Provision for Gratuity Amounting to ?2,18,00,000/-: The fourth issue deals with the disallowance of ?2,18,00,000/- towards gratuity provision under section 43B. The AO disallowed the provision as it was not paid by the due date. The assessee argued that the liability was incurred in the current year, though the payment was made in the previous year. The tribunal, agreeing with the assessee and citing the Hon'ble Kerala High Court's decision in CIT vs Kerala Solvent Extractions Ltd, allowed the provision as the payment was already made, thus satisfying the conditions of section 43B. The revenue's appeal on this ground was dismissed. 5. Adjustments in the Computation of Book Profits Under Section 115JB: Given the tribunal's ruling that section 115JB does not apply to the assessee bank, the issue of adjustments in the computation of book profits became academic. Consequently, this ground raised by the revenue was dismissed. 6. Granting of TDS Credit Amounting to ?10,19,31,487/-: The final issue involves the granting of TDS credit of ?10,19,31,487/-. The AO denied the refund of TDS, stating it should be claimed from the TDS Officer. The tribunal found that the TDS was duly reflected in Form 26AS and directed the AO to grant the credit, emphasizing that the revenue was unjustly enriched by the TDS amount. The tribunal upheld the DRP's direction to grant TDS credit, dismissing the revenue's appeal on this ground. Conclusion: The appeal of the assessee in ITA No. 477/Kol/2015 was allowed, and the appeal of the revenue in ITA No. 496/Kol/2015 was dismissed.
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