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2019 (7) TMI 743 - AT - Income TaxInterest on sticky loans - Co-operative Banks as eligible for deduction u/s. 43D in respect of interest on sticky advances/Non Performing Assets - HELD THAT - Interest of sticky loans has been laid to rest by Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. 2015 (1) TMI 1218 - BOMBAY HIGH COURT held that Co-operative Banks are eligible for deduction u/s. 43D in respect of interest on sticky advances/Non Performing Assets. The aforesaid law has been reiterated in the case of Principal Commissioner of Income Tax Vs. Solapur District Central Co-op. Bank Ltd. 2019 (2) TMI 238 - BOMBAY HIGH COURT . Thus, in view of law laid down by the Hon ble Jurisdictional High Court, ground Nos. 1 to 3 of the appeal by the Department are dismissed. Disallowance u/s. 14A r.w. Rule 8D - HELD THAT - Assessee has not earned any exempt income in the period relevant to the assessment year under appeal. The Hon ble Delhi High Court in the case of Cheminvest Limited Vs. Commissioner of Income Tax 2015 (9) TMI 238 - DELHI HIGH COURT has held that no disallowance u/s. 14A is to be made in the absence of any exempt income. The CIT (Appeals) has decided the issue in line with the judgment of Hon ble High Court. We find no reason to interfere with the findings of CIT (Appeals) on this issue. Accordingly, the ground No. 4 of the appeal is dismissed being devoid of any merit.
Issues:
1. Interest on sticky loans 2. Disallowance u/s. 14A r.w. Rule 8D Interest on Sticky Loans: The appeal by the Revenue challenged the Commissioner of Income Tax (Appeals) order for the assessment year 2012-13, focusing on two issues. The first three grounds pertained to interest on sticky loans, while the fourth ground concerned disallowance u/s. 14A r.w. Rule 8D. The assessee's representative cited precedents from the Hon'ble Bombay High Court, emphasizing that the issue of interest on sticky loans was resolved in favor of the assessee. The Commissioner of Income Tax (Appeals) had ruled in alignment with decisions from the Hon'ble Bombay High Court, leading to the dismissal of grounds 1 to 3 raised by the Revenue. Disallowance u/s. 14A r.w. Rule 8D: Regarding the fourth ground of the appeal, the Assessing Officer had disallowed a specific amount under section 14A r.w. Rule 8D, despite the assessee not earning any exempt income in the relevant period. The Commissioner of Income Tax (Appeals) overturned this disallowance, citing the Hon'ble Delhi High Court's judgment that no disallowance should occur in the absence of exempt income. The tribunal found no reason to interfere with the Commissioner's decision, leading to the dismissal of the fourth ground raised by the Revenue. Ultimately, the appeal by the Revenue was dismissed, upholding the decisions made by the Commissioner of Income Tax (Appeals) in both issues. Judgment: The Hon'ble Jurisdictional High Court rulings played a pivotal role in resolving the issues raised by the Revenue. The decision underscored the eligibility of Co-operative Banks for deduction u/s. 43D concerning interest on sticky advances/Non Performing Assets. Additionally, the judgment emphasized that no disallowance u/s. 14A should occur if the assessee has not earned any exempt income. The tribunal, in alignment with the legal precedents, dismissed the Revenue's appeal, affirming the decisions made by the Commissioner of Income Tax (Appeals) on both the interest on sticky loans and disallowance u/s. 14A r.w. Rule 8D issues.
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