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2020 (9) TMI 613 - AT - Income TaxDeduction on account of penal interest paid to Reserve Bank of India (RBI) - assessee in the present case is a Co-operative bank which is registered u/s 9(1) of Maharashtra Cooperative Societies Act, 1960 - CIT-A deleted the addition - HELD THAT - Assessee has submitted that the entire liability on account of penal interest charged by RBI for non-maintenance of SLR and CRR was accepted by the assessee bank and the same having been arisen and crystallized during the year under consideration, CIT(A) was fully justified in allowing the claim of the assessee for deduction even on account of provision made on account of penal interest charged by RBI. No infirmity in the impugned order of Ld. CIT(A) allowing the claim of assessee for deduction on account of penal interest paid to RBI for non-maintenance of SLR and CRR including especially the provision made - Decided against revenue.
Issues:
1. Validity of deduction on account of penal interest paid to RBI. 2. Entertaining new claim at the appellate stage. 3. Justification of allowing deduction for provision made on account of penal interest. Analysis: Issue 1: Validity of deduction on account of penal interest paid to RBI The appeal was filed by the Revenue against the order allowing the claim of the assessee for deduction on account of penal interest paid to RBI. The assessee, a Co-operative bank, filed a revised return claiming a deduction for penal interest charged by RBI for non-maintenance of SLR and CRR. The Assessing Officer considered the revised return invalid due to being filed beyond the due date and completed the assessment based on the original return, disallowing the claim. However, the Ld. CIT(A) entertained the claim and allowed it on merit, citing relevant case laws supporting the compensatory nature of the penal interest charged by RBI. The Tribunal upheld the decision of Ld. CIT(A) as the Revenue did not challenge it, leading to the dismissal of the appeal. Issue 2: Entertaining new claim at the appellate stage The Ld. CIT(A) entertained the claim of the assessee for deduction on account of penal interest charged by RBI at the appellate stage. This action was supported by the decision of the Hon'ble Supreme Court in a relevant case. The Revenue did not challenge this decision, and the Tribunal found it justified, leading to the dismissal of the appeal. Issue 3: Justification of allowing deduction for provision made on account of penal interest The Revenue contended that the Ld. CIT(A) was not justified in allowing the claim of the assessee for deduction, specifically for the provision made on account of penal interest. The Ld. Counsel for the assessee argued that the entire liability on account of penal interest was accepted by the assessee, and the provision was justified as it had arisen during the relevant year. As the Ld. DR did not dispute this assertion, the Tribunal upheld the decision of Ld. CIT(A) in allowing the deduction for the provision made on account of penal interest, leading to the dismissal of the appeal. In conclusion, the Tribunal upheld the decision of Ld. CIT(A) in allowing the deduction for penal interest paid to RBI, including the provision made for the same, as the Revenue's contentions were not found to be valid.
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