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TMI Blog2015 (2) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... proper to remit this issue to the file of the AO for limited purpose of verification as to whether gratuity has actually been paid to the employees. - Decided in favour of assessee for statistical purposes. Interest accrued on NPA but not credited to the profit and loss account - CIT(A) deleted the addition - Held that:- In case of CIT vs. Canfin Homes Ltd. [2011 (8) TMI 178 - KARNATAKA HIGH COURT ] has laid down the law on accrual of income, particularly interest on sticky loans/NPA and has held that if in the account of the assessee, it is clearly stated that though a particular income is due to him but it is not possible to recover the same, then it cannot be said to have been accrued and the said amount cannot be brought to tax. Thus no reason to interfere with the order of the CIT(A). - Decided against revenue. - ITA Nos. 1711 & 1712/Bang/2013, ITA Nos. 1772 & 1773/Bang/2013 - - - Dated:- 31-12-2014 - Smt. P. Madhavi Devi And Shri Jason P. Boaz,JJ. For the Petitioner : Shri Bijay Kumar Panda, Addl.CIT(DR). For the Respondent : Shri S.Ramasubrmanian, CA. ORDER Per Smt. P. Madhavi Devi, JM: All these are cross appeals filed by both the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue. The assessee, vide letter dated 04/11/2011 stated that as regards the accounting of interest on loans/advances is concerned, the assessee is following mixed system of accounting regularly and systematically since many long years and that there is no change in the method of accounting during the year. It was submitted that the bank is required to account interest on loans and advances on receipt basis under the Karnataka Co-operative Societies Act to ensure effective credit control and recover procedures of the bank. The AO was, however, not convinced with the assessee s contention and held that in order to arrive at the correct taxable income as per the Income-tax Act, the interest receivable on loans and advances/investments but not credited to profit and loss account has to be added. Thereafter, on perusal of the balance sheet of the assessee, he observed that interest receivable on overdue/NPA loans is not credited to profit and loss account but the same is shown on both sides of the balance sheet. Thereafter, he worked out interest receivable on loans but not credited to profit and loss account and sought to bring it to tax. The assessee replied that the bank is following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the material on record, we find that the issue is covered in favour of the assessee. However, we remit the issue to the file of the AO for verification and quantification of the interest paid to members on both time deposits and other deposits. Needless to mention the assessee shall be given a fair opportunity of hearing. 5. As regards ground Nos.6 7 relating to confirmation of disallowance of gratuity paid to retired employees, the learned counsel for the assessee submitted that the AO has made the disallowance on the ground that the amount paid is towards unapproved gratuity fund. He submitted that the assessee had, in fact, made payment to the retired employees and is not a contribution towards a provision or a fund and therefore the provisions of sec.36(1)(v) and 40(a)(ia) of the Act do not apply. The assessee has also filed the evidence in support of his contention that gratuity has been paid to the employees. The assessee has filed an application for admission of additional evidence. 5.1 Though the learned Departmental Representative supported the orders of the authorities below, submitted that the issue needs verification by the AO and therefore the AO may be dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit available u/s 43D cannot be extended to the assessee herein. 8.1 The learned counsel for the assessee, on the other hand, submitted that as per banking regulations and guidelines, interest on NPA has to be recognized only on receipt basis and the Hon ble Supreme Court in the case of UCO Bank has clearly held that interest accrued on sticky advances which was not brought into profit and loss account but taken into separate suspense account should be added as income only when actually received. He submitted that the Hon ble Karnataka High Court in the case of Canfin Homes Ltd., (supra) has considered and followed the decision of the Hon ble Supreme Court in granting relief to the assessee therein. Thus, according to him, the decision of the jurisdictional High Court is binding on the revenue authorities and the CIT(A) has rightly followed the same. He also placed reliance upon the decision of the Hon ble Bombay High Court in the case of Commissioner of Sales-tax vs. Jalani Tools (India) Ltd. (2014) 76 VST 104(Bom) wherein after referring to the judgment of the Hon ble Supreme Court in the case of Central Board of Dawoodi Bohra Community vs. State of Maharashtra (2005) AIR 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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