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TMI Blog2013 (10) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... otional interest on the said amount.- Decided in favour of assessee. Suspense interest realized - CIT(A) deleted the addition - Held that:- Submission of the assessee which is well supported by RBI / NABARD circular dated 17.8.2002 vide para No. 3.1 clearly states that the policy of income recognition should be based on record of recovery and therefore unrealized income should not be taken into profit and loss account by State Co-op Bank / Central Co-op Banks and that the provisions of Section 43D of the Act are clear regarding the recognition of interest income on NPA. The Ld. CIT(A) in our view has thus rightly held that overdue interest not realized during the year and credited to suspense interest account cannot be taken tobe the income of the assessee. Thus the Ld. CIT(A) has thus rightly deleted the addition in question. - Decided in favour of assessee. - ITA No. 2486/Del/2011 - - - Dated:- 31-10-2013 - Shri I. C. Sudhir And Shri J.S. Reddy JJ. For the Appellant : Shri Sameer Sharma, DR For the Respondent : Shri S.K. Bansal, CA ORDER PER I.C. SUDHIR, JUDICIAL MEMBER The revenue has questioned first appellate order on the following grounds :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to the respective depositors. The AO did not agree with these explanation of the assessee and added the amount to the total income of the assessee. The AO further held that interest income on the said deposit cannot be ruled out and added the interest income of ₹ 64,581/- being interest at 3.5% per annum on the deposits in this account. These additions made by the AO were questioned by the assessee before the Ld. CIT(A) with the following submissions :- (a) The proposed Coop. Societies willing to register themselves with the Registrar of Coop. Societies have to follow the instructions of the Registrar of Coop. Societies before granting registration to the new societies. One of such instructions is that they have to deposit some amount with the nearby Coop. Bank normally ranging from ₹ 1000 to ₹ 3000. This amount has to be utilized as per the instructions of the Registrar of Coop. Societies. The assessee bank cannot repay or utilize this amount at its own or upon the instructions of the depositor. (b) Once such societies are registered with the Registrar of Coop. Societies, they have to get their accounts audited from the Coop. Auditors wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee and with this finding that the AO has not cared to give reasons as to why the explanation offered by the assessee is not tenable. He observed that the assessee cannot forfeit the deposits made by the individuals / societies and if the accounts are opened the amounts are transferred to the respective accounts or otherwise these amounts have to be refunded to the respective depositors. Regarding the addition of ₹ 64581/- made on account of interest the Ld. CIT(A) held that the funds in the account are available to the assessee free of cost which was advanced for generating profit, the question of deriving notional interest does not arise. We find that under almost similar facts in the case of ACIT vs. Rohtak Central Co-op Bank (supra) relied upon by the Ld. AR identical issues have been decided in favour of the assessee by the Delhi Bench of Tribunal. Relevant para No. 8 of the said decision is being reproduced hereunder :- 8. We have carefully considered the submissions of the Ld. Sr. DR. We have carefully gone through the assessment order and the order passed by the Ld. CIT(Appeals). Right from the beginning it has been the contention of the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee an interest of earlier years amounting to ₹ 1,00,51,715/- has been realised under the head suspense interest realized . The explanation of the assessee in this regard remained that overdue interest has not been utilized during the year hence it is not taxable on the following grounds :- i) This is as per the master circular of Reserve Bank of India and as per the guidelines of the State Govt. ii) This amount is not taxable as per Hon'ble Supreme Court ruling in the case of UCO Bank vs. Commissioner of Income Tax (1999) 237 ITR 889 (SC) iii) The amount is taxable on cash receipt basis. Iv) Section 43 D also supports the view and as per section 43 D, income from interest is accounted for on cash receipt basis or when the amount is transferred to the P L account v) Even if any addition is to be made of ₹ 1,29,91,989/- then deduction of ₹ 1,00,51,715/- is to be allowed on account of interest of earlier years credited during the year to P L account. 8. From the above submission the AO concluded that the assesee had no objection for the addition of ₹ 29,40,274/- (Rs. 1,29,91,989/- - ₹ 1,00,51,715/-) and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for on cash receipt basis and when the amount is transferred to the profit and loss account. Therefore any amount of accretion to interest reserve account is not taxable. It was pointed out that the same system of accounting has been regularly followed by the assessee bank and there is no change in the system of accounting during the year. 10. In support of the ground the Ld. DR has basically placed reliance on the assessment order and submitted that the assessee was having no objection to this addition. The Ld. AR on the other hand tried to justify the first appellate order and rejected the submissions made before the authorities below. 11. Considering the above submission of the assessee which is well supported by RBI / NABARD circular dated 17.8.2002 vide para No. 3.1 clearly states that the policy of income recognition should be based on record of recovery and therefore unrealized income should not be taken into profit and loss account by State Co-op Bank / Central Co-op Banks and that the provisions of Section 43D of the Act are clear regarding the recognition of interest income on NPA. The Ld. CIT(A) in our view has thus rightly held that overdue interest not realized ..... X X X X Extracts X X X X X X X X Extracts X X X X
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