9911796707
TMI Blog2015 (8) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is directed against the order dated 02-12-2013 of the CIT(A)-III, Pune relating to Assessment Year 2010-11. 2. The grounds raised by the Revenue are as under : 1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of ₹ 16,19,053/- made by the AO on account of interest on Non Performing Assets u/s.43D of the Income Tax Act, 1961, as the assessee is a cooperative bank and not a Scheduled Bank. 2. The learned CIT(A) is erred in not observing that the provisions of section 43D are only applicable to Financial Institutions and Scheduled Banks whereas the assessee is a non-scheduled bank and cannot take the benefit of section 43D of the Act. 3. Whether the learned CIT(A) erred in not appreciating the ratio of Hon'ble Supreme Court judgment in Southern Technologies Limited Vs. JCIT 320 ITR 577 (SC) which says that the RBI directions under RBI Act are prudential norms and have nothing to do with computation of taxability of provisions of NPA under the Income Tax Act, 1961, cannot override the provisions of the Income Tax Act, 1961. 4. The appellant craves to add, alter, amend, substitute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions in the balance sheet and it has no effect on the taxability of such income under the Income Tax Act. The Assessing Officer similarly held that the CBDT circular dated 09-10-1984 is also not applicable to the facts of the case. Relying on the decision of Hon ble Supreme Court in the case of Southern Technologies Ltd. reported in 320 ITR 577, the Assessing Officer added the amount of ₹ 16,19,053/- being the overdue interest on the NPAs to the total income of the assessee. 6. In appeal the Ld.CIT(A) following the decision of the Pune Bench of the Tribunal in the case of Osmanabad Janata Sahari Bank Ltd. vide ITA No.795/PN/2011 order dated 31-08-2012 deleted the addition made by the Assessing Officer. 7. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Pune Bench of the Tribunal in the case of Osmanabad Janata Sahari Bank Ltd (Supra) has decided an identical issue in favour of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in the previous year in which it is credited. The words credited and actually received has been highlighted hereinabove while reproducing the section in question. The other deviation from the said accepted principle of accountancy is that an income by way of interest shall be chargeable to tax in the previous year in which it is actually received. The Act says that the incidence of credit or actually received , whichever is earlier is to be taken into account for the purpose of chargeability of income by way of interest. Simultaneously, it is noteworthy that this section is an overriding section because the opening word is notwithstanding anything to the contrary contained in any other provisions of this Act . Therefore, in spite of anything contained in the Act, the provisions of this section shall override those provisions. Once the Statute has categorically made a law in respect of public financial institutions that interest is chargeable to tax either in the year in which credited or actually received, whichever is earlier, then it is compulsory to abide by the said Rule. According to us, no scope is left with the Revenue Authorities to ignore these provisions due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bank of Travancore reported in 110 ITR 336 (Ker.), wherein it was held that the assessee, a banking company, did not credit in its account the interest that had accrued on sticky advances because the assessee felt that the interest could not to be realised. It credited the interest to a separate account known as interest suspense account . On reference, the Hon'ble Court has held that there was an accrual of income liable to income-tax and the assessee was not justified in not crediting the interest income on such stick advances it its accounts. However, later on at the Hon'ble Apex Court while pronouncing the judgment of the said State Bank of Travancore vs. CIT reported in (1986)158 ITR 102(SC), there were Hon'ble three Judges presiding the Court, out of which Hon ble two Judges were in the opinion that the interest on sticky advances was rightly treated as income which had accrued to the appellant. There was a descending note by one of the Hon'ble Judge and commented that whether an income on receipt basis or on accrual basis, it is the real income and not any hypothetical income which may have theoretically accrued, i.e. subject to tax under the Act. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its letter and spirit. It is pertinent to mention that later on, in the case of CIT vs. Bank of America S.A. 262 ITR 504 (Bom) the question of interest on sticky loans was decided in favour of the assessee and held that the question is to be answered in favour of the assessee following the decision of UCO Bank reported at 237 ITR 889(SC) :: 240 ITR 355 (SC). Likewise, in an another case of CIT vs. State Bank of India 262 ITR 662 (Bom.) again it was held that the amount credited to the interest suspense account was not taxable following the decision pronounced in the case of UCO Bank (supra). (V) Judgement in favour of Revenue : From the side of the Revenue an order of the Tribunal has been vehemently relied upon and this is the basic reason of the elaborate discussion made hereinabove so as to unfold the controversy. In the said decision of the Tribunal, viz. Jt.CIT v/s. India Equipment leasing Ltd. (2008)111 ITD 37 (Chennai), the Respected Co-ordinate Bench has expressed that quote Prior to insertion of section 43D with effect from 1-4-1991, recognition of income was on the basis of circular of 9- 101984. It said that for first three years the income may be taken on accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NBFC. The observation of the Respected Tribunal was that if the contention of the assessee was to be accepted, then it would amount to insertion of NBFC in section 43-D of the I.T.Act. As against that, as far as the assessee is concerned, it is an accepted fact that the assessee is a cooperative bank and not a non-banking financial company and this noteworthy distinction has already been appreciated by us in one of the paragraphs above. There is one more decision of the Hon ble Apex Court which is yet to be mentioned while discussing the arguments raised from the side of the Revenue. A decision in the case of Southern Technologies Ltd. vs. Jt. CIT 320 ITR 577 (SC) has been cited but the fundamental difference is that the issue before the Hon ble Court was in respect of provision for NPA and debited to P L Account by a NBFC. The said provision was undisputedly made by the said NBFC as per the prudential norms made by the Reserve Bank. Therefore we want to make it clear that the question for consideration before the Hon ble Court was that if a provision for doubtful debt is made then what will be the legal position of the applicability of Explanation to section 36(1)(vii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual would arise or not, nevertheless, the interest from such NPA would be taxed in the appropriate assessment year on the basis of actual receipt. It is worth to mention that for this decision, the Hon'ble Madras High Court has relied upon an another decision of the same High Court pronounced in the case of Jt.CIT vs. India Equipment Leasing Ltd. 293 ITR 350. 7. In the case before us, admittedly, assessee has directly taken the interest to the Balance Sheet and it is not routed through the Profit Loss Account. Moreover, the issue of the taxability of the interest on the sticky losses/advances, is covered in favour of the assessee by the decision of the coordinate Benches in the case of The Durga Cooperative Urban Bank Ltd., Vijayawada (supra) and Karnavati Cooperative Bank Ltd. (supra). We find no reason to interfere with the reasoned order of the Ld. CIT(A) and accordingly the same is confirmed. In the result, the Revenue s ground is dismissed. 9. We find the Ld.CIT(A) while deciding the issue in favour of the assessee has followed the decision of the Coordinate Bench of the Tribunal in the case of Osmanabad Janata Sahari Bank Ltd (Supra). In view of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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