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TMI Blog2014 (9) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... to be credited to the P&L a/c . The addition made by the Assessing Officer is deleted. See ITO vs. M/s.Shiva Sahakari Bank Niyamitha [2012 (12) TMI 1021 - ITAT BANGALORE] - Decided in favour of assessee Disallowance of provision for bad and doubtful debt u/s 36(viia) - Held that:- In the present case, the assessee contended that the claim was made in the return, but provision was not made in the books. We directed the learned Counsel to show us the statement of income. He placed on record the claim which read as under: Less: Deductible expenditure and income to be excluded NPA provision u/s 36(1)(ix) = ₹ 6,78,133 Sub clause (ix) of section 36(1) deals with any expenditure bonafidely incurred by a company for the purpose of promoting family planning amongst its employees. It does not talk about any provision for bad and doubtful debts. Thus neither specifically disclosed in the return of income, nor had a provision made in the audited accounts. We do not find any basis for the assessee to make a claim at this stage. Therefore, there is no error in the order of the CIT (A) on this ground, this ground of appeal is rejected. Other grounds are general in nature or suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment and a notice u/s 143(2) was issued and served upon the assessee. On an analysis of the record, it revealed to the Assessing Officer that the assessee has debited a sum of ₹ 6,04,07,062/- towards interest on deposit and loans . According to the Assessing Officer the assessee ought to have deducted the TDS while crediting the accounts of the depositors. He found that the assessee has not deducted the tax at source while making payments towards interest exceeding ₹ 10,000/- on time deposits. Therefore, he issued a show cause notice for making disallowance u/s 40(a)(ia). The assessee contended that such payments are exempt from TDS, as per section 194(3)(v) of the Income Tax Act, therefore, it has not deducted the tax at source. Assessing Officer was not satisfied with the explanation of the assessee. He disallowed the claim of the assessee and made an addition of ₹ 10,99,420/-. 3. Appeal to the CIT (A) did not bring any relief to the assessee. 4. Learned Counsel for the assessee submitted that an identical issue was considered by the Tribunal in the case of a cooperative society engaged in the banking busienss. He placed on record copy of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in cl. (v) is a general species, whereas the other five categories of co-operative societies which are specifically referred to in other provisions are specific co-operative societies. The further conclusion in the said decision that the term co-operative society in cl. (v) of s. 194A(3) has to be interpreted as co-operative society other than co-operative bank, is again unsustainable. The law is well settled that by a process of interpretation one cannot add on words that are not found in the text of the statute. Such a course is permitted only when there is causes omisus . We do not think that the provisions of Sec.194A(3)(v) suffers from any causes omisus as has been interpreted by the ITAT Pune Bench SMC. 16. We are also of the view that the decision of the Hon ble Kerela High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd. (supra) supports the plea of the Assessee before us. The petitioners in that case were primary credit societies registered under the Kerala Cooperative Societies Act. In view of the specific provisions of Sec.194A(3(viia) of the Act, they claimed that they need not deduct tax at source on interest paid. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns have been received in the Board seeking clarification as to whether a member of a co-operative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such co operative bank without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non-member depositor of the co-operative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDS under section 194A. 3. A question has also been raised as to whether normal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v). It is hereby clarified that the exemption is available only to such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amitha rendered in ITA N o.257/Bang/2012 read as under: 8. Having heard both the parties and having considered their rival contentions, we find that undisputedly the assessee is in the banking business and is also governed by the Banking regulations. Whether the interest accrued on NPA's which are doubtful of being recovered, should be recognized as assessee's income on accrual or on receipt basis is the question before us. Let us first consider the applicability of the decisions relied upon by the learned DR. The Hon'ble Supreme Court in the case of Southern Technologies Ltd was considering the issue of allowability of provisions of NPA u/s 36(1)(vii) of the Income-tax Act while the case before us is with regard to the accrual of interest on NPA's and recognition of the same on receipt basis and not on accrual basis. Further, the Hon'ble Supreme Court, while holding that the RBI directions are only norms and act in a different field as against the Income-tax Act, has also observed that collectability of a receipt is different from accrual and hence in each case, the assessee has to prove that interest is not recognized or taken into account due to uncertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax. In the instant case we are concerned with a non performing asset. As the definition of non performing asset shows an asset becomes non performing when it ceases to yield income. Non performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non performing asset then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise. As is clear from the policy ITA No.257/B/12 guidelines issued by the National Housing Bank, the income from non performing asset should be recognized only when it is actually received. That is what the Tribunal held in the instant case. Therefore, the contention of the revenue that in respect of non performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In that view of the matter, the second substantial question framed is answered against the revenue and in favour of the assessee. 9. In view of the same, respectfully foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee made a provision but it was not claimed in the return of income and no revised return was filed. Assessing Officer disallowed the claim of the assessee with regard to advances made by rural branches on the ground that it was not claimed in the return or the assessee failed to file revised return. Assessing Officer put reliance upon the judgment of the Hon'ble Supreme Court in the case of Gotze India Ltd vs. CIT reported in 284 ITR 323. The Tribunal has entertained this ground and set aside the issue to the Assessing Officer for examination and adjudication on merit. In the present case, the assessee contended that the claim was made in the return, but provision was not made in the books. We directed the learned Counsel to show us the statement of income. He placed on record the claim which read as under: Less: Deductible expenditure and income to be excluded NPA provision u/s 36(1)(ix) = ₹ 6,78,133 Sub clause (ix) of section 36(1) deals with any expenditure bonafidely incurred by a company for the purpose of promoting family planning amongst its employees. It does not talk about any provision for bad and doubtful debts. Thus neither specifically disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by way of depreciation. Similarly, the appellant purchased Govt. securities on premium which were to be redeemed on the expiry of the period of investment at part. Thus, the appellant claimed to have paid premium on Govt. securities held till maturity and amortized the same over a period of holding by the said security or ten years whichever is earlier. The amount of premium of ₹ 1,86,000/- was disallowed as capital in nature in view of the decision of Vijaya Bank v. Addl. CIT 187 ITR 541 (SC) wherein it has been held that interest paid on purchase of securities till the date of purchase constitutes capital expenditure in the case of the appellant bank. The appellant has debited a sum of ₹ 25,56,000/- on account of depreciation on GOI securities which represents difference between the cost of the security and market value as on 31st March. The Assessing Officer held that the securities held is for long term period and thus, it was apparent that the appellant had invested in the above securities for a long term period and thus, it was apparent that the appellant had invested in the above securities for a long term basis and investment cannot be termed as stock-in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claim . Therefore, the appellant having categorized the said securities as stock in trade i.e. Held for Trading (HFT) and available for sale (AFS) is right in claiming loss difference amount between sale price and purchase price as depreciation loss as per the Instruction No.17/2008. The Assessing Officer has not been able to establish as to how the said securities are investments and not stock in trade. The appellant has followed the guidelines of the RBI in categorizing its securities and as such, the Assessing Officer is not justified in disallowing ₹ 23,70,000/- claimed as depreciation and accordingly, the Appellant s this ground of appeal is allowed . 14. With the assistance of the learned representatives, we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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