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TMI Blog2013 (9) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. 3.1 So far as the issue in respect of interest on NPA is concerned, the AO has observed that the assessee has not offered accrued interest on NPA for taxation. In the opinion of the Assessing Officer as the assessee is following mercantile system of accounting, the accrued interest on NPA has to be offered for tax. The assessee filed the written submission and contended that interest on the NPA account is treated separately and income is recognised on actual receipt basis. The AO did not accept that the provisions of section 43D are applicable and the interest on NPA which are classified by the RBI as bad and doubtful debt is to be assessed on the receipt basis. The AO, therefore, made addition to the extent of Rs. 1,19,77,000/- to the income of the assessee. The assessee carried the issue before the Ld.CIT(A) and the Ld.CIT(A) deleted the said addition. 4. We have heard the parties. In this case, it is not disputed that on receipt basis the assessee is consistently declaring the income in respect of interest on NPA account. We find an identical issue has come up for the consideration before the Tribunal in the case of Osmanabad Janata Sahakari Bank Ltd. vide ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove 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 to unambiguous use of language in the Section. (ii) Status of assessee for the purpose of application Section 43-D. As fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount 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. Nevertheless, that decision was not followed while deciding the appeal of UCO Bank (supra) by the Hon'ble three Judges of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 accrual basis and from 4th year onwards, the income in respect of doubtful debts was to be recognized on receipt basis. Since the income was to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonbanking 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 the I.T. Act. For the sake of ready reference, relevant paragraph from the held portion is reproduced below: " The income-tax is a tax on "re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. 4.1 In this case, nowhere it is disputed that on receipt basis the assessee is recognising the income that has been accepted by the AO in the past. Moreover, the issue stands covered in favour of the assessee by the decision of this Tribunal in the case of Osmanabad Janata Sahakari Bank Ltd. (Supra). We find no reason to take a different view than taken by the Ld.CIT(A) on ..... 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