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TMI Blog2016 (9) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June 2015 Gratuity payable to its employees - availability for deduction - Held that:- The counsel for the assessee would be quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible if the actual payment is made and these sections are mutually exclusive and therefore, the Karnataka Electricity Board case is no longer relevant, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest receivable from non-performing assets, bad and doubtful debts though the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted? 3. The learned counsel for the parties submit that the matter is covered by a decision of this Court in ITA No.200002/2015 and connected appeals. 4. This Court in ITA No.200002/2015 and connected appeals has raised the following substantial questions of law; i) Whether the interest paid to members of a Co-operative Bank above ₹ 10,000/- should be added to tax or not? ii) Whether the gratuity payable to its employees is available for deduction? iii) Whether interest receivable from non-performing assets, bad and doubtful debts though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: 3. The Tribunal having held that it is so deductible, is sought to be questioned in the light of Section 36(1)(v) of the Income Tax Act, 1961. However, even this has been answered by a Division Bench judgment of this Court as early as in the case of Chief Commissioner (Admn) and Another vs. Karnataka Electricity Board in 1991 ITR 197 page 48, wherein it was held that the mere fact that the contribution would not come within the ambit of the provisions of section 36(1)(iv) would not disentitle the assessee to claim the benefit under Section 37(1) if the requirements thereunder were satisfied. Reference in the said judgment is also made to CIT vs. Eastern Spinning Mills Ltd (1980) 126 ITR 686, a decision of the Calcutta Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible if the actual payment is made and these sections are mutually exclusive and therefore, the Karnataka Electricity Board case is no longer relevant, by virtue of the amendment to Section 40-A(7). Under Section 43-B, the assessee had not merely made a provision but payment was actually made and therefore, was entitled to deduction, would also answer this question as to whether the payment made towards a gratuity fund could be deducted. 7. The third question is answered at para 5 as follows: 5. In this regard, the learned counsel for the assessee has produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. At this, the learned counsel for the revenue would submit that the decision only refers to non- performing assets and it is not evident that non- performing assets would also cover other classification of loans and advances. In this regard, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of bills purchased and discounted; (iv) the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops; (v) the instalment of principal or interest thereon remains overdue for one crop seasons for long duration crops. Banks should, classify an account as NPA only if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter. Further, asset classification which is separately dealt with reference to categories of non-performing assets, as follows: Banks are required to classify non- performing assets further into the following three categories based on the period for which the asset has remained non- performing a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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