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TMI Blog2015 (7) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax(Appeals) confirmed the action of the Assessing Officer on the ground that the assessee failed to furnish any evidence in support of its claim. 5. Before us, the Authorized Representative of the assessee submitted that the deduction was allowable to the assessee as the same was claimed in pursuance to the guidelines of the Reserve Bank of India. However, he did not furnish the details and evidence or any documents in support of the same. In absence of the same, we find no infirmity in the order of the Commissioner of Income Tax(Appeals), which is confirmed and the ground of appeal of the assessee is dismissed. 6. Ground No.2 of the appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) disallowing the interest of Rs. 30,08,157/- for not deducting TDS u/s. 194A(3)(v) of the Act. 7. The Assessing Officer observed that the assessee had paid interest on term deposits in excess of Rs. 10,000/- without deducting TDS and the total interest paid of Rs. 30,08,157/- is liable to be disallowed u/s. 40(a)(ia) of the Act. According to the Assessing Officer, the assessee bank cannot claim exemption from making TDS on interest paid to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ini Nivedita Sahakara Bank Ltd. Vs. ACIT (87 ITD 569), the Assessing Officer computed the liability of the assessee u/s. 201(1) & 201(1A) of the Act. 6. Aggrieved by this, assessee carried the matter before the Ld.CIT(A) and reiterated its claim that the Assessing Officer has relied upon wrong decisions referring to its own orders for the A.Y. 2002-03. It was pointed out to the Ld. CIT(A) that the then Ld. CIT(A) has allowed the assessee‟s appeal based on the decision of Jalgaon District Central Co-op Bank Ltd. & another Vs. Union of India (265 ITR 423). After considering the facts and the submissions of the Ld. CIT(A) at para 6.3 has observed as under:- "6.3 Now coming to the circular No. 9 of 2002 issued by the CBDT relied upon by the appellant, the Board vide said circular had sought to interpret the definition of word „member‟ clarifying that the word 'member' does not include word 'nominal member'. It was held by the Bombay High Court in the case of Jalgaon District Central Co-op Bank Ltd & Anr v. Union of India 265 ITR 423 (Bom), that the Board has no power to interpret the provisions of law by way of circular. The issue at hand of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. [Section 194A(3)(viia)(b) of the Act] Therefore, as per the provisions of section 194A(1) read with provisions of section 194A(3)(i)(b) and 194A(3)(viia)(b), co-operative bank is required to deduct tax from interest payment on time deposits if the amount of such payment exceeds specified threshold of Rs. 10,000. However, as the provisions of section 194A(3)(v) of the Act provide a general exemption from making tax deduction from payment of interest by all co-operative societies to its members, the co-operative banks tried to avail this exemption by making their depositors as members of different categories. This has led to dispute as to whether the co-operative banks, for which the specific pro-visions of tax deduction exist in the form of section 194A(1), section(c)4A(3)(i)(b) and 194A(3)(viia)(b) of The Act can take the benefit of general exemption provided to all co-operative societies from deduction of tax on payment of interest to members. The matter has been carried to judicial forums and in some cases a view has been taken that the provisions of section 194A(3)(viia)(b) of the Act makes no distinction between members and non-members of co-operative banks for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the non-members. 9. Per contra, learned DR strongly supported the order of the Assessing Officer. It is the say of the DR that the amendment is only of clarificatory in nature. Learned DR further pointed out that the Circular 9 of 2002 has been withdrawn by the CBDT as it has been struck down by the Bombay High Court in the case of Jalgaon District Central Co. Bank (supra). 10. Having given a thoughtful consideration to the rival contentions. We have carefully perused the orders of the authorities below. We have also gone through the decisions relied upon by the rival parties and the Circulars of the CBDT brought to our notice. 11. Firstly, the Assessing Officer and the Ld. CIT(A) have heavily relied upon the decision of the Tribunal Panaji Bench in the case of Bailhongal Urban Co. Bank Ltd. (supra), wherein the Tribunal has held that circular No. 9 of 2002 dated 11/09/2002 issued by the CBDT has been quashed and set aside by the Hon‟ble High Court of Bombay in the case of Jalgaon District Co. Bank (supra). Therefore, assessee‟s reliance on the said case and the circular is found to be ill-founded. The Tribunal decided the appeal in favour of the Revenue and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-performing Assets' relying on the Karnataka High Court's decision in Canfin Homes Ltd. (2011) 5 TaxCorp (DT) 49593. 14. We have heard the rival submissions, perused the orders of the lower authorities and materials available on record. 15. The Assessing Officer observed from the details furnished by the assessee that the total amount of NPAs on 31/03/2011 is Rs. 1,28,25,626/- which was shown on 31/03/2010 at Rs. 1,09,19,401/- Thus, the interest on NPA works out to Rs. 19,06,225/- which is not credited to the profit & loss account and therefore, the same is added to the income of the assessee on accrual basis. 16 On appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance by observing as under:- "5.2.4 I have carefully considered the submissions of the appellant in this regard and also perused the decisions relied upon by it. The Assessing Officer while bringing to tax the interest income of the appellant from NPAs/sticky loans on accrual basis has relied on the judgment of Hon'ble Supreme Court in the case of State Bank of Travancore Vs. CIT (158 ITR 102) and the judgment of Hon'ble Karnataka High Court in the case of Karnataka State Finance Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of UCO BankVs.CIT, 237 ITR 889 (1999) has held as under:- "Therefore, it is clear if an assessee adopts mercantile system of accounting and in his accounts he shows a particular income as accruing, whether that amount is really accrued or not is liable to bring the said income to tax. His accounts should reflect true and correct statement of affairs. Merely because the said amount; accrued was not realized immediately cannot be a ground to avoid payment of tax. But, if in his account it is clearly stated though a particular income is due to him but it is not possible to recover the same, then it cannot said to have been accrued and the said amount cannot be brought 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 asst 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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