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TMI Blog2019 (3) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the case of Shri Mahila Sewa Sahakari Bank Ltd [2016 (8) TMI 377 - GUJARAT HIGH COURT] The substantial question of law is answered in favour of the appellant-assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... In appeal in respect of doubtful debts and provisions for sundry debtor were found to be admissible and disallowance was deleted. However, balance of ₹ 41,08,767/- was confirmed. In respect of disallowance of ₹ 1,94,00,000/- an interest on NPA which was claimed in view of the guidelines issued by the Reserve Bank of India were disallowed and affirmed by the Commissioner, Income Tax (Appeal) on the findings:- "6. The appellant has claimed that in view of the guidelines the claim of the appellant is allowable. I have seen the copy of the P & L account furnished by the appellant. It is seen that the sum of ₹ 1,94,00,000/- has been shown as 'reserve' (Kaalateet Byaz Kosh) and not as provision. Further this interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal Commissioner of Income-tax-5 Vs. Shri Mahila Sewa Sahakari Bank Ltd., [2017] 395 ITR 324 (Gujarat), Principal Commissioner of Income-tax, Ludhiana Vs. Ludhiana Central Co-op. Bank Ltd, [2018] 99 taxmann.com81 (Punjab & Haryana), Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd, [2017] 79 taxmann.com 396 (Bombay), Commissioner of Income-tax Vs. Vasisth Chay Vyapar Ltd, [2011] 196 Taxman 169 (Delhi). In Shri Mahila Sewa Sahakari Bank Ltd (supra) it was held that the Co-operative Banks were acting under the directives of the Reserve Bank of India with regard to prudential norms set out. And that the taxing interest on NPA cannot be justified on the real income theory. The decision in Shri Mahila Sewa Sahakari Bank Ltd ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken the detailed exercises to examine an identical situation. The Court held that, the Cooperative Banks were acting under the directives of the Reserve Bank of India with regard to the prudential norms set out. The Court was of the opinion that, taxing interest on NPA cannot be justified on the real income theory. The decision of the Gujarat High Court in Shri Mahila Sewa Sahakari Bank Ltd., (supra) was carried in Appeal by the Revenue to the Supreme Court and such appeal was dismissed. Later on, similar issue came up before Gujarat High Court in case of Pr. CIT v/s. Sarangpur Cooperative Bank Ltd., reported in 406 ITR 302, the Court followed the earlier decision in case of Shri Mahila Sewa Sahakari Bank Ltd., (supra) and dismissed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any reason to entertain these Appeals, since no question of law can be stated to have arisen."
The issue in the case at hand is also not different as was in the case of Shri Mahila Sewa Sahakari Bank Ltd (supra). The appellant -assessee acting under the directives of the Reserve Bank of India with regard to prudential norms set out, taxing interest on NPA, therefore, cannot be justified on the real income theory.
In view whereof, the substantial question of law is answered in favour of the appellant-assessee. The order passed by the Assessing Officer, Appellate Authority and Tribunal are set aside. The deduction as claimed for on the uncharged interest on NPA is allowed to the extent above. No costs. X X X X Extracts X X X X X X X X Extracts X X X X
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