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TMI Blog2016 (3) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the interest accrued but not due on government securities is income accrued to the assessee during the year under consideration and accordingly, brought the same to tax - HELD THAT:- It is clear that this issue is decided in favour of the assessee by this Tribunal by following the decision of the Hon ble Kerala High Court in case of CIT Vs Federal Bank [ 2008 (1) TMI 195 - KERALA HIGH COURT ] as well as the judgment of jurisdictional High Court in the cased of Karnataka Bank Ltd. [ 2014 (11) TMI 221 - KARNATAKA HIGH COURT ] Following the earlier order of the Co-ordinate Bench of this Tribunal in assessee s own case, we do not find any error or illegality in the impugned order of the CIT(A) on this issue. Hence, ground no.3.2 of the revenue is dismissed. TDS u/s 194A - payment of interest on deposits - disallowance u/s 40(a)(ia) - Assessee paid interest on deposits from members and payment to each of the depositors exceeded a sum of 10,000 - CIT-A deleted the addition - HELD THAT:- CIT(A) has correctly deleted the disallowance made by the AO by following the decision of Bagalkot District Central Co-op. Bank Ltd [ 2015 (1) TMI 1005 - ITAT BANGALORE ] wherein it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is taxable. The ld.CIT(A) has relied upon he decision of Hon'ble jurisdictional High Court in the case of CIT Vs Canfin Homes Ltd(2011) 5 Tax Corp(DT) 49593, reported in 347 ITR 382 on this issue despite the fact that the department has challenged this decision before the Hon 'ble Supreme Court and the SLP is pending in this case. 3.1 The ld.CIT(A) ought to have upheld the decision of the AO in respect of the addition made in the case of interest income on account of method of accounting followed by the assessee as the assessee has neither allowed mercantile nor cash system but followed hybrid system. By virtue of the provisions of sec.1445 of the IT Act, the assessee is require to follow either cash or mercantile system of accounting to compute the real income. No adjustment could be made to the income assessed on accrual basis. CIT(A) deleted the amount ignoring he fact that the assessee is following the mercantile system of accounting as stated in the form 3CD. 3.2 Reliance on the decision of Hon'ble Karnataka High Court in CIT Vs The Karnataka Bank Ltd in ITA NO.433/2006 on this issue is wrong because the department has not accepted the decision and since the SLP filed has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TN Power Finance & Infrastructure Development Corpn.Ltd Vs JCIT(2006) 280 ITR 491 (Mad.) wherein, it is held that RBI guidelines cannot override the mandatory provisions of income tax, is applicable in this case. 9.1 The ld. CIT(A) has erred in deleting the addition made in respect of disallowance of provisions for nonperforming assets and standard assets. The ld.CIT(A) failed to appreciate the fact that and the provision for NPA is neither expenditure non an allowance which is permitted deductions u/s 28 to 43B of the Act. 9.2 The ld,CIT(A) has erred in holding both bad debts as per income tax Act and NPA under RBI norms as same. As per Sec.36(1)(vii) bad debt or part thereof written off as irrecoverable shall not include any provision for bad and doubtful debts. The provisions for NPA under RBI directions Is not only in respect of loss assets but also doubtful assets and sub-standard assets. 10. For these and such other grounds that may be urged that the order of the ld.CIT(A), on the above points may be set aside and the order of the AO be restored. 3. Ground no.1 is general in nature and does not require any specific adjudication. 4. Ground no.2 & 3 regarding addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made an addition of ₹ 4,16,05,627/- by holding that the interest accrued but not due on government securities is income accrued to the assessee during the year under consideration and accordingly, brought the same to tax. 7. On appeal, the CIT(A) has deleted the addition made by the AO, by following the earlier order for the assessment year 2010-11. 7.1 We have heard the rival submissions of the parties and considered the relevant material on record. At the outset, we note that for the assessment years : 2010-11 and 2011-12 vide order dated 04-09- 2014, this Tribunal has considered and decided an identical issue in para-49 to 51 as under; "49. We have heard the rival submissions. We have given a careful consideration to the rival submissions. At the time of hearing before us, it was agreed y the parties that the issue raised by the revenue in this appeal has already been decided by the Hon'ble Madras High Court in the case of CIT Vs Tamil Nadu Mercantile Bank Ltd ., 291 ITR 137 (Mad.) The question of law before the Hon'ble Madras High Court was as follows: "Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that interest on secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, which was in force during the relevant assessment years". 50. It is not in dispute before us that identical decision has also been rendered by the Hon'ble High Court of Kerala in the case of CIT Vs Federal Bank, 301 ITR 188(Ker.) and the Hon'ble Karnataka High Court in the case of Karnataka Bank Ltd in ITA No.433/Bang/2005 dated 12.9.2013. 51. In the present case, the assessee has been following the method of offering interest on securities to tax on receipt basis on maturity and the same has been accepted by the revenue in the past. In view of the aforesaid decision, we are of the view hat the order of the CIT(A) does not call for any interference. Consequently, the relevant grounds of appeal raised by the revenue are dismissed". Thus, it is clear that this issue is decided in favour of the assessee by this Tribunal by following the decision of the Hon'ble Kerala High Court in case of CIT Vs Federal Bank 301 ITR 188(Ker.) as well as the judgment of jurisdictional High Court in the cased of Karnataka Bank Ltd. in ITA No.433/2005 dated 12.9.2013. Following the earlier order of the Co-ordinate Bench of this Tribunal in assessee's own case, we do not find any error ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est 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 of credited before 1st June, 2015". 3. In the light of the aforesaid circular, the view of the Tribunal holding that co-operative bank was required to deduct tax is not sustainable. Hence, this appeal merits consideration". By following the decision of the Hon'ble jurisdictional High Court in the case of Bailhongal Urban Co-Op. Bank Ltd. w do not find any error or illegality in the impugned order of the CIT(A) on this issue. Accordingly, ground no.4.1 & 4.2 of revenue are dismissed. 11. Ground no.5.1 & 5.2 are regarding the disallowance of expenditure on the ground of non-business expenditure. The AO noted that the assessee had paid a sum of ₹ 1,18,60,800/- to M/s Navodaya Grama Vikasa Charitable Trust with a description HGVCT animator salary. When the AO questioned the allowability of the said expenditure the assessee submitted that the said trust is a registered trust formed as per the directions of their controlling authority i.e NABARD. The assessee is promoting the formation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores from the SHGs. It is also clear that the expenditure in question was incurred by the assessee keeping in mind the commercial exigency. The decision of the Hon'ble Rajasthan High Court in Rajasthan Spinning and Weaving Mills Ltd cited supra, clearly support the conclusions arrived at by the CIT(A). In the aforesaid decision, the Hon'ble Rajasthan High Court held that it is not necessary to show that the expenses were not profitable or no benefit was actually derived. The receipt of actual benefit is also not necessary. The key aspect to be seen is relationship between the expenses incurred and carrying on of the business of the assessee. If there is a benefit to the assessee, then the expenditure has to be regarded as incurred for the purpose of business of the assessee and allowed as a deduction. The Hon'ble Rajasthan High Court followed the decision of the Hon'ble Supreme Court in the case of Sasoon J. David & Co. Pvt. Ltd Vs CIT, 118 ITR 261(SC) wherein reference was made to the expression 'wholly or exclusively' used in sec.37(1) of the Act and was of the view that the expression used is not necessary. In the light of the legal position as explained in the judicial prono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while framing the assessment u/s 143(3) of the IT Act, for the assessment year 2007-08, the AO noticed that the assessee has claimed a sum of ₹ 26,.40,237/- under amortization of premium on investments and the assessee had no explanation for the claim. Hence, he disallowed the same. While disallowing the same, the AO followed the decision of the Madras High Court in the case of TN Power Finance and Infrastructure Development Corpn. Ltd. Vs JCIT (2006) 280 ITR 491. Aggrieved, the assessee moved the matter in appeal before the first appellate authority. 05. The ld.CIT(A) after considering the submissions made before him and following the decision of the Madras High Court has that merely because the RBI had directed the assessee to provide for non-performing assets, that direction cannot override the mandatory provisions of the Income-tax Act, contained in sec.36(1)(viia)a which stipulate for deduction not exceeding 5 percent of the total income only in respect of the provision for bad and doubtful debts which are predominantly revenue in nature or trade related and not for provision for non-performing assets which are of predominantly capital in nature. Thus, we are of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the securities are 'held to maturity'. That being so and having regard to the CBDT Instruction No.17 of 2008 dated 26.11.2008 as reproduced herein above, the premium paid on such government securities is required to be amortized over the period remaining to maturity………. iii) In the case of Corporation Bank Vs ACIT, Mangalore in ITA 112/Bang/2008(Bang)/ for the assessment year 2004-05, the earlier bench had also held a similar view. In the light of the above discussion and the case laws discussed supra, taking into account the totality of the facts and materials, we are of the considered view that the assessee is entitled to claim this deduction and hence, we allow the grounds of the assessee relating to this issue". 40. We are of the view that in the light of the decision on the issue considered by the Tribunal, the claim made by the assessee was rightly allowed by the CITA). Accordingly, the relevant ground of appeal is dismissed". 17. Following the earlier order of this Tribunal we do not find any merit or substance in the grounds raised by the revenue. Accordingly, ground no.8 of the revenue's appeal is dismissed. 18. Ground no.9.1 & 9.2 regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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