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TMI Blog2023 (2) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, 1961 (briefly 'the Act' hereinafter) against the order dated 18.03.2005 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad (briefly 'the Tribunal' hereinafter) in I.T.A.No.894/Hyd/2002 for the assessment year 1999-2000. 3. Appeal was admitted vide the order dated 17.09.2012 on the following substantial questions of law: a. Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that interest pertaining to non-performing assets cannot be deducted from the taxable income relating to an accounting year, even though the relevant assets have become non-performing assets only in that accounting year ? b. Whether reversal of credit entries relating to a past accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vide the assessment order dated 19.03.2006. 6. This was assailed by the assessee before the Commissioner of Income Tax (Appeals)-IV, Hyderabad (for short 'CIT(A)' hereinafter). By the appellate order dated 20.08.2002, CIT(A) held that assessing officer was correct in disallowing the deduction claimed by the appellant. Adverting to Section 43D of the Act, CIT(A) held that income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed by the RBI in relation to such debts shall be chargeable to tax in the previous year in which it is credited by the Schedule Bank to its profit and loss account. Holding that claim of the assessee is not permissible under Section 43D of the Act, the said ground of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order. It may be noted here that it was a case of excess collection of interest and there was a duty cast upon the bank to refund the excess interest whereas in the instant case interest on NPAs was earlier declared as income on accrual basis and though it has not become bad in all respects, the entry was sought to be reversed only because of RBI guidelines. The assessee has furnished the circular letter of the RBI containing consolidated instructions/guidelines on matters relating to prudential norms on income recognition In the circular dated 4th July, 2002, the RBI has consolidated all the instructions issued earlier. Paras 3.2, 3.2.1 and 3.2.2 of the Circular read as under: 3.2. Reversal of income 3.2.1. If any advance, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of Rs.3 lakhs for three months ending on 31-3-98. Such interest is assessable to tax in the assessment year 1998-99. However, if the assessee has not received any interest during the previous year relevant to the assessment year 1999-00, on the expiry of 30th day of June, 1998 the assessee bank can treat it as NPA and interest for the period of three months if already credited in the books as income, such entry should be reversed in the later part of the accounting year and for the balance period of 9 months of the previous year 1998-99 the assessee need not recognize the income of Rs.9 lakhs. If the assessee has other income to the tune of Rs.20 lakhs, can tbe assessee claim that only Rs.17 lakhs has to be treated as income, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the decision of ITAT, Delhi Bench in the case of Poysha Oxygen (P) Ltd., (91 ITD 616). Admittedly, the assessee ha not written off the impugned sum as bad-debt u/s 36(1)(vii) of the Act and in fact the case of the assessee is that there is no question of write off us 36(1)(vii) of the Act. Such being the case, we are of the view that the claim of the assessee is contrary to law and accordingly we reject the contention of the assessee. 8. From the above, we find that Tribunal had considered the circular of RBI dated 04.07.2002 and held that once an income of a previous year is recorded, assessee cannot reduce the income of subsequent years on the ground that in the earlier year income was shown on actual basis wrongly. Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the RBI which is binding on all the banking companies in general. However, when it comes to assessment under the Act, the revenue authorities are bound by the provisions of the Act. Therefore, the claim of the assessee that interest paid on NPAs should be excluded from computation of income was rightly negatived by the assessing officer, which has been affirmed by the two lower appellate authorities. 11. As pointed out by the Supreme Court in M/s. Motor Industries Company (supra), it is always open for the assessee or appellant to file a revised return and claim the deduction. Even if assessment is completed, assessee could have demanded adjustment or refund by preferring the claim in time. But that was not done. 12. Thus in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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