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TMI Blog2024 (5) TMI 1497X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same, we decline to interfere with the well-reasoned and cogent order passed by the learned CIT (A) and dismiss the ground no.2, raised by the Revenue. - Shri V. Durga Rao, Judicial Member And Shri K.M. Roy, Accountant, Member For the Assessee : Shri Manoj G. Moryani. For the Revenue : Shri Kailash C. Kanojiya. ORDER PER K.M. ROY, A.M. The present appeal has been filed by the Revenue challenging the impugned order dated 29/03/2019, by the learned Commissioner of Income Tax (Appeals)-2, Nagpur, [ learned CIT(A) ], for the assessment year 2009-10. 2. Following grounds have been raised by the Revenue:- 1. Whether, on the facts and in the circumstances of the case, the Ld. CIT (A) erred in not appreciating the disallowance u/s 36(viia) to the tune of Rs. 1,94,57,134/- made in assessment order under the provision I.T. Act 1961? 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT (A) erred in not appreciating the addition made in respect of accrued interest on NPAs to the tune of Rs. 1,43,97,123/- made in assessment order under the provision I.T. Act 1961? 3. Any other Ground which may be raised during the course of hearing. 3. Facts in Brief:- The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id explanation and the term Co- operative Bank has the same meaning as given in part V of the Banking Regulation Act, 1949. Thus, a Co-operative Bank means a State Co-operative Bank, a Central Co-operative Bank and a primary co-operative Bank. However, the Ld. AO thereafter making some discussion tried to arrive at the conclusion that in the case of the appellant bank the bylaws permit admission of any co-operative society as member and therefore the bank would not qualify as a primary co-operative bank as the same i.e. primary co-operative bank the definition is given in Section 56 clause (ccv) of Banking Regulation Act. By the discussion in between the Ld. AO also reached the conclusion that as per NABARD Act (National Bank for Agriculture and Rural Development) 1981, as per Section 2(d) the banks like the appellant bank are neither Central co-operative bank nor State co-operative bank as defined in Section 2(d) of the same Act i.e. NABARD Act, 1981. 5.1.1 Thereafter depending on the above discussion and line of thinking, the learned AO disallowed the deduction as claimed by the appellant and as discussed above made total disallowance of Rs. 1,94,57,134/- on account of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O Bank v/s CIT, judgment dated 13/05/1999. 7. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that this issue has been decided in favour of the assessee by the Coordinate Bench of the Tribunal, Nagpur Bench, in the case of Arvind Sahakari Bank Ltd., ITA No. 376-377/Nag./2013, order dated 16/09/2015, for the assessment year 2009-10 and 2010-11. The issue is also covered by the decision of the Co-ordinate Bench of the Tribunal, Nagpur, in Revenue s appeal being ITO v/s The Bhandara District Central Co-operative Bank Ltd., ITA No. 345/Nag./ 2014, order dated 25/02/2016, for the assessment year 2010-11, wherein the Tribunal has decided this issue against the Revenue and in favour of the assessee. The relevant findings of the Tribunal is reproduced below:- 4. It was also noted by the Ld. AO that the appellant has not declared / recognized interest on accrual basis on NPAs. He considered the submission made by the appellant submission made by the appellant and came to the conclusion that neither RBI norms nor the accounting standards stop accrual interest income on NPAs. He based his findings on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. 6. As regards the second issue of disallowance of 27,03,083 as income of the assessee being interest accrued on NPAs, learned CIT(Appeals) considered the orders of ITAT, Vishakhapatnam Bench in the case of CIT vs. Durga Co-operative Urban Bank (ITA No. 511/Vizag/2010) and also the Hon'ble Delhi High Court decision in the case of Vasisth Chay Vyapar Ltd. 330 CTR 440. Considering the above, learned CIT(Appeals) decided the issue in favour of the assessee by observing as under: On perusal of the above judgment clearly establishes that the facts of the case are identical to the case law quoted above. The Hon'ble Tribunal has also taken into consideration the ratio of the Apex Court in Southern Technologies Ltd. And that of the Delhi High Court in the case of Vasisth Chay Vyapar Ltd. (supra) reported in 330 CTR 440 (Del). Respectfully following the above judicial pronouncements, I hold that the AO has not justified in disallowing 27,03,083/- as income of the appellant being interest accrued on NPAs. This ground is therefore allowed. 8. Since the issue for our adjudication is covered by the aforesaid decision of the Tribunal, consistent with the view taken therein, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patnam Bench decision in the case of CIT vs. Durga Urban Cooperative Bank Ltd. (supra) which read as under: 9. The Hon'ble Supreme Court in the case of M/s Southern Technologies Ltd (Supra) dissected the matter into two parts viz.. a) Income Recognition and b) permissible deduction/exclusions under the Income Tax Act. In so far as income recognition is concerned, the Hon'ble Supreme Court held that Section 145 of the Income Tax Act has no role to play and the Assessing Officer has to follow Reserve Bank of India directions 1998, since by virtue of 45Q of the Reserve Bank of India Act, an overriding effect is given to the directions of Reserve Bank of India vis-a-vis income recognition principles in the Companies Act 1956. In so far as computation of income under the Income Tax Act is concerned, (which involves deduction of permissible deductions and exclusions) the admissibility of such deductions shall be governed by the provisions of the Income Tax Act. The relevant observations of the Hon'ble Supreme Court are extracted below: Applicability of Section 145 40. At the outset, we may state that in essence RBI Directions 1998 are Prudential/Provisioning Norms issued by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Vasisth Chay Vyapar Ltd (Supra) has held that the interest on NPA assets cannot be said to have accrued to the assessee. In this regard, the following observations of Hon'ble Delhi High Court in the above cited case are relevant: What to talk of interest, even the principle amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not accrued . The said decision of the Hon'ble Delhi High Court is equally applicable to the issue in our hands. Accordingly we do not find any infirmity with the decision of the learned CIT (A) in holding that the interest income relatable on NPA advances did not accrue to the assessee. Accordingly we uphold his order. 11. In the result the appeal of the revenue is dismissed. 11. Considering the above, learned CIT(Appeals) held as under: On perusal of the above judgment clearly establishes that the facts of the case are identical to the case law quoted above. The Hon'ble Tribunal has also taken into consideration the ratio of the Apex Court in Southers Technologies Ltd., and that of the Delhi High Court in the case of Vasistha Chay Vyapar Ltd. (supra) repo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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