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Income Tax Appellate Tribunal, PUNE ‘B’ BENCH, PUNE
Before: SHRI S. S. VISWANETHRA RAVI & SHRI G. D. PADMAHSHALI
ORDER PER G. D. PADMAHSHALI, AM; The present appeal of the assessee is arisen out of DIN & Order No. ITAB/NFAC/S/250/2022-2023/1042794299(1) dt. 24/04/2022 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ hereafter] by National Faceless Appeal Centre Delhi [‘NFAC’ hereafter] for assessment year 2016-17 [‘AY’ hereafter] ITAT-Pune Page 1 of 6
Suvarnayug Sahakari Bank Ltd. AY: 2016-17 2. Briefly narrated facts of the present case are; 2.1 The assessee is a registered co-operative society and engaged in banking business, had e-filed its return of income [‘ITR’ hereafter] which was subjected to scrutiny through CASS mechanism.
2.2 By an order dt. 19/12/2018 the Ld. Asstt. Commissioner of Income Tax, Circle-6, Pune [‘AO’ hereafter] assessed total income of the assessee u/s 143(3) of the Act with two bullet additions viz; (i) disallowance of ₹47,58,031/- debited to profit & loss account [‘P&L’ hereafter] towards amortisation of premium on Govt. Securities and (ii) disallowance of excess provision of interest of ₹17,58,090/- payable on outstanding overdue/matured term deposits receipts/fixed deposit receipts [‘TDRs/FDRs’ hereafter].
2.3 Aggrieved assessee contested aforestated disallowances in an appeal before first appellate authority u/s 246A(a) of the Act. Following the decision of Co- ordinate bench rendered in assessee’s own case for preceding year, the Ld. NFAC by the impugned order has ITAT-Pune Page 2 of 6
Suvarnayug Sahakari Bank Ltd. AY: 2016-17 deleted the first disallowance representing amortisation premium. However finding no force in assessee’s contention has confirmed the disallowance of excess interest provided over and above 4% of total outstanding amount of overdue/matured TDRs/FDR’s.
2.4 Still aggrieved, the assessee instituted present appeal u/s 253(1)(a) of the Act challenging the disallowance of part of total interest provided @4% p.a. on an outstanding overdue/matured TDRs/FDRs.
Heard rival contentions, perused the material placed on record in light of rule 18 of Income Tax Appellate Rules, 1963 and we note that, 3.1 Following Mercantile System of Accounting [i.e. ‘accrual system’] assessee created a provision for interest accrued on outstanding balance of overdue/matured TDRs/FDRs on timely basis. In first stage said provision is computed applying an interest @4% p.a. having regards two factors viz; (i) outstanding value of individual overdue/matured TDRs/FDRs and (ii) overdue period for which these TDRs/FDRs remained unpaid to depositors.
ITAT-Pune Page 3 of 6
Suvarnayug Sahakari Bank Ltd. AY: 2016-17 3.2 These amount of provisions in the second stage are summed at branch-level and then bank level for the purpose of reporting into financial statement, which was worked out to ₹66,90,010/- for the year under consideration. Likewise outstanding value of overdue/matured TDRs/FDRs are also reported firstly branch-wise and then totalled at bank level which was worked out to ₹12,32,98,006/- for impugned AY 2016-17.
3.3 Undisputedly aforestated amount of provision towards interest payable was first debited to P&L and then claimed as expenditure u/s 36(1)(iii) of the Act.
3.4 As against the amount of provision computed & claimed by the assessee in its ITR, both the tax authorities below have computed provision plainly @4% on total outstanding amount of overdue/matured TDRs/FDRs i.e. ₹12,32,98,006/- and restricted the deduction u/s 36(1)(iii) to ₹49,31,920/-. The said computation is found made without reference to outstanding period for which these TDRs/FDRs are remained overdue from their maturity individually. Consequently, the differential amount of ITAT-Pune Page 4 of 6
Suvarnayug Sahakari Bank Ltd. AY: 2016-17 provision was treated as excess and thus disallowed while framing an assessment u/s 143(3) of the Act, which was countenanced by the Ld. NFAC.
In order to showcase the correctness of amount of interest provision computed, provided & claimed by the assessee, during the course of hearing the Ld. AR meticulously taken us through individual entries of outstanding TDR/FDR and interest provided thereagainst which is placed at page 109-181 of the Paperbook, and branch-wise & total interest provided as placed at page 5 of the Paperbook etc., which remained uncontroverted.
After having verified the factual position, we note that, it is nobodies’ case that, provision for interest on overdue/matured TDRs/FDRs is not allowed, and none of the parties are in dispute either over rate of interest to be applied or the amount of overdue/matured TDRs/FDRs to be considered. However, present dispute of disallowance has solely arisen on account of disparity in considering the overdue period of time for which interest payable is to be computed on matured TDRs/FDRs.
ITAT-Pune Page 5 of 6
Suvarnayug Sahakari Bank Ltd. AY: 2016-17 6. Ostensibly, the appellant in the light of section 9(b) of Master Direction issued by Reserve Bank of India [‘RBI’ hereafter] vide it’s ‘Interest Rate on Deposit Direction, 2016’ has computed the interest payable @4% p.a. (as applicable to saving deposit) on the outstanding amount of individual overdue/matured TDR/FDR held at branches having regard to their overdue period, which may be more or less than a year in each case. Per contra turning a blind eye to overdue period of which overdue/matured TDRs/FDRs remained payable, the department applied blanket rate of 4% which led to incorrect calculation, thus the disallowance. Faced with the situation, we direct the Ld. AO to delete impugned disallowance on this score.
Resultantly, the assessee’s appeal stands ALLOWED In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Monday 14th day of August, 2023.