THE PR. COMMISSIONER OF INCOME TAX-3, LUDHIANA. vs. M/S THE LUDHIANA CENTRAL CO-OPERATIVE BANK LTD.,

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ITA/200/2018HC Punjab & HaryanaPHHC01119045201808 October 2018Author: MR. JUSTICE R.C. KATHURIA (RETD.),MS. JUSTICE RITU BAHRI4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court noted that similar issues had previously come before it in ITA-349-2017 (The Principal Commissioner of Income Tax-3, Ludhiana v. The Ludhiana Central Co-Op. Bank Ltd., Ludhiana) and other connected appeals involving the respondent-assessee. In those cases, the High Court, by order dated 24.9.2018, had dismissed the appeals filed by the revenue. Following its own precedent in the identical matter concerning the same assessee, the High Court dismissed the present appeal. The specific reasoning of the ITAT or the Supreme Court decision in State Bank of Travancore, or the implications of Section 43D or Section 145, were not elaborated upon by the High Court in this judgment as it relied on its prior decision.

What were the facts?

The assessee, M/s The Ludhiana Central Co-Operative Bank Ltd., Ludhiana, filed its income tax return for Assessment Year 2010-11. The Assessing Officer (AO) completed the assessment under Section 143(3) of the Income Tax Act, 1961, adding ₹2,67,88,000/- on account of non-crediting of interest on Non-Performing Assets (NPA) to the Profit and Loss account. The case was later re-opened under Section 147, and a revised assessment was completed. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition of ₹2,67,88,000/-. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which dismissed the revenue's appeal, upholding the CIT(A)'s deletion. The revenue has now filed an appeal before the High Court against the ITAT's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was justified in deleting the addition of ₹2,67,88,000/- made by the AO on account of interest accrued on non-performing assets, ignoring the decision of the Hon'ble Supreme Court in the case of State Bank of Travancore (158 ITR 102)? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the ITAT was justified in deleting the addition of ₹2,67,88,000/- made by the AO on account of interest accrued on non-performing assets, ignoring the fact that the scope of Section 43D of the Income Tax Act was broadened for co-operative societies by Finance Bill 2017? (Question of law) 3. Whether, on the facts and in the circumstances of the case, the ITAT was justified in deleting the addition of ₹2,67,88,000/- made by the AO on account of interest accrued on non-performing assets by accepting the assessee's hybrid system of accounting (one for sticky loans and another for non-sticky loans) contrary to the provisions of Section 145 of the Income Tax Act? (Question of mixed law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that the ITAT's deletion of the addition was unjustified, citing the Supreme Court decision in State Bank of Travancore and the broadened scope of Section 43D by the Finance Bill 2017. The revenue also contended that the assessee's hybrid accounting system was contrary to Section 145.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 147,Section 40(a)(ia),Section 43D,Section 145

AI-generated summary — verify with the full judgment below

ITA-200-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-200-2018 (O&M) Date of Decision: 8.10.2018 The Principal Commissioner of Income Tax-3, Ludhiana ....Appellant. Versus M/s The Ludhiana Central Co-Operative Bank Ltd., Ludhiana ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE AVNEESH JHINGAN. PRESENT: Mr. Rajesh Katoch, Sr. Standing Counsel for the appellant. *** AJAY KUMAR MITTAL, J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 21.9.2017 (Annexure-4) passed by the Income Tax Appellate Tribunal, Chandigarh Benches 'A', Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 749/CHD/2017, for the assessment year 2010- 11, claiming the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT, Chandigarh is justified in deleting the addition of ` 2,67,88,000/- made by the Assessing Officer on account of interest accrued on non-performing assets by GURBACHAN SINGH 2018.10.15 12:59 I attest to the accuracy and integrity of this document

ITA-200-2018 -2- ignoring the decision of the Hon'ble Supreme Court in the case of State Bank of Travancore 158 ITR 102? (ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT, Chandigarh is justified in deleting the addition of ` 2,67,88,000/- made by the Assessing Officer on account of interest accrued on non performing assets ignoring the fact that the scope of Section 43D of the Income Tax Act was broadened for co-operative society by Finance Bill 2017? (iii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT, Chandigarh is justified in deleting the addition of ` 2,67,88,000/- made by the Assessing Officer on account of interest accrued on non performing assets by accepting the assessee's hybrid system of accounting one for sticky loans and another for non-sticky loans contrary to the provisions of Section 145 of the Income Tax Act?

2.

Put shortly, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee filed its return of income on 1.10.2010 declaring net income at ` 4,50,16,970/- claiming refund of ` 2,25,840/- which was revised on the same date by declaring same income but claiming refund of ` 2,90,420/- as the claim of TDS was enhanced from ` 12,94,260/- to ` 13,58,260/-. The said return was again GURBACHAN SINGH 2018.10.15 12:59 I attest to the accuracy and integrity of this document

ITA-200-2018 -3- revised on 30.3.2012 by declaring total income at ` 4,45,26,050/- claiming refund of ` 4,96,860/- as the TDS was shown at ` 14,10,992/-. The assessment was completed under Section 143(3) of the Act by the Assessing Officer vide order dated 15.2.2013 (Annexure-1) at an income of ` 7,13,14,050/- as against the returned income of ` 4,45,26,050/- by making an addition of ` 2,67,88,000/- on account of non-crediting of interest on Non-Performing Assets (NPA) in the Profit and Loss account by the assessee. The case of the assessee of the relevant year was reopened on the ground that the assessee had not made any disallowance out of interest payment to other cooperative societies under Section 40(a)(ia) of the Act as it had failed to deduct tax on such interest payment. The re-assessment was completed by the Assessing Officer under Section 143(3) read with Section 147 of the Act vide order dated 25.7.2014 (Annexure-2) at ` 14,03,08,310/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. The CIT (A) vide order dated 24.2.2017 (Annexure-3) deleted the addition of ` 2,67,88,000/- made by the Assessing Officer. Against the order, Annexure-3, the revenue filed an appeal before the Tribunal who vide order dated 21.9.2017 (Annexure-4) dismissed the appeal of the revenue upholding the deletion made by the CIT (A). Hence, the present appeal by the revenue.

3.

It could not be disputed by the learned counsel for the revenue that the similar issues came up before this Court in ITA-349-2017 (The Principal Commissioner of Income Tax-3, Ludhiana v. The Ludhiana Central Co-Op. Bank Ltd., Ludhiana) and other connected appeals in the case of the respondent-assessee as well and this Court vide order dated 24.9.2018 dismissed the appeal filed by the revenue. GURBACHAN SINGH 2018.10.15 12:59 I attest to the accuracy and integrity of this document

ITA-200-2018 -4-

4.

Accordingly, the present appeal is also dismissed. (AJAY KUMAR MITTAL) JUDGE October 8, 2018 (AVNEESH JHINGAN) gbs JUDGE Whether Speaking/Reasoned Yes/No Whether Reportable Yes/No GURBACHAN SINGH 2018.10.15 12:59 I attest to the accuracy and integrity of this document

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