THE PR. COMMISSIONER OF INCOME TAX vs. THE CO-OP. BANK OF RAJKOT LTD.

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TAXAP/1094/2018HC GujaratGJHC24050529201810 September 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Revenue's appeals. The Court noted that a similar issue had previously come before the same High Court in the case of Principal Commissioner of Income-Tax v. Shri Mahila Sewa Sahakari Bank Limited, reported in [2017] 395 ITR 324 (Guj.). In that case, a Division Bench had dismissed the Revenue's appeal with a detailed judgment. Following this precedent, the High Court held that no question of law arose in the present appeals. Therefore, all the Tax Appeals were dismissed. The operative direction was the dismissal of the appeals.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, has filed these Tax Appeals challenging the order of the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, dated January 19, 2018. The appeals pertain to Assessment Year 2007-2008. The assessee is Rajkot Peoples Co-op. Bank Ltd. During scrutiny assessment, the Assessing Officer objected to the bank claiming a deduction for accrued interest on Non-Performing Assets (NPAs). The Assessing Officer contended that as the bank followed the mercantile system of accounting, such interest should be added back. The ITAT ruled in favor of the assessee, leading to the present appeals by the Revenue.

What were the issues?

1. Whether the Appellate Tribunal has erred in law on facts in deleting the addition made on account of accrued interest on NPA on accrual basis? Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's decision, which is being challenged, implies that the assessee argued for the deletion of the addition. The assessee likely relied on the mercantile system of accounting to justify its treatment of accrued interest on NPAs. Revenue's Contention: The Revenue's contention, as reflected in the question of law, is that the accrued interest on NPAs should have been added back to the income, given the assessee's mercantile system of accounting. The Revenue likely argued that the ITAT erred in deleting this addition.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

C/TAXAP/1093/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 1093 of 2018 With R/TAX APPEAL No. 1094 of 2018 With R/TAX APPEAL No. 1095 of 2018 With R/TAX APPEAL No. 1096 of 2018 With R/TAX APPEAL No. 1097 of 2018 With R/TAX APPEAL No. 1098 of 2018 ============================================================= THE PRINCIPAL COMMISSIONER OF INCOME TAX Versus RAJKOT PEOPLES CO-OP. BANK LTD. ============================================================= Appearance : Mrs MAUNA M BHATT, Advocate for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ============================================================= CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 10th September 2018

COMMON ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) All these Tax Appeals involve similar question, in similar background-facts. We may, therefore, notice facts from Tax Appeal No. 1093 of 2018. Appeal is filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot [“Tribunal” for short] dated 19th January 2018, raising following question for our consideration : Page 1 of 2

C/TAXAP/1093/2018 ORDER “Whether the Appellate Tribunal has erred in law on facts in deleting the addition made on account of accrued interest on NPA on accrual basis ?” The respondent-assessee is a Cooperative Bank. For AY 2007- 2008, the return filed by the assessee was taken in scrutiny. The Assessing Officer objected to the Bank having claimed deduction of the accrued interest on non-performing assets. According to the Assessing Officer, since the Bank was following mercantile system of accounting, such interest had to be added. The issue was ultimately decided by the Tribunal against the Revenue, upon which this appeal is filed. Such issue had come up before this Court in the case of Principal Commissioner of Income-Tax v. Shri Mahila Sewa Sahakari Bank Limited, reported in [2017] 395 ITR 324 [Guj.], whereby Division Bench had dismissed Revenue’s appeal by a detailed judgment. No question of law, therefore, arises. Tax Appeals are dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 2 of 2

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