PRINCIPAL COMMISSIONER OF INCOME TAX2 vs. SABARKANTHA DISTRICT CENTRAL COOP BANK LTD

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TAXAP/685/2018HC GujaratGJHC24035865201820 June 2018Bench: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE A.Y. KOGJE3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that both the CIT(Appeals) and the ITAT had relied on a binding decision of the same High Court in the case of Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd. (2017) 395 ITR 324 (Guj.). In that precedent, the Court had held that in line with RBI guidelines, it is permissible for an assessee to recognize income from non-performing assets on an accrued basis but to book such income only when it is actually received. The assessee, being bound by RBI guidelines issued under the RBI Act, 1934, was justified in not showing interest on non-performing assets as income. The Court concluded that the issue was no longer res integra due to the binding precedent. Therefore, no substantial question of law arose, and the appeal was dismissed.

What were the facts?

The Revenue has appealed against an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'A', dated January 3, 2018. The ITAT had dismissed the Revenue's appeal, upholding the order of the Commissioner of Income Tax (Appeals). The CIT(A) had deleted an addition of Rs. 2,25,54,888/- made by the Assessing Officer. This addition pertained to interest accrued on bad and doubtful debts for the Assessment Year 2012-13. The assessee is Sabarkantha District Central Coop Bank Ltd. The appeal is filed by the Principal Commissioner of Income Tax.

What were the issues?

1. Whether the Appellate Tribunal had erred in law and on facts in deleting the addition of Rs. 2,25,54,888/- made in respect of interest accrued on bad and doubtful debts? (Question of law and fact, concerning the treatment of interest on bad and doubtful debts). Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the ITAT or the High Court. However, the reasoning of the CIT(A) and the Tribunal, as stated in the judgment, implies that the assessee argued that interest on non-performing assets should only be recognized upon actual receipt, in accordance with RBI guidelines. Revenue's Contention: The Revenue, through its counsel Ms. Bhatt, argued that the ITAT had erred in law and facts by deleting the addition made by the Assessing Officer regarding interest accrued on bad and doubtful debts.

AI-generated summary — verify with the full judgment below

C/TAXAP/685/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 685 of 2018 ================================================================ PRINCIPAL COMMISSIONER OF INCOME TAX2 Versus SABARKANTHA DISTRICT CENTRAL COOP BANK LTD ================================================================ Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE

Date : 20/06/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Feeling aggrieved and dissatisfied by the impugned judgment and order passed by the learned ITAT, Ahmedabad Bench ‘A’, Ahmedabad dated 03.01.2018 passed in ITA No.13/Ahd/2016 for Assessment Year 2012-13, by which the learned Tribunal has dismissed the said appeal preferred by the Revenue and has confirmed the order passed by the CIT (Appeals) deleting addition of Rs.2,25,54,888/- made by the Assessing Officer in respect of interest accrued on bad and doubtful dents, the Revenue has preferred the present Tax Appeal with the following proposed question of law:- “Whether the Appellate Tribunal had erred in Page 1 of 3

C/TAXAP/685/2018 ORDER law and on facts in deleting the addition of Rs.2,25,54,888/- made in respect of interest accrued on bad and doubtful debts?” 2. Heard Ms.Bhatt, learned Counsel appearing on behalf of the appellant-Revenue. 3. At the outset, it is required to be noted that while passing the impugned order, the learned CIT as well as the learned Tribunal have relied upon a binding decision of this Court in the case of Principal Commissioner of Income-Tax Vs. Shri Mahila Sewa Sahakari Bank Ltd., reported in (2017) 395 ITR 324 (Guj.). In the said decision, in similar set of facts and circumstances, the Division Bench of this Court has observed and held that in view of mandate of the RBI guidelines, it is permissible for the assessee to recognize income from non-performing assets on accrued basis and can book such income only when it is actually received. It is further observed that the assessee being bound by the RBI guidelines, which are issued under the provisions of the RBI Act, 1934, had rightly not shown the interest on the non-performing assets as income. That thereafter, considering various other decisions on the point, the Division Bench of this Court in the aforesaid decision, has confirmed such a deletion of the addition made by the Assessing Officer in respect of interest accrued on bad Page 2 of 3

C/TAXAP/685/2018 ORDER and doubtful assets. Therefore, the issue involved in the present appeal is now not res integra in view of the binding decision of the Division Bench of this Court in the case of Shri Mahila Sewa Sahakari Bank Ltd. (supra). 4. Under the circumstances, no question of law arises in the present appeal and hence, present appeal deserves to be dismissed and is accordingly dismissed.

(M.R. SHAH, J) (A.Y. KOGJE, J) SHITOLE Page 3 of 3

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