DEPUTY COMMISSIONER OF INCOME TAX,, PUNE vs. JAI HIND CO-OPERATIVE BANK LTD,, PUNE

The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) by raising four grounds on two issues. The ground Nos. 1 to 3 of the appeal are on the issue of interest on sticky loans. The second issue raised in ground No. 4 is qua disallowance u/s. 14A r.w. Rule 8D.

Shri Kishor Phadke appearing on behalf of the assessee submitted out the outset that the first issue relating to interest on sticky loans raised in ground Nos. 1 to 3 of the appeal by the Revenue is covered by the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. reported as 379 ITR 24 and in the decision of Principal Commissioner of Income Tax Vs. Solapur District Central Co-op. Bank Ltd. reported as 261 Taxman 476 (Bom). The ld. AR submitted that the Commissioner of Income Tax (Appeals) has decided this issue in favour of assessee by following various decisions of Hon’ble Bombay High Court including the decision rendered in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. (supra).

The ld. AR submitted that it is a well settled law that where the assessee has not earned any exempt income, no disallowance u/s. 14A is to be made.

On the other hand Shri N. Ashok Babu representing the Department vehemently defended the action of Assessing Officer in making the impugned additions/disallowances. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals).

Both sides heard. Orders of the authorities below perused. The issue raised in the appeal by the Revenue against deleting of interest of sticky loans has been laid to rest by Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. (supra). The Hon’ble High Court held that Co-operative Banks are eligible for deduction u/s. 43D in respect of interest on sticky advances/Non Performing Assets. The aforesaid law has been reiterated by the Hon’ble High Court in the case of Principal Commissioner of Income Tax Vs. Solapur District Central Co-op. Bank Ltd. (supra). Thus, in view of law laid down by the Hon’ble Jurisdictional High Court, ground Nos. 1 to 3 of the appeal by the Department are dismissed.

In ground No. 4 of the appeal, the Revenue has assailed deleting of disallowance made u/s. 14A r.w. Rule 8D. It is an undisputed fact that the assessee has not earned any exempt income in the period relevant to the assessment year under appeal. The Hon’ble Delhi High Court in the case of Cheminvest Limited Vs. Commissioner of Income Tax (supra) has held that no disallowance u/s. 14A is to be made in the absence of any

In the result, the appeal of Revenue is dismissed.