DEPUTY COMMISSIONER OF INCOME TAX vs. M/S. VIDYA SAHAKARI BANK LTD, PUNE

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM :

This appeal preferred by the Revenue emanates from the order of Ld. CIT(Appeals)-4, Pune dated 20.10.2016 for the assessment year 2013-14 as per following grounds of appeal on record:

“1. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting addition of interest of Rs.2,17,08,000/- on NPA when the said interest has accrued to the bank as per the mercantile system of accounting followed by it. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in failing to appreciate the fact that the assessee is a co- operative bank and not a scheduled bank and that the provisions of

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section 43D are applicable to the financial institutions and not to co- operative societies? 3. For this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) be vacated and that of the Assessing Officer be restored. 4. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”

through his Authorized Representative. The presence of Ld.D.R is recorded.

proceedings the assessee was asked to furnish details of accrued interest on

NPA's as per section 43D r.w.r 6EA and explanation as to why the same

should not be included in the total income. In response, the assessee

submitted that it generally follows RBI guidelines with reference to income

recognition of interest on Non-performing Assets unless and until it is

actually realized and relied on the decision of Bombay High Court in the case

of CIT-8 Vs. M/s. KEC Holdings Limited and submitted the working of

interest accrued on NPA as follows:

Particulars F.Y. 2012-13 (Amounts in Lakhs) Opening Balance 1425.39

Add. Addition during the year 416.22

Less. Recovery during the year 199.14

Closing Balance 1642.47

Net addition during the year 217.08

The contention of the assessee was not accepted by the AO due to the

following reasons:

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“1. In Form No. 3CD Report the assessee had mentioned that they are following Mercantile System of accounting and in that case income as well as expenditure had to be accounted on accrual basis. 2. As far as liability of income tax is concerned, the same is to be governed by Income Tax Act and merely because for accounting purpose, the assessee is following RBI guidelines does not mean that the assessee is not liable to show the accrued interest income when it had accrued to the assessee under the mercantile system and exigible to tax under the Act.

the assessee filed written submissions. It was submitted that the case of the

assessee is fully covered by the decision of the Co-ordinate Bench of Tribunal,

Pune in assessee’s own case for assessment year 2009-10 and 2010-11. The

Co-ordinate Bench of the Tribunal relying upon the decision of the Hon'ble

Bombay High Court in the case of M/s. Deogiri Nagari Sahakari Bank Ltd. in

ITA No. 53/PUN/2014 has decided the similar issue in favour of the assessee.

That on consideration of assessment order, facts on record and submissions

of the assessee, the Ld. CIT(Appeals) has held as follows:

“Decision : I have carefully considered the observations of the AO in the assessment order as well as the contentions raised by the AR of the appellant in the written submission. On perusal of the jurisdictional ITAT, Pune's Order ITA No.671/PN/2014 dated 24/08/2015 in the Appellant's own case, wherein, the Hon'ble ITAT held that "respectfully following the decision of Hon'ble jurisdictional High Court (supra) and in absence of any contrary material brought to our notice by the Ld Departmental Representative against the consistent view of the Tribunal on the issue do not find infirmity in the order of the CIT(A) deleting the addition made by the AD. Accordingly, the same is upheld and the

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ground raised by the Revenue is dismissed. Hence, the AO is directed to cancel the addition of Rs.2,17,08,000/-.”

Sd/- Sd/- R.S. SYAL PARTHA SARATHI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 23rd January, 2019. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-4, Pune. 4. The Pr. CIT-3, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

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Date 1 Draft dictated on 22.01.2019 Sr.PS/PS 2 Draft placed before author 22.01.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order