ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-3, JALANDHAR vs. M/S JALANDHAR CENTRAL CO OP. BANK LTD., JALANDHAR

The Ld. CIT(A) while relying upon the order passed by the Hon’ble ITAT, Amritsar Bench dated 20.01.2017 in ITA No.604, 605 & 625(Asr/2015-16 in the case of the assessee itself deleted the addition of Rs.2,14,85,165/- made by the A.O on account of interest on non performing assets (NPA).

The Ld. DR on behalf of the Revenue Department relied upon the order passed by the Assessing Officer and submitted that the order passed by the Ld. CIT(A) is liable to be set aside on the grounds as mentioned in Para No.1 of the instant order.

On the other hand, the Ld. AR submitted that similar and identical questions arose during the Asst. Year: 2011-12 to 2013-14, which were subjected to adjudication by the ITAT Bench at Amritar and the ITAT Bench at Amritsar thoroughly considered the pros and cons of the issue under consideration and pass the order which has been followed by the Ld. CIT(A) while deleting the addition made by the Assessing Officer.

We have gone through with the facts and circumstances of the case as well as order passed by the authorities below and specifically raised the query by the Bench qua following the RBI guidelines and whether any provision of non performing assets (NPA) has been made in computation of total income which was replied by the Ld. AR by placing on record license No. RPCD (CHD) (JLR) PB-11 dated 30th May, 2012 issued by the RBI while granting a license to commerce and carrying on Banking Business. The Ld. AR also placed on record computation of total income, where it is clearly reflects that the provision of N.P. amounts and NP Accounts are also part of the computation of total income and from the audited financial statement, it reflects that the assessee is following the mercantile system of accounting in accordance with RBI guidelines. Even otherwise the Co-ordination Bench of ITAT at Amritsar has already gone through with minute details of the assessee’s own case itself and vide ITA No. 652(Asr)/2015 and ITA No.604 & 605(Asr)/2016 passed on 20.01.2017 whereby similar and identical grounds raised by the Revenue dismissed. For the sake of convenience and clarity, we feel it appropriate to reproduce the crux part of the aforesaid judgments. “6. It remains an undisputed fact the assessee co-operative bank has been following the mercantile system of accounting, except with regard to interest pertaining to NPAs. As notice by the ld. CIT(A), this proposition stands accepted by the department in the earlier years. The assessee has been following the RBI guidelines in this matter. Its method of accounting is entirely in accordance with the RBI guidelines. The RBI guidelines need to be mandatorily followed by the assessee. Moreover, this method of accounting,

In “M/s Vasisth Chay Vyapar Ltd.” (supra), it has been held that when an NBFC classifies an asset as a Non-performing Asset in accordance with the directions issued the Reserve Bank of India, it is legitimate to infer that the interest income thereon is not accrued, even though the NBFC is following the mercantile system of accounting. Interalia, “M/s Southern Technologies Ltd.” (supra) has been distinguished “in M/s Vasisth Chay Vyapar Ltd.” (supra). 8. Apropos the applicability of section 43D of the I.T. Act, it is on record that during the proceedings before the Id. CIT(A), the assessee, by way of submission dated 17.09.2015, the assessee had stated that the assessee had been confirmed by the Headquarter of the Punjab State Co-operative Bank, to be a scheduled bank. This position has not been disputed. 9. In view of the above, we find that the grievance of the department is without any force. The order of the ld. CIT(A) is a well versed reasoned detailed order, requiring no interference whatsoever at our hands. The same is, accordingly, confirmed.

As noted at the beginning of this order, all the three appeals involve the same common issue. That being so, our above observations shall apply equally, mutatis mutandis, to the other two appeals also.

Accordingly, all the orders of the ld. CIT(A) in these three appeals are upheld and the grounds raised by the department are rejected. 12. In the result, all three appeals are dismissed.”

In the result, the appeal filed by the Revenue Department stands dismissed. Order pronounced in the open Court on 08.03.2018.