THE ASSISTANT COMMISSIONER vs. M/S THE BIJAPUR DISTRICT CENTRAL

1 IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH DATED THIS THE 7TH DAY OF JANUARY, 2020 PRESENT THE HON’BLE MR.JUSTICE G.NARENDAR AND THE HON’BLE MR.JUSTICE M.NAGAPRASANNA I.T.A.NO. 200011/2018 Between: The Assistant Commissioner of Income Tax, Circle-I, Vijayapura. … Appellant (By Sri. Ameet Kumar Deshpande, Advocate) And: M/s. The Bijapur District Central Co-operative Bank Ltd., Solapur Road, Vijayapura-586101. … Respondent This I.T.A. is filed under Section 260-A of the Income Tax Act, praying to allow this appeal, and to set aside the order dated 14.03.2018 (received on 26.03.2018), passed in I.T.A.No.2052/BANG/2017 by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru, confirming the order dated 31.07.2017, passed in No.C.I.T.(A) BELGAUM/11180/2015- 16 passed by the Commissioner of Income Tax (Appeals), Belgavi, and to pass any other appropriate orders as deemed fit on the facts and circumstances of the case, in the interest of justice. This appeal coming on for Admission this day, Narendar J., delivered the following:

2 J U D G M E N T Heard the learned counsel for the appellant. 2. The Revenue is in appeal being aggrieved by the orders of Appellate Tribunal. The question that arise for consideration as below:- 1. Whether the Hon’ble I.T.A.T. is right in law and on facts in confirming the decision of the Id. CIT (A) deleting the additions on account of accrued interest on loans which are classified as "Non-performing Assets” relying on the Karnataka High Court decision in Canfin Homes Ltd (2011) 5 Tax Corp (DT) 49593, ignoring the provisions of section 43D of the I.T. Act. 1961? 2. On the facts and in law, whether the Hon’ble I.T.A.T. is right in confirming the decision of the Hon’ble Id. CIT (A) in holding that the income accrued to the assessee cannot be taken as income in the year ignoring the amendment provisions of section 43D of the I.T.Act, 1961, which provides certain benefits to the certain class of assessees but does not provide such benefit to the assessee bank?

3 3. The question of law need not hold this court for long as the issue raised by the revenue is answered by a Coordinate Bench in the case of CIT V/s Canfin Homes Limited. This judgment is followed by another Coordinate Bench in case of CIT V/s Bijapur District Central, Cooperative Bank Ltd. Vijayapura. The Co-ordinate Bench apart from expressing agreement with the finding rendered by the earlier Bench in the case of CIT V/s Canfin Ltd. was also of the view that the provisions of Section 43D of the Act itself provides that interest which has not been received on bad debts and doubtful debts cannot be the basis of taxing the accrued interest which is not received into the account of the financial institution. 4. The learned counsel for the appellant would submit that the issue though has reached finality before this High Court, the Hon’ble Apex Court in the case of CIT Davangere V/s The Urban Co-operative Bank Ltd., Shimoga, has kept the question of law open, be that as it may, we do not find any ground to hold differently than as is held by the Coordinate Bench as mentioned herein

4 above. That apart in the light of the amendment brought to Section 43D of the I.T.Act. We are of the opinion that the legislature in his wisdom has found it fit to hold that accrued interest on bad debts and doubtful debts and Non- performing Assets which are not received by the institution cannot be taxed. In that view of the matter, we are in respectful agreement with the judgment of the earlier Coordinate Bench in the case of CIT V/s Bijapur District Central, Co-Operative Bank Ltd., Vijayapura. For the aforesaid reasons, the appeal stands rejected. Sd/- JUDGE Sd/- JUDGE SMP