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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI K.N. CHARY
PER SHRI K.N. CHARY, JUDICIAL MEMBER
Revenue filed this appeal challenging the order dated 28.03.2014 in appeal no. 14/2013-14 passed by the Ld. Commissioner of Income Tax (Appeals)-XXV, New Delhi (hereinafter for short called as the “Ld. CIT (A)”) on the following grounds:
1. “On the facts and circumstances of the case, Ld.CIT (A) has erred in deleting addition of Rs. 4,56,64,365/- made on account of income from NPA.
2. The Ld. CIT (A)’s order is afflicted with contradictions as far as the accounting principal adopted by the assessee in respect of accounting for the interest on NPA’s is concerned.
3. The Ld. CIT (A) has given relief to the assessee without appreciating that the assessee failed to write off the bad debts on account of NPAs in the books of accounts which is in contravention of the provision of section 36(1)(vii) of the Income Tax Act, 1961.
4. The Ld. CIT (A) has erred in observing that the assessee has followed the RBI guidelines without pointing out as to what such guidelines are and how the assessee followed the same. 5. The Ld. CIT (A) has erred in allowing the assessee’s appeal without identifying the assets that have become NPA.”
Briefly stated facts are that the assessee bank filed its return of income on 21.09.2010 declaring the total income of Rs. 1,31,96,539/- and after scrutiny u/s 143(3) of the Act AO made an addition of Rs. 4,56,64,365/- on account of the interest accrued on NPA account for the FY 2009-10 which is not recognized as income on account of NPA and a sum of Rs. 6,250/- on account of dividend wrongly claimed. In the appeal, by way of impugned order, the Ld. CIT (A) deleted the addition of Rs. 4,56,64,365/-. Hence, this appeal by the Revenue.
It is the argument of the Ld. DR that the Ld. CIT (A) failed to appreciate the fact that the assessee failed to write off the bad debts on account of NPA in the books of account in contravention of the provisions u/s 36(1)(vii) of the Act. It is the submission of the AR that the assessee maintains the books of account on the basis of the RBI Guidelines and no interest would be accrued to the assessee in respect of the non performing assets and there is a series of case law on this aspect including the decisions reported in CIT vs. Shoorji Vallabhdas & Co., 46 ITR 144 (SC) (1962), UCO Bank vs. CIT 237 ITR 889 (SC) (1999), CIT vs. Vasisth Chay Vyapar Limited 330 ITR 440 (Del) (2011), CIT vs. Elgi Finance Limited 293 ITR 357 (Madras), CIT vs. Motor Credit Co. Pvt. Ltd. 127 ITR 572 (Madras) (1981) and CIT vs. Nainital Bank Limited 309 ITR 335 (Uttarakhan). He further submitted that in respect of the AY 2009-10 in assessee’s own case a coordinate bench of this Tribunal in held the issue in favour of the assessee and dismissed the appeal preferred by the Revenue holding that the interest on NPA is not to be recognized as per the RBI guidelines and income has to be recognized only when there is some reasonable certainty about the receipt of the income. For this principle the Tribunal followed the decision reported in Cit vs. Elgi Finance Ltd. 293 ITR 357 (Madras) (HC). He further brought to our notice that for the AY 2012-13 also the first appellate authority allowed the appeal of the assessee and Revenue accepted the same without preferring an appeal. By way of paper book, he produced the order of the first appellate authority.
We have carefully gone through the record. In the case of the assessee for the AY 2009-10 in appeal no. 3310/Del/2012 and in the case of the sister concern in the appeal in a coordinate bench of this Tribunal held that unless there is some reasonable certainty about the receipt of the income, income cannot be recognized and the interest on NPA is not to be recognized as per the RBI guidelines and on this principle dismissed the appeals of the Revenue. We have also gone through the order of the first appellate authority in assessee’s own case for the AY 2012-13, where a similar finding was returned and relief was granted to the assessee. There is no denial of the assertion of the assessee that no appeal was preferred by the Revenue against the order of the first appellate authority in respect of the AY 2012-13. In the circumstances, while respectfully following the view of a coordinate bench of this Tribunal in respect of the AY 2009-10, we hold that the appeal of the Revenue cannot be sustained. With this view of the matter, appeal is dismissed.
Order pronounced in the open court on 09.10.2017