ASSISTANT COMMISSIONER OF INCOME-TAX vs. RATANCHAND SHAH SAHAKARI BANK LTD.,, SOLAPUR

Both the appeals filed by Revenue on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.

The learned Departmental Representative for the Revenue at the outset pointed out that though several grounds of appeal are raised but the effective grounds of appeal in both the appeals are grounds of appeal No.1 and 8, which read as under:- “1. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) Pune has erred in deleting the addition of Rs.3,35,60,345/- made by the A.O., on account of accrued interest on Non Performing Assets u/s. 43D of the I.T. Act, 1961. 8. On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A)-7, Pune erred in deleting the addition of Rs.7,49,244/- made by the AO on account of amortization of premium on investments.”

First, we shall take up the appeal in ITA No.1420/PUN/2016.

The learned Authorized Representative for the assessee pointed out that the issue raised in ground of appeal No.1 i.e. deletion of addition made on account of accrued interest on NPAs under section 43D of the Act is squarely covered by the order of the Tribunal in the case of assessee itself, wherein this

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the order of Assessing Officer.

We find that similar issue as before us arose in bunch of appeals including the appeal of Revenue against the assessee relating to assessment year 2011-12, wherein the Tribunal in turn relied on earlier decision in Kolhapur Mahila Sahakari Bank Ltd. Vs. ITO in ITA No.01/PN/2013, relating to assessment year 2009-10, vide order dated 29.01.2014. The Tribunal in turn following the ratio laid down by the Pune Bench of Tribunal in ACIT Vs. Osmanabad Janta Sahakari Bank Ltd. in ITA No.795/PN/2011, order dated 31.08.2012, held as under:- “2. The assessee is a Co-operative Bank engaged in the business of accepting deposits from members and giving loans to members. It has filed its return of income on 11.09.2009 for the year under consideration declaring total income at ₹ 14,57,840/-. In the scrutiny assessment, the Assessing Officer noticed that the assessee had not credited interest receivable or accrued on non-performing assets (hereinafter referred to as NPA) to its profit and loss account for financial year 2008-09. The Assessing Officer after rejecting the various contentions of the assessee has held that the RBI guidelines are not intended to regulate the income tax law and the assessee was liable to be

The Hon’ble Bombay High Court in CIT Vs. M/s. Deogiri Nagari Sahakari Bank Ltd. in Income Tax Appeal No.53 of 2014 & Ors. has laid down the proposition that the interest accrued on NPAs is not taxable in the hands of assessee, in view of the guidelines issued by the RBI.

Following the same parity of reasoning, we hold that no addition is warranted on account of interest accrued on NPAs. Accordingly, we uphold the order of CIT(A) in deleting the addition made on account of interest accrued on NPAs. The ground of appeal No.1 raised by the Revenue is dismissed.

The second issue raised vide ground of appeal No.8 is against deletion of addition made on account of amortization of premium on investments.

The learned Authorized Representative for the assessee pointed out that this issue also stands covered by different decisions of Pune Bench of Tribunal.

The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer.

We find that the Pune Bench of Tribunal in series of decisions has decided the issue in favour of assessee. However, we make reference to the decision of the Tribunal in ACIT Vs. Jath Urban Co-op. Bank Ltd. in ITA Nos.2713 & 2714/PUN/2016, relating to assessment years 2007-08 & 2008-09, order dated 23.03.2018. The ground of appeal No.8 raised by the Revenue is thus, dismissed.

Now, coming to the appeal in ITA No.1422/PUN/2016.

The issue raised vide ground of appeal No.1 is similar to the issue raised vide ground of appeal No.1 in ITA No.1420/PUN/2016 and our decision in ITA No.1420/PUN/2016 shall apply mutatis mutandis to ITA No.1422/PUN/2016.

The ground of appeal No.8 raised by Revenue is also similar to the ground of appeal No.8 raised in ITA No.1420/PUN/2016. However, the learned Authorized Representative for the assessee pointed out that no such addition was made by the Assessing Officer and no such deletion was also done by the CIT(A). He pointed out that the addition of ₹ 2,27,224/- relates to broken period interest and whether the same is to be allowed as deduction. He further pointed out that the issue stands covered by the order of the Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. reported in 107 DTR 140 (Bom).

We find no merit in the ground of appeal No.8 raised by the Revenue as no such decision on amortization of premium on investments has been decided either by the Assessing Officer or CIT(A) in the aforesaid appeal. Hence, the ground of appeal No.8 does not stand. In any case, the issue which has been decided by the Assessing Officer against the assessee and CIT(A) in favour of assessee relates to broken period interest which is now decided in favour of assessee by the Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (supra). The ground of appeal No.8 raised by the Revenue is dismissed.

In the result, both the appeals of Revenue are dismissed.