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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM:
This appeal filed by Revenue is directed against the order of Commissioner of Income Tax (Appeals), Pune-9 dated 04.01.2016 for assessment year 2012-13.
The Revenue has raised following grounds in appeal:
2 ITA No. 1000/PUN/2016 A.Y.2012-13
“1.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 58,96,203/- made on account of accrued interest on Non-Performing assets? 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in disregarding the judgement of hon'ble Supreme Court given in the case of Southern Technologies Ltd. VS JCIT 320 ITR 577 (SC) which says that provisions of RBI Act cannot override the provision of Section 145 of the Income Tax Act, since both the Acts operate in different fields and therefore assessee cannot recognize interest income on NPA and yet not offer it for taxation? 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in disregarding the judgement of Hon'ble ITAT, Ahmedabad Bench, Ahmedabad in the case of Sarangpur Co-op Bank Ltd. (ITA No. 529 and 530/Ahd/2013 dated 21.6.2013), wherein it is held that Section 43D is not applicable to non-scheduled banks and the decision of ITAT Bench, Pune, in ITA Nos. 460/461 of 2012 wherein, it is held that accrued interest on NPA should be brought to tax on accrual basis? 4. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance on account of accrued interest on NP A and failed to appreciate that the assessee is a Non- Schedule Co-operative Bank and the provisions of Section 43D are not applicable to the assessee. 5. The appellant craves leave to add, amend or alter any of the above grounds of appeal.”
Briefly stated relevant facts include, the assessee is a co-operative
bank registered under Co-operative Society Act, 1960. The assessee is
engaged in the business of banking i.e. lending money to members and
accepting deposits from its members. Assessee filed return of income
declaring total income of Rs.1,24,66,361/-. During assessment
proceedings, the Assessing Officer assessed total income of assessee at
Rs.1,87,51,160/-. In reply to Assessing Officer’s query, assessee submitted
the detail working of the NPA and stated that, as per accounting policy, the
interest income on NPA shall be recognized only when it is as actually
realized. Assessing Officer rejected the contention of assessee relying on the
various Hon'ble High Court’s decisions and made addition of
Rs.58,96,203/- on account of accrued interest on Non Performing assets.
3 ITA No. 1000/PUN/2016 A.Y.2012-13
Aggrieved with the order of Assessing Officer, assessee filed appeal before
CIT(A).
During First Appellate proceedings, CIT(A) observed that Assessing
Officer erred in law on the facts treating interest on NPA of Rs.58.96 Lakhs
as income of current year. Thereafter, CIT(A) relying on the decision of
Pune Bench of Tribunal in the case of Pavana Sahakari Bank Ltd., ITA
No.1754/PN/2013, for A.Y.2010-11, has allowed the appeal in favour of
assessee. Aggrieved with the order of CIT(A), Revenue is in appeal before us
raising grounds as extracted above.
The Ld. DR for the Revenue relied heavily on the order of Assessing
Officer. The Ld. DR further submitted that provisions of RBI Act cannot
override the provision of section 145 of the I.T Act since both the Acts
operate in different fields and therefore, assessee cannot fail to recognize
interest income on NPA and has placed reliance on the Hon'ble Supreme
Court judgment in the case of Southern Technologies Ltd. Vs. JCIT, 320
ITR 577 (SC). The Ld. DR further contended that Section 43D is not
applicable to non scheduled banks and assessee is a Non schedule Co
operative bank. He placed reliance on the following decisions:
i) Sarangpur Co-op Bank Ltd. ITA Nos.529 and 530/Ahd/2013 dated 21.06.2013. ii) The Cosmos Co-operative Bank Ltd Vs. DCIT, ITA Nos. 460 & 461/PN/2012 dated 23.01.2014.
On the other hand, the Ld. Counsel for the assessee submitted that
as per RBI guidelines for treatment of interest income on NPA A/c , it was
not required to account for interest related to NPAs. He further submitted
that, as per section 5 of the I.T Act, only real income needs to be taxed and
4 ITA No. 1000/PUN/2016 A.Y.2012-13
NPA interest was only a notional income and therefore, the same was not
required to be taxed. The Ld. Counsel for the assessee relied heavily on the
order of CIT(A). The Ld. Counsel for the assessee has placed reliance on the
following decisions:
i) CIT Vs. Vasisth Chay Vyapar Ltd, 98 taxmann.com 365 (SC) ii) CIT Vs. Deogiri Nagari Sahakari Bank Ltd., 379 ITR 249 iii) ACIT Vs. Omerga Sahakari Bank Ltd., ITA No.350/PN/2013 iv) Pr. CIT Vs. Davangere Urban Co-operative Bank., 93 taxmann.com 221 (Kar)
We have heard both the sides and perused the orders of Authorities
below. We have also considered the ratio laid down by the Hon'ble Supreme
Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd. (supra.) wherein it
has been held that interest on Inter-Corporate Deposits (ICDs) which had
become Non-Performing Asset (NPA) in terms of Prudential Norms issued by
RBI, having not accrued, would not be taxable in hands of a non-banking
financial company like the present assessee. The CIT(A) discussed the issue
in Para 4.3 and 4.4 of his order. For the sake of completeness, we extract
the relevant paragraphs herein below:
“4.3 I have carefully perused the impugned assessment order. the statement of facts and written submissions made on behalf of the Appellant, as well as the explanation provided by Authorized Representative (A.R.) of the assessee during appellate proceedings. There is only one effective ground of appeal in this case under which it is contended that the AO erred in' law on and on facts as erroneously treating interest on NPA of Rs.58.96 lakhs as income of current year, negating the contention and submission made by the appellant that interest on Non performing Advances (NPA) is taxable on cash basis as prescribed by Reserve Bank of India is mandatory for bank. The issue has been discussed in Para 4 of the assessment order. 4.4 I found that the relevant facts and issue in the present case are similar to the facts of the case in Pavana Sahakari Bank Ltd., for A.Y.2010-11 wherein the ITAT Pune Bench “A” Pune has allowed appeal in favour of assessee in ITA No.1754/PN/2013. Thus,
5 ITA No. 1000/PUN/2016 A.Y.2012-13
following the jurisdictional ITAT's order as discussed supra, A.O. is directed to delete the said disallowance. Thus ground No.1 & 2 are allowed.
Considering the ratio laid by the Hon'ble Supreme Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd. (supra.), we find the decision given by the CIT(A) on the issue is fair and reasonable and does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed. 8.
Order pronounced on 06th day of June, 2018.
Sd/- Sd/- (�वकास अव�थी /Vikas Awasthy) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 06th June, 2018. 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)-9, Pune. 4. The Pr. CIT-5, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” 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.