ASSISTANT COMMISSIONER OF INCOME-TAX vs. SHRI ANAND CO-OP. BANK LTD., PUNE

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ITA 1299/PUN/2016Status: DisposedITAT Pune28 March 2018AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, holding that accrued interest on sticky advances is not taxable, following the Bombay High Court's decision in CIT vs. Deogiri Nagari Sahakari Bank Ltd.

What were the facts?

The Assessing Officer added Rs. 1,24,32,910/- on account of accrued interest on Non-Performing Assets (NPA) not offered to tax. The CIT(A) deleted this addition, relying on High Court and Tribunal decisions.

What were the issues?

Whether accrued interest on NPA is taxable in the hands of a co-operative bank following the mercantile system of accounting.

Which sections of the Income-tax Act were involved?

Section 145

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Respondent: Shri Mukesh Jha

Heard together (2 matters)

ITA No.1299/PUN/2016
CO No.13/PUN/2018

Read from the judgment's own cause title. This page is filed under one of them.

आदेश / ORDER

PER VIKAS AWASTHY, JM :

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-9, Pune dated 17-03-2016 for assessment year 2012-13. The assessee has filed cross objections (CO) supporting the order of Commissioner of Income Tax (Appeals). The Revenue in appeal has raised solitary issue assailing the findings of Commissioner of Income Tax (Appeals) in deleting the addition of Rs.1,24,32,910/- on account of accrued interest on Non Performing Assets (NPA).

2.

The notice of appeal for today was issued to the assessee on 06-02- 2018 through RPAD. The acknowledgment available on file clearly indicates that the notice of appeal has been duly served on the assessee. Despite service of notice none has appeared to represent the assessee nor any letter of adjournment has been received on behalf of assessee. It appears that the assessee is not keen to defend this case. Under such circumstances, we are proceeding to decide the appeal and the cross objections with the assistance of ld. DR and the material available on record.

3.

Shri Mukesh Jha representing the Department submitted that the assessee is a Co-operative Bank. During the course of scrutiny assessment, the Assessing Officer observed that the assessee has not included interest accrued on NPA Rs.1,24,32,910/- in the profit and loss account. The Assessing Officer made addition of the aforesaid amount. In

3 ITA No. 1299/PUN/2016 & CO No. 13/PUN/2018, A.Y. 2012-13

first appeal, the Commissioner of Income Tax (Appeals) deleted the aforesaid addition by placing reliance on the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. and others reported as 379 ITR 24 and the order of Tribunal in assessee’s own case for assessment year 2010-11. The ld. DR submitted that the assessee is following mercantile system of accounting. As per provisions of section 145 of the Act, the assessee has to follow either mercantile system or cash system of accounting. The assessee cannot adopt mix system of accounting. The ld. DR further contended that the Hon’ble Supreme Court of India in the case of Southern Technologies Ltd. Vs. Joint Commissioner of Income Tax reported as 320 ITR 577 has held that the Reserve Bank of India directives under the Reserve Bank of India Act are prudential norms and have nothing to do with computation or taxability of the provisions of NPA under the Income Tax Act. The ld. DR further pointed that the assessee is a non-schedule Co-operative Bank, thus, the provisions of section 43D of RBI Act are not applicable to the assessee. To support of his contentions the ld. DR placed reliance on the decision of Ahmedabad Bench of Tribunal in the case of The Sarangpur Co-op. Bank Ltd. Vs. DCIT in ITA Nos. 529 & 530/Ahd/2013 decided on 21-06-2013.

4.

We have heard the submissions made by ld. DR and have perused the documents available on record. The Revenue in appeal has raised solitary issue of deleting addition by Commissioner of Income Tax (Appeals) in respect of accrued interest on NPA. The Revenue has raised as many as 5 grounds in the appeal, however, all the grounds are directed towards the single issue as mentioned above. The assessee is a Co-operative Society engaged in banking business. The Assessing Officer made addition of

4 ITA No. 1299/PUN/2016 & CO No. 13/PUN/2018, A.Y. 2012-13

Rs.1,24,32,910/- in respect of accrued interest on NPA not offered to tax in the return of income by the assessee. The Commissioner of Income Tax (Appeals) deleted the addition by following the decision of Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. and others (supra), as well as, the decision of Co-ordinate Bench of the Tribunal in assessee’s own case for assessment year 2010-11.

5.

The Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. and others (supra) has held that accrued interests on sticky advances are not taxable. The Hon’ble Bombay High Court while deciding this issue in favour of the assessee has also considered the decision of Hon’ble Apex Court in the case of Southern Technologies Ltd. Vs. Joint Commissioner of Income Tax (supra). The Hon’ble High Court held that the Co-operative banks are also governed by Reserve Bank of India and thus, the directions with regard to prudential norms issued by Reserve Bank of India equally apply to the Co- operative Banks. The provisions of section 45Q of the RBI Act have an overriding effect over income recognition principle followed by Co-operative Banks. Thus, in view of the decision rendered in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. and others (supra), we do not find any infirmity in the order of Commissioner of Income Tax (Appeals). Accordingly, the same is upheld and the appeal of Revenue is dismissed.

6.

The assessee has filed cross objections in support of order of Commissioner of Income Tax (Appeals). Since, we have already dismissed

5 ITA No. 1299/PUN/2016 & CO No. 13/PUN/2018, A.Y. 2012-13

the appeal of Revenue, the cross objections filed by the assessee have become infructuous and accordingly, the same are dismissed as such.

7.

In the result, appeal by the Revenue and cross objections filed by the assessee are dismissed.

Order pronounced on Wednesday, the 28th day of March, 2018.

Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 28th March, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-9, Pune 3. 4. The Pr. CIT-5, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,

यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune

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