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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
DATED THIS THE 29TH DAY OF JANUARY, 2018
PRESENT
THE HON’BLE MRS. JUSTICE S. SUJATHA
AND
THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA
I.T.A.NO.100087/2015 C/W I.T.A.NO.100088/2015
IN ITA No.100087/2015:
BETWEEN:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, DR.B.R.AMBEDKAR ROAD, BELAGAVI.
JOINT COMMISSIONER OF INCOME TAX, CIRCLE-1, VIJAYAPURA. ... APPELLANTS
(BY SRI Y V RAVIRAJ, ADVOCATE)
AND
SHRI LAXMI SAHAKARI BANK NIYAMIT, MAIN ROAD, NEAR MUNCIPALITY, GULEDGUDD- 587 203, DIST: BAGALKOT, PAN: AAAA L0402A. ... RESPONDENT
(BY SRIYUTHS H R KAMBIYAVAR, ASHOK A KULKARNI, NEILOO PRASAD, SIDDAREDDY K.G. & SMT.PREETI S.PATIL, ADVOCATES)
THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 PRAYING TO FORMULATE THE
: 2 : SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE, IN ITA NO.515/PNJ/2014, DATED 23.01.2015 FOR THE ASSESSMENT YEAR 2008-09 AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, BIJAPUR RANGE, BIJAPUR AND ETC.
IN ITA No.100088/2015:
BETWEEN:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, DR.B.R.AMBEDKAR ROAD, BELAGAVI.
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, VIJAYAPURA. ... APPELLANTS
(BY SRI Y V RAVIRAJ, ADVOCATE)
AND
SHRI LAXMI SAHAKARI BANK NIYAMIT, GULEDGUDD- 587 203, DIST: BAGALKOT, PAN: AAAA L0402A. ... RESPONDENT
(BY SRIYUTHS H.R.KAMBIYAVAR, PRAKASH BADIGER & SMT. PREETI S.PATIL, ADVOCATES)
THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BANGALORE, IN ITA NO.800/BANG/2013, DATED 23.01.2015 FOR THE ASSESSMENT YEAR 2009-10 AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, BIJAPUR RANGE, BIJAPUR AND ETC.
THESE APPEALS COMING ON FOR FINAL HEARING THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:
: 3 : JUDGMENT These appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 (‘the Act’ for short), challenging the order of the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘the Tribunal’) in ITA No.515/PNJ/2014 and ITA No.800/BANG/2013, dated 23.01.2015 relating to the assessment years 2008-09 and 2009-10.
At the time of admission, this Court has framed the following substantial questions of law: a) Whether the Tribunal was right in law in deleting the addition made on account of accrued interest on loans treated as “Non Performing Assets” and thereby rejecting the contention of the Revenue that there is a violation of Section 145 of the Income Tax Act, 1961? b) Whether on the facts and circumstances of the case and in law the Tribunal was right in concluding that provisions of Section 194A(3)(v) of the Income Tax Act, 1961 applies to all co-operative societies
: 4 : including societies engaged in the business of banking? c) Whether on facts and circumstances of the case and in law the Tribunal was right in upholding the depreciation claimed by the assessee on investments in government securities ‘held to maturity’ treating the same as “held for trading”?
Heard learned counsel appearing for the parties and perused the material on record.
Learned counsel Sri Y.V.Raviraj appearing for the appellants fairly submits that the substantial questions of law involved in these appeals are no more res integra in view of the judgment of the Co-ordinate Bench of this Court rendered in the following cases: a) The Commissioner of Income Tax and another V/s Shri Siddeshwar Co- operative Bank Limited and others in ITA No.200002/2015 C/w 200004/2014, 200005/2014, 200006/2014, 200007/2014 and 200008/2014 (DD 22.06.2016)
: 5 : b) The Commissioner of Income Tax and another V/s the Bagalkot District Central Co-op. Bank, ITA No.100116/2014 (D.D. 16.12.2015) c) The Commissioner of Income Tax and another V/s Karnataka Vikas Grameen Bank, ITA No.100014/2014 C/w 100013/2014 (D.D. 14.12.2015)
As regards 1st question, this Court in the case of Shri Siddeshwar Co-operative Bank Limited and others(supra) placing reliance on the Co-ordinate Bench judgment of this Court in the case of Commissioner of Income Tax and another V/s Canfin Homes Ltd. (2012) 347 ITR 382 (Karn), has held that mere nomenclature adopted with reference to the bad loans and advances receivable, would refer to all non-performing assets of any nature, of whatever category placed as a non-performing asset and therefore, the contention of the Revenue that in respect of non-performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the Revenue
: 6 : which has accrued notionally is without any basis. In that view of the matter, the substantial question of law is answered against the Revenue and in favour of the assessee. In view of the same, the said decision of this Court in Canfin Homes (supra) and Shri Siddeshwar Co-operative Bank Limited (supra) would squarely apply to the facts of the present case. Hence, the 1st substantial question of law is answered against the Revenue and in favour of the assessee.
As regards the 2nd question, the said issue is squarely covered by the Co-ordinate Bench judgment of this Court in the case of Bagalkot District Central Co- op. Bank (Supra) whereby this Court considering the Circular No.19/2015 in F.No.142/14/2015-TPL, has held that the Co-operative Bank is not required to deduct tax while paying interest under Section 194A of the Act. Accordingly, appeal filed by the Revenue has been dismissed. Hence, we answer this second question against the Revenue.
: 7 : 7. As regards the 3rd question, the said issue is covered by the Co-ordinate Bench judgment of this Court in Karnataka Vikas Grameen Bank (supra). The Co-ordinate Bench of this Court has held that securities categorized and accounted as “held to maturity” were stock-in-trade and could not be considered as investments and accordingly answered the said question against the Revenue. We are in respectful agreement with the view taken by the Co- ordinate Bench of this Court and accordingly we answer the said question against the Revenue.
In the result, appeals filed by the Revenue stands dismissed.
(Sd/-) JUDGE (Sd/-) JUDGE
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