THE SINDHUDURG DIST CENTRAL CO.OP BANK LTD,,SINDHUDURG vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 2,, KOLHAPUR

PER BENCH :

This appeal preferred by the assessee emanates from the order of the Ld. CIT(A)-2, Kolhapur, dated 11.01.2018.

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on the ground that it is merely a provision. The assessee submitted his reply stating that the said provision was made as per RBI guidelines and therefore, it was allowable. However, the AO has disagreed with the submissions of assessee holding that the CBDT Circular No.17/2008 is against the assessee and also noted that in the assessee’s own case for A.Y. 2007-08, the Pune Bench of Tribunal had upheld this disallowance. The assessee challenged the same before the ld. CIT(A). The ld. CIT(A) dismissed the appeal of assessee, against which the assessee is in appeal before us.

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held that the Cooperative Banks were acting under the directives of the Reserve Bank of India with regard to the prudential norms set out. The Court was of the opinion that taxing interest on NPA cannot be justified on the real income theory. The decision of the Gujarat High Court in Shri Mahila Sewa Sahakari Bank Ltd., (supra) was carried in Appeal by the Revenue to the Supreme Court and such appeal was dismissed. [Para 5].  The Court concluded in case of Pr. CIT v. Ludhina Central Co-operative Bank Ltd. [2018] 99 taxmann.com 81 concluded that the Tribunal while relying upon the various pronouncements had correctly decided the issue regarding taxability of interest on NPA in favour of the assessee as being taxable in the year of receipt; the Tribunal had upheld the deletion made by the CIT(A) on account of addition of Rs.3,02,82,000 regarding interest accrued on NPA and that there was no illegality or perversity in the aforesaid findings recorded by the Tribunal. [Para 6].  The issue is thus, covered by the decisions of two High Courts. Against the judgment of the Gujarat High Court, the appeals have been dismissed by the Supreme Court. Thus, the Supreme Court can be seen to have approved the decision of the Gujarat High Court. Therefore, there is no reason to entertain these Appeals, since no question of law can be stated to have arisen. [Para 7].  For the reference, it may also be noticed that subsequently, legislature has amended section 43D. Section 43D essentially provides for charging of interest on actual basis in case of certain special circumstances, in the hands of the public financial institutions, public companies etc. Explanation to section 43D defines certain terms for the purpose of said section. Clause (g) was inserted in the said explanation by Finance Act, 2016 which provides that for the purpose of such section, Cooperative Banks, Primary Agricultural Credit Society and Primary Agricultural and Rural Development Bank shall have meanings respectively assigned in Explanation to sub-section 4 of section 80B. By virtue of such insertion, the Cooperative Banks would get the benefit of section 43D. One way of looking at this amendment, can be that, the same is curative in nature and would, therefore, apply to pending proceedings, notwithstanding the fact that, the legislature has not made the provision retrospective. [Para 7].  As per the Memorandum explaining the provision, the insertion of clause (g) to the Explanation was to provide for a level playing field to the Cooperative Banks. This may be one more indication to hold a belief that, the legislature in order to address a piquent situation and to obviate unintended hardship to the assessee, has introduced the amendment. However, in the present case, there is no need to conclude this issue and leave it to be judged in appropriate proceedings. [Para 8]”

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ITR 121 and the Hon’ble Madras High Court in the case of CIT vs. Tiruchirapalli District Central Co-Operative Bank Ltd., 429 ITR 127 and also the Hon’ble Karnataka High Court in the case of CIT vs. Davangere District Central Co-Operative Bank Ltd., 430 ITR 29. The issue in the present appeal is identical to the issue of taxability of interest on the non- performing assets. Therefore, the ratio laid down in the above decisions clearly applicable to the facts of present case. Accordingly, we allow the claim of the assessee. Thus, the grounds raised by the assessee are allowed.

Order pronounced in the open Court on 14th July, 2021.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनधांक / Dated : 14th July, 2021 GCVSR आदेश की प्रतिलऱपप अग्रेपिि / Copy of the Order forwarded to : अऩीऱधथी / The Appellant. 1. प्रत्यथी / The Respondent 2. 3. The CIT (Appeals)-2, Kolhapur. 4. The Pr. CIT-2, Kolhapur. 5. DR, ITAT, “B” Bench, Pune. गधर्ा फ़धइऱ / Guard File. 6. //सत्यधपऩत प्रनत// True Copy// आदेशधनुसधर / BY ORDER,

वररष्ठ ननजी सचिव / Sr. Private Secretary आयकर अऩीऱीय अचधकरण, ऩुणे / ITAT, Pune