THE CHIKHALI URBAN COOP. BANK LTD., Buldhana V. THE DY. CIT- AKOLA CIRCLE, Akola

ITA 11/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2211 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revision of order; Bad and doubtful debts; Validity of assessment
• Section: 143(3); 147; 145; 263

Judgement Text

1 ITA NOS. 11, 12 & 13/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS.11, 12 & 13/NAG/2015 ASSESSMENT YEARS : 2007 - 08, 2008 - 09 & 2010 - 11. THE CHIKHALI URBAN COOP. DY. COMMISSIONER OF INCOME TAX, BANK LTD., CHIKHALI. VS. AKOLA CIRCLE, AKOLA. PAN AAAAT4084G. (APPELLANT) (RESPOND ENT) APPELLANT BY : SHRI K.B. LOHIYA. RESPONDENT : SHRI D. RAVI KUMAR. DATE OF HEARING : 28 - 04 - 2016 DATE OF PRONOUNCEMENT : 31 ST MAY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THESE THREE APPEALS HAVE BEEN FILED BY THE ASSESSEE EMANATING FROM THE THREE SEPARATE ORDERS OF LEARNED CIT(APPEALS) - I, NAGPUR RESPECTIVELY DATED 19 - 09 - 2014, 22 - 09 - 2014 AND 23 - 09 - 2014 FOR ASSESSMENT YEARS 2007 - 08, 2008 - 09 AND 2010 - 11. THE APPELLANT HAD RAISED NUMBER OF GROUNDS ALMOST IDENTICALLY WORDED, THEREFORE, TO BE REPRODUCED BELOW FROM THE LEAD ASSESSMENT YEAR 2007 - 08. IT IS WORTH TO MENTION THAT THE GROUNDS RAISED WERE ARGUMENTATIVE IN NATURE AND SOME OF THE GROUNDS HAVE CHALLENGED THE VALIDITY OF ASSESSMENT U/ S 147/148 OF I.T. ACT WHICH WERE NOT PRESSED BY LEARNED A.R. MR. K.B. LOHIYA. THE GROUNDS WHICH ARE ARGUED BEFORE US THUS REPRODUCED BELOW : 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING IN PARA 12 OF THE APPEAL ORDER THAT OUT OF TOTAL ACCRUED INTEREST ON NPAS AN AMOUNT OF RS.842200000/ - IS LIABLE TO THE TAXED AS INTEREST CHARGED BUT NOT RECEIVED ON SUCH NPAS WHICH 2 ITA NOS. 11, 12 & 13/NAG/2015 FALLS WITHIN THE PERIOD OF LESS THAN THREE YEARS. THE APPELLANT IS CLAIMING THAT THE INTEREST ON NPA IS NOT TAXABLE AT ALL. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE CLAIM OF ASSESSEE THAT A SUM OF RS.22808907/ - IS DEBITED TO PROFIT & LOSS ACCOUNT AS NPA INTEREST RECOVERED, THEREBY ADDITION OF RS.605782/ - HAS BEEN MADE IN THE RETURN OF INCOME ITSELF. 2. AN ASSESSMENT WAS MADE U/S 143(3) READ WITH SECTION 147 OF I.T. ACT VIDE ORDER DATED 28 - 03 - 2013 FOR ASSESSMENT YEAR 2007 - 08. THE ASSESSEE IS A COOPERATIVE SOCIETY AND CARRYING ON BUSINESS OF BANKING. THE OBSERVATION OF THE AO WAS THAT T HE ASSESSEE HAD FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING. HOWEVER, ON PERUSAL OF ACCOUNTS IT WAS FOUND BY THE AO THAT INTEREST ACCRUED BUT NOT REALIZED ON NPA HAS BEEN RECOGNIZED ON CASH BASIS. THUS THE AO HAS COMMENTED THAT AS PER THE AMENDED SECTION 145(1) HYBRID SYSTEM OF ACCOUNTING WAS NOT PERMISSIBLE. ADMITTEDLY THE INTEREST ACCRUED BUT NOT REALIZED ON NPA WAS NOT CREDITED IN THE PROFIT & LOSS ACCOUNT. THE INTEREST WAS DIRECTLY CREDITED IN THE OVERDUE I NTEREST R ECEIVABLE A CCOUNT, AS WELL AS OVER DUE I NTEREST R ESERVE A CCOUNT. THE AO HA S ISSUED A SHOW CAUSE IN THE FOLLOWING MANNER : IT WAS THUS OBSERVED THAT THERE WAS A NET ACCRUED UNREALIZED NPA INTEREST OF 84,22,080/ - FOR THE FINANCIAL YEAR 2006 - 07 WHICH WAS DIRECTLY CREDITED TO THE BALANCE SHE ET AND EQUAL AMOUNT WAS CREDITED TO THE OVERDUE INTEREST RESERVE A/C WITHOUT ROUTING THE CREDIT / DEBIT OF THESE ENTRIES IN THE PROFIT & LOSS A/C. THUS THE ACCRUED BUT NOT REALIZED INTEREST AMOUNT ON NPA OF 84,22,080/ - HAS NOT BEEN OFFERED TO TAX ON THE G ROUND THAT ASSESSEE WAS ACCOUNTING THE NPA INTEREST ON CASH/ACTUAL REALIZATION BASIS AND THIS METHOD WAS CONSISTENTLY FOLLOWED. IN THIS REGARD, ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE ACCRUED INTEREST ON NPA SHOULD BE ADDED BACK TO INCOME IN VIEW OF THE PROVISIONS OF SECTION 145(1) THAT SUCH HYBRID SYSTEM CANNOT BE FOLLOWED. 2.1 BEFORE THE AO THE APPLICABILITY OF CBDT CIRCULAR, THE PROVISIONS OF SECTION 43B, THE DECISION OF UC O . BANK 237 ITR 889 (SC) AND THE DECISION OF 3 ITA NOS. 11, 12 & 13/NAG/2015 M/S SOUTHERN TECHNOL OGIES 320 ITR 577 (SC) HAVE BEEN DISCUSSED AT LENGTH. THE CONCLUSION OF THE AO WAS AS UNDER : 08. I HAVE CAREFULLY CONSIDERED THESE SUBMISSIONS. MY FINDINGS THEREON ARE GIVEN IN THE SUBSEQUENT PARAGRAPHS. THE ASSESSEE HAS MAINLY CONTENDED THAT THE REAL IN COME POLICY WAS REQUIRED TO BE FOLLOWED. AS PER THE SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE ASSESSEE, ALL ALONG THE INTEREST ON NPA ACCOUNT WAS ACCOUNTED IN THE PROFIT & LOSS A/C ON THE ACTUAL REALIZATION BASIS ONLY. THESE SUBMISSIONS ARE NOT ACCEP TABLE. THE INCOME FOR THE PURPOSE OF INCOME TAX ACT HAS TO BE COMPUTED AS PER THE PROVISIONS OF THE INCOME TAX ACT. SECTION 145(1) MANDATORY REQUIRES THE ASSESSEE TO EITHER FOLLOW MERCANTILE SYSTEM OF ACCOUNTING OR CASH SYSTEM OF ACCOUNTING. THE KIND OF HY BRID SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS NOT PERMITTED AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS ALREADY QUANTIFIED THE ACCRUED INTEREST INCOME ON NPA ACCOUNTS BUT HAS NOT CREDITED TO THE PROFIT & LOSS A/C. TO THIS EX TENT, THE ASSESSEES BOOKS ARE FOUND TO BE DEFECTIVE AND LIABLE TO BE REJECTED. THE INCOME OF THE ASSESSEE IS TO BE WORKED OUT BY CONSIDERING ALL THE ACCRUED INCOME IN VIEW OF THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN RESPE CT OF INTEREST ACCRUED FROM OTHER LOANS/DEPOSITS/ ASSETS. HENCE, THE ASSESSEES CLAIM TO OFFER TO TAX THE ACTUAL INTEREST RECEIVED IN NPA IS FOUND TO BE NOT TENABLE IN LAW. IT IS THEREFORE REJECTED. 09. FOR ACCOUNTING TREATMENT & REVENUE RECOGNITION POLIC Y ADOPTED AS ABOVE FOR THE INTEREST ON NPA, THE ASSESSEE MAY BE FOLLOWING DIRECTIONS OF THE RBI. BUT THESE DIRECTIONS ARE NOT BINDING FOR THE PURPOSE OF COMPUTATION OF THE INCOME AS PER THE PROVISIONS OF THE INCOME TAX ACT,1961. IN THIS REGARD, I RELY UPON THE RATIO OF HONBLE SUPREME COURT JUDGMENT IN THE CASE OF M/S. SOUTHERN TECHNOLOGIES LTD. (320 ITR 577). 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS AFFIRMED THE ACTION OF THE AO AFTER A DETAILED DISCUSSION AS UNDER : 10.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. AS POINTED OUT BY THE APPELLANT IT IS OBSERVED THAT ON IDENTICAL FACTS, MY LEARNED PREDECESSORS HAVE DECIDED THE ISSUES VIDE ORDER NO.CIT(A) - I/013/09 - 10 DATED 05.07.2010 FOR AY 2007 - 08 AND VIDE ORDER NO. CIT(A) - 1/339/2011 - 12 DATED 15.11.2012 IN AKOLA DISTRICT CO - OPERATIVE BANK FOR A.Y.2009 - 4 ITA NOS. 11, 12 & 13/NAG/2015 10 HOLDING THAT THE ADDITION ON INTEREST ON NPA IS REQUIRED TO BE MADE IN ACCORDANCE WITH BOARDS CIRCULAR DATED 09.10.1984. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 12. CONSIDERING THE FACTS OF THE PRESENT CASE, IT WOULD BE NECESSARY TO COMPUTE THE INCOME THAT IS TO BE BROUGHT TO TAX BEING INTEREST ON CERTAIN AMOUNT CLASSIFIED AS NPAS IN VIEW OF THE BOARDS ABOVE REFERRED CIRCULAR DATED 09.10.1984. THEREFORE , THE APPELLANT WAS CATEGORICALLY ASKED TO FILE THE CLASSIFICATION/ DETAILS OF SUCH DEBTS/ NPAS IN TERMS OF THE AGE OF DEBTS TO ASCERTAIN THE QUANTUM OF INTEREST ATTRIBUTABLE TO SUCH NPAS WHICH HAS BECOME IRRECOVERABL E FOR THE PAST THREE CONSECUTIVE ACCOUNTING YEARS AND THE NPAS / DEBTS RECEIVABLE BEING OUTSTANDING INTEREST LESS THAN 36 MONTHS AS ON 31.03.2007. THE AR OF THE APPELLANT ON 17.09.2014 HAS PROVIDED THE BIFURCATION OF THE INTEREST ACCRUED ON NPAS AND THE FIGURES OF INTEREST ATTRIBUTABLE TO SUCH NPAS, WHICH ARE OUTSTANDING FOR LESS THAN 3 YEARS AND MORE THAN 3 YEARS. ACCORDINGLY, AS PER THE ABOVE DETAILS SUBMITTED BY THE A.R. OF THE APPELLANT AND AS VERIFIED BY THE AO IN HIS REMAND REPORT, IT IS SEEN THAT OUT OF THE TOTAL ACCRUED INTEREST ON NPAS AN AMOUNT OF RS.84,22,00,000/ - IS LIABLE TO BE TAXED AS INTEREST CHARGED BUT NOT RECEIVED ON SUCH NPAS WHICH FALLS WITHIN THE PERIOD OF LESS THAN 3 YEARS. THE FIGURES PROVIDED BY THE AR OF THE APPELLANT AS MENTION ED ABOVE, ARE CERTIFIED BY THE AR OF THE APPELLANT. THE AO HOWEVER, IS AT LIBERTY TO VERIFY THE VERACITY OF THE FIGURES PROVIDED BY THE APPELLANT WHILE GIVING EFFECT IN VIEW OF THE FINDING GIVEN ABOVE TAKING INTO CONSIDERATION THE BOARDS CIRCULAR DATED 09 .10.1984. THIS GROUND IS ACCORDINGLY DISMISSED. 4. IN THE LIGHT OF THE ABOVE DISCUSSION AT THE OUTSET IT IS CLEAR THAT THE ISSUE OF TAXABILITY OF ACCRUED INTEREST ON NPA NOW STOOD SETTLED BY SEVERAL DECISIONS OF THIS VERY TRIBUNAL BENCH OF NAGPUR. IN THE CASE OF AKOLA DISTRICT CENTRAL COOPERATIVE BANK LTD., THE ITAT, NAGPUR IN APPEAL BEARING ITA NO. 179/NAG/2013 FOR ASSESSMENT YEAR 2008 - 09 VIDE AN ORDER DATED 28 TH AUGUST, 2015 H AS ADDRESSED THIS ISSUE AS UNDER : 6. THE NEXT QUESTION WHICH IS TO BE A DDRESSED BY US IS THAT IN A SITUATION WHEN THE AO HAS EXAMINED THE PROBLEM OF NPA FACED BY THE ASSESSEE BANK AND THE AO HAS ALSO EXAMINED THE PRUDENTIAL NORMS AS WELL AS THE GUIDELINES OF RBI THEN IT IS NOT FAIR TO ALLEGE THAT THERE WAS NO APPLICATION OF MIND ON THIS ISSUE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BECAUSE THERE WAS AN APPLICATION OF MIND BY THE AO AND THAT VIEW OF THE AO WAS NOT A PERVERSE VIEW BUT A POSSIBLE VIEW 5 ITA NOS. 11, 12 & 13/NAG/2015 UNDER THE PROVISIONS OF THE ACT, THEREFORE, IT IS UNFAIR ON TH E PART OF THE LEARNED COMMISSIONER TO ALLEGE THAT THE SAID ASSESSMENT ORDER WAS AN ERRONEOUS ORDER CAUSING PREJUDICE TO THE REVENUE DEPARTMENT. 7. APART FROM THE ABOVE OBSERVATIONS IT IS NECESSARY TO MENTION BEFORE CONCLUDING OUR ORDER THAT IN NUMBER OF DECISIONS THE RESPECTED COORDINATE BENCHES OF THE TRIBUNAL HAVE EXAMINED THE PROVISIONS OF SECTION 43D OF I.T. ACT AND HELD THAT THE ASSESSEE WAS JUSTIFIED IN FOLLOWING THE RBI GUIDELINES. IN THE CASE OF CIT VS. OSMANABAD JANTA SAHAKARI BANK 152 TTJ 1 ( PUNE) THERE WAS A MENTION OF KARNAVATI COOPERATIVE BANK 134 ITD 486 (AHD.). IN THOSE DECISIONS THIS ISSUE WAS DISCUSSED AND HELD THAT THE INTEREST ON STICKY ADVANCES WAS NOT REQUIRED TO BE CREDITED ON ACCRUAL BASIS IN THE PROFIT AND LOSS ACCOUNT SPECIALLY WHEN THE GUIDELINES OF THE RBI HAS BEEN FOLLOWED. SO WE HEREBY HOLD THAT THE ISSUE AS RAKED UP BY THE LEARNED COMMISSIONER NOW STOOD SETTLED IN FAVOUR OF THE ASSESSEE, THEREFORE, THE ORDER U/S 263 CANNOT BE UPHELD. THE ORDER IN QUESTION IS CANCELLED AND T HE GROUNDS ALLOWED. 4.1 FURTHER IN THE CASE OF DCIT VS. WASHIM URBAN CO.OP. BANK LTD., THE ITAT NAGPUR BENCH IN APPEAL BEARING ITA NO. 233/NAG/2013 ASSESSMENT YEAR 2009 - 10 ORDER DATED 5 TH JUNE, 2015 HAS HELD AS UNDER : 6. IN THE LIGHT OF THE ABOVE F ACTUAL AND LEGAL ARGUMENTS RAISED BEFORE US, WE HAVE TO ADDRESS THE CONTROVERSY THAT WHETHER THE ASSESSEE IS ELIGIBLE FOR THE EXCEPTION AS PRESCRIBED UNDER SECTION 43D OF I.T. ACT. AT THE OUTSET, WE MAY LIKE TO REFER THE DECISION OF KARNAVATI CO - OP BANK L TD. 114 ITR (TRIB.) 175 (AHM) WHEREIN THE ISSUE WAS IDENTICAL THAT WHETHER INTEREST ON ACCRUAL BASIS IN RESPECT OF NON PERFORMING ASSETS (NPA) OF A COOPERATIVE BANK ARE TO BE TAXED OR NOT. IT WAS HELD THAT IN A SITUATION WHEN THE ASSESSEE IS A COOPERATIVE BANK, HOWEVER, GOVERNED BY RBI GUIDE LINES THEN THE PROVISIONS OF SECTION 43D IS TO BE APPLIED. EVEN THE ITAT, PUNE BENCH IN THE CASE OF OMERGA JANTA SAHAKARI BANK LTD. 166 TTJ 375 HAS HELD THAT THE ASSESSEE, A COOPERATIVE BANK, OPERATING UNDER THE LICENS E FROM RBI AND GOVERNED BY THE CIRCULARS OF RESERVE BANK OF INDIA IS ENTITLED FOR RELIEF. ON THE BASIS OF THOSE CIRCULARS, THE SAID COOPERATIVE BANK HAD NOT ACCOUNTED FOR THE INTEREST INCOME OF NPA. IT WAS HELD THAT INTEREST INCOME RELATABLE TO NPA WAS NOT INCLUDIBLE ON ACCRUAL BASIS SINCE THE INTEREST INCOME HAD NOT ACCRUED TO THE ASSESSEE IN THAT PERIOD. BOTH THE TRIBUNALS HAVE ALSO DISCUSSED A DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. 320 ITR 577 (SC). THE HON BLE COURT HAS EXPRESSED THAT IN ESSENCE RBI DIRECTIONS WERE PRUDENTIAL NORMS ISSUED WHICH DEALS ESSENTIALLY IN 6 ITA NOS. 11, 12 & 13/NAG/2015 RESPECT OF RECOGNITION OF INCOME. THE GUIDELINES WERE IN RESPECT OF NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FINANCIAL ACCOUNTS. BY VIRTUE OF SECTION 45Q AN OVERRIDING EFFECT IS GIVEN TO SAID DIRECTIONS VIS - A - VIS PRINCIPLES OF INCOME RECOGNITION. THE HONBLE COURT HAS OBSERVED THAT THE ACCOUNTING POLICIES ADOPTED BY NBFC CANNOT DETERMINE THE TAXABILITY OF INCOME. IT WAS HELD THAT THE ASSES SING OFFICER HAS TO CONSIDER THE DIRECTIONS OF RESERVE BANK OF INDIA AS PER SECTION 45Q OF RESERVE BANK OF INDIA ACT AND EXAMINE THE ISSUE AS PER THE PRUDENTIAL NORMS ISSUED BY RBI IN CONNECTION WITH THE INCOME RECOGNITION OF A BANK. THE COURT HAS ALSO CO MMENTED THAT IN SUCH A SITUATION THE PROVISIONS OF SECTION 145 HAD NO ROLE TO PLAY. 7. THEREFORE, WE HEREBY CONCLUDE THAT IN A SITUATION WHEN THE BENCHES OF THE TRIBUNAL HAVE FOLLOWED THE DECISIONS OF HONBLE HIGH COURTS AND HONBLE SUPREME COURT, THEREFORE, THE DECISION OF ITAT, LUCKNOW BENCH BEING ON DIFFERENT FACTS IS NOT APPLICABLE ON THE FACTS OF THIS CASE, SPECIALLY WHEN THE RESPECTED COORDINATE BENCH LUCKNOW (HAMIRPUR DIST. COOPERATIVE BANK 148 ITR 233) HAS ALSO ENDORSED THE VIEW OF SOUTHE RN TECHNOLOGIES (SUPRA), AS PER THE FOLLOWING OBSERVATIONS: ACCRUAL (OR OTHERWISE) OF AN INCOME (OR EXPENDITURE) IS MATTER OF FACT, TO BE DECIDED SEPARATELY FOR EACH CASE, ON THE BASIS OF THE ASSESSMENT OF THE OBTAINING FACTS AND CIRCUMSTANCES. THE SAME C ANNOT BE STATED AS AN ACCOUNTING POLICY WHICH BY ITS VERY NATURE IS TO BE APPLIED UNIFORMLY, EXCEPT WHERE IT IS STATED IN BROAD TERMS, BEARING THE NECESSARY INGREDIENTS OF THE QUALIFYING CRITERION, I.E. EXISTENCE OF A REASONABLE CERTAINTY AS TO ULTIMATE REALIZATION AT THE TIME OF RAISING THE CLAIM OR EVEN AS AT THE END OF THE ACCOUNTING PERIOD. CLEARLY, THE SAME WOULD REQUIRE AN ASSESSMENT OF THE RELEVANT FACTS, AND INCOME TO THAT EXTENT SHALL NOT BE RECOGNIZED UNLESS THERE IS REASONABLE CERTAINTY OF REA LIZATION. THE SAME WOULD NECESSARILY REQUIRE EXAMINATION OF THE FACTS AND CIRCUMSTANCES OF EACH CASE, AND TAKING A DECISION HAVING REGARD THERETO. THIS STANDS ENDORSED BY THE HONBLE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA). THE ADOPTE D ACCOUNTING POLICY, I.E., RECOGNIZING INCOME ON NPA ACCOUNTS ONLY SUBJECT TO REALIZATION, DOES NOT SERVEAS A VALID QUALIFYING CATEGORY AS THERE COULD BE OTHER M ITIGATING FACTORS, MAKING IT REASONABLE TO EXPECT REALIZATION DESPITE THE ACCOUNT BEING A NPA. FURTHER, ON FACTS, IT IS FOUND THAT THERE HAS BEEN IN FACT RECOGNITION OF INCOME, AND THE ASSESSEES CLAIM IS ONLY QUA PROVISION FOR BAD AND DOUBTFUL DEBTS WITH REFERENCE TO TOTAL ASSETS, INCLUDING THE INTEREST INCOME BOOKED AND DEBITED TO THE ACCOUNT OF RESPECTIVE BORROWER, AND QUA 7 ITA NOS. 11, 12 & 13/NAG/2015 WHICH THE ASSESSEE IS ENTITLED TO AND HAS CLAIMED DEDUCTION U/S 36(1)(VIIA) 8. AN ORDER OF ITAT, AHMEDABAD BENCH HAS ALSO BEEN CITED BEFORE US PRONOUNCED IN THE CASE OF KARNAVATI COOPERATIVE BANK 144 TTJ 769 (AHD) WHEREIN THE IDENTICAL ISSUE HAS BEEN DEALT WITH AT LENGTH AND THE CBDT INSTRUCTIONS HAVE ALSO BEEN CONSIDERED. IT IS ALSO WORTH TO MENTION THAT IN THIS DECISION AS WELL THE CASE OF SOUTHERN TECHNOLOGIES 320 ITR 577 (SC) HAS BEEN DISCUSSED AND FOLLOWED. WE HAVE ALSO NOTED THAT THE DECISION OF U.CO. BANK 237 ITR 889 (SC) WAS ALSO DISCUSSED FOR THE LEGAL PROPOSITION THAT A BEN EFICIAL CIRCULAR IS NOT TO BE TREATED AS INCONSISTENT WITH THE PROVISIONS OF STATUTE AND BINDING ON THE AUTHORITIES. ACCORDING TO THE HONBLE COURT, THE INTEREST IN RESPECT OF STICKY ADVANCES ARE TO BE TAXED ONLY WHEN ACTUALLY RECEIVED AS PRESCRIBED BY C BDT CIRCULAR. 8.1 THERE IS ONE MORE DECISION OF ITAT, BENGALORE BENCH - B, BENGALORE BEARING ITA NO.1528/BANG/1013 ASSTT. YEAR 2009 - 10 ORDER DATED 13 TH OF FEB., 2015 PRONOUNCED IN THE CASE OF ACIT V/S. BAGALKOT DISTRICT CENTRAL COOPERATIVE BANK WHEREIN IT WA S HELD THAT THE COOPERATIVE BANK BEING GOVERNED BY RBI GUIDELINES, THE PROVISIONS OF SECTION 43D OF THE ACT ARE ALSO APPLICABLE TO SUCH COOPERATIVE BANKS AND THERE IS NOTHING IN THE SECTION WHICH MAKES THE INTEREST INCOME OF COOPERATIVE BANK FROM NPAS TA XABLE ON ACCRUAL BASIS. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WHEREIN THE PROVISIONS OF SECTION 43D HAVE BEEN DISCUSSED IN THE LIGHT OF THE SOUTHERN TECHNOLOGIES 320 ITR 577 WE HEREBY HOLD THAT THE ASSESSEE BEING GOVERNED BY RBI GUIDELINES, HENCE TH E PROVISIONS OF SECTION 43D ARE ALSO APPLICABLE. HENCE INTEREST INCOME FROM NPA IS NOT TAXABLE ON ACCRUAL BASIS. THE VIEW TAKEN BY THE REVENUE AUTHORITIES ARE HEREBY REVERSED AND GROUND NO. 6 RAISED BY THE ASSESSEE IS ALLOWED. 5. APROPOS TO GROUND NO. 8 : THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.2,28,08,907/ - AS BAD AND DOUBTFUL DEBTS. ACCORDING TO THE AO THE SAID AMOUNT WAS LIABLE TO BE ADDED BACK IN THE COMPUTATION OF TOTAL INCOME. HOWEVER, INSTEAD OF THE ENTIRE AMOUN T THE ASSESSEE HAD ADDED BACK ONLY AN 8 ITA NOS. 11, 12 & 13/NAG/2015 AMOUNT OF RS.6,05,782/ - IN THE COMPUTATION OF TAXABLE INCOME. THE DIFFERENCE OF RS.2,22,03,125/ - WAS TAXED IN THE HANDS OF THE ASSESSEE. 6. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE HAS TRIED TO CLARIFY THE POSITION IN THE FOLLOWING MANNER : THE DEBIT ITEM AS APPEARING IN THE PROFIT & LOSS ACCOUNT AT RS.22808907/ - IS TOTAL OF DEBIT TO THE PROVISION FOR NPA INTEREST (P/L) A/C. EXCLUDING CREDIT ENTRIES IN THE SAID ACCOUNT AT RS.22203125/ - . BUT DUE TO ERRONEOUS PRESENTATION ON P/L THE ITEM AS APPEARING IN THE PROFIT & LOSS ACCOUNT FOR PROVISION FOR NPA INTEREST LOOKS AT RS.2,2808,907/ - DR. BECAUSE THE CREDIT ENTRIES FOR RS.2,22,03,125/ - ARE CLUBBED TO INCOME INTEREST ON LOAN S A/C CR IN PROFIT & LOSS ACCOUNT INSTEAD OF DEDUCTING IT FROM THE PROVISION FOR NPA INTEREST A/C (P/L ITEM) . THUS IT CAN BE WELL SAID THAT DURING THE YEAR PROVISION FOR THE NPA INTEREST A/C (P/L ITEM) WAS MADE AT RS.605782/ - ONLY (I.E. RS.22808907 RS .22203125). 6.1 IN SUPPORT OF THE ABOVE CONTENTION A CERTIFICATE OF THE CHARTERED ACCOUNTANT HAS ALSO BEEN FURNISHED BEFORE THE LEARNED CIT(APPEALS). HOWEVER, BY REFERRING THE PROVISIONS OF RULE 46A THE SAME WAS NOT ENTERTAINED BY LEARNED CIT(APPEALS) A LLEGED TO BE A FRESH EVIDENCE. 7. IN THE LIGHT OF THE ABOVE BACKGROUND IT IS WORTH TO MENTION THAT THE REVENUE AUTHORITIES HAVE REJECTED THE CONTENTION OF THE ASSESSEE IN A CRYPTIC MANNER. THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IS REQUIRED TO BE VERI FIED IN THE LIGHT OF THE REGULAR ACCOUNTS MAINTAINED BY THE ASSESSEE WHEREIN AN ERRONEOUS ENTRY WAS STATED TO BE PASSED. AS FAR AS THE LEGAL POSITION IS CONCERNED THIS ISSUE CAN BE DECIDED IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. 206 TAXMAN 182 (SC) OR 18 T AXMANN.COM 282 (SC). IT IS ALSO WORTH MENTIONING THAT THE PROVISIONS OF SECTION 36(1)(VII) AND THE PROVISIONS OF SECTION 36(1)(VIIA) ARE SEPARATE AND TO BE APPLIED AS PER THE FACTS OF THE CASE IN THE LIGHT OF EXPLANATION ANNEXED TO THE MAIN SECTION. THIS ISSUE CAN, THEREFORE, BE DECIDED AS PER THE 9 ITA NOS. 11, 12 & 13/NAG/2015 RATIO ALSO LAID DOWN IN THE CASE OF DCIT VS. KARNATAKA BANK LTD. 210 TAXMAN 265 (SC) OR 25 TAXMANN.COM 235 AND LORD KRISHNA BANK LTD. 195 TAXMAN 57 (KER.). SINCE THE RELEVANT FACTS ARE YET TO BE EXAMINED, HENCE WE DEEM IT PROPER AS WELL AS JUSTIFIABLE TO RESTORE THIS ISSUE BACK TO THE FILE OF THE AO TO B E DECIDED DENOVO AS PER LAW. THIS GROUND BY THE ASSESSEE MAY, THEREFORE, BE TREATED AS ALLOWED B UT FOR STATISTICAL PURPOSES. 8. REST OF THE APPEALS FOR ASSESSMENT YEAR 2008 - 09 AND ASSESSMENT YEAR 2010 - 11 ARE ALSO DECIDED ON THE SAME LINES AND THE DIRECTIONS AS MADE HEREIN ABOVE. 9. IN THE RESULT, ALL THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (M UKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 31 ST MAY, 2016. 10 ITA NOS. 11, 12 & 13/NAG/2015 COPY FORWARDED TO : 1. THE CHIKHALI URBAN COOP. BANK LTD., CHIKHALI, DR. SHYAMAPRASAD MUKHARJI MARG, SHIVAJI CHOWK, CHIKHALI, 433201, DIST. BULDHANA. 2. D.C.I.T., AKOLA CIRCLE, AKOLA. 3. COMMISSIONER OF INCOME - TAX - I, NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.