Bhagini Nivedita Sahakari Bank Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 136/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93762 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: General deduction; Bad and doubtful debts; Provision of bad debts
• Section: 145; 6; 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 136 /PN/201 4 ASSESSMENT YEAR : 20 10 - 11 BHAGINI NIVEDITA SAHAKARI BANK LTD., 387/388, NARAYAN PETH, RASHTRABHASHA BHAVAN, PUNE-30. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE. (APPELLANT) (RESPONDENT) PAN NO. AAAAB0289K ASSESSEE BY: SMT. DEEPA KHARE REVENUE BY: SHRI PANKAJ GARG DATE OF HEARING : 08-04-2015 DATE OF PRONOUNCEMENT : 29-05-2015 ORDER PER VIKAS AWASTHY, JM:- THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 31.10.2 013 FOR THE ASSESSMENT YEAR 2010-11. 2. IN APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ADDITION OF RS.68,50,765/- TOWARDS DISALLOWANCE OF DEDUCTIO N UNDER SECTION 36(1)(VIIA). 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DI RECTING THE ASSESSING OFFICER FOR VERIFYING THE INTEREST ON NPA OF RS.63,98,459/- AS TO EXAMINE REALISABILITY OF INTEREST ON EACH NPA ACCOUNT AND IGNORING THE RBI GUIDELINES AS ALSO THE CONSISTENT PR ECEDENTS OF THE HONBLE PUNE TRIBUNAL. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ADDITION OF RS.1,77,500/- TOWARDS DISALLOWANCE OF AMORTIZ ATION OF PREMIUM ON HTM SECURITIES. 2 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED UNDER MAH ARASHTRA CO- OPERATIVE SOCIETIES ACT AND IS ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEA R 2010-11 ON 27.09.2010 DECLARING TOTAL INCOME OF RS.8,44,80,270/-. THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SEC TION 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUED ON 20.09.2011 . THE ASSESSING OFFICER VIDE ORDER DATED 30.11.2012 MADE CERTAIN ADDITIONS/DISALLOWANCE. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30.11.2012, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORD ER PARTLY ACCEPTED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE HAS COME IN SECOND APPEAL IMPUGNING TH E ORDER OF THE FIRST APPELLATE AUTHORITY. 4. SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) OF TH E ACT. THE ASSESSEE IS CARRYING ON BANKING ACTIVITIES. ADMITTEDLY , ALL THE BRANCHES OF THE ASSESSEE ARE IN URBAN AREA AND AS SUC H, THERE ARE NO RURAL BRANCHES OF THE ASSESSEE. IN THE EARLIER ASSESSME NT YEARS, THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 36(1)(VIIA) OF TH E ACT. IN THE PRESENT ASSESSMENT YEAR, THERE HAS BEEN NO CHANG E IN THE ACCOUNTING PRINCIPLES FOLLOWED BY THE ASSESSEE OR CHANGE IN ANY BUS INESS ACTIVITY, HOWEVER, THE REVENUE HAS DISALLOWED THE CLAIM OF A SSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT IN AN ARBITRARY MANNER. THE 3 AUTHORITIES BELOW HAVE FOLLOWED THE DECISION OF THE HONBLE S UPREME COURT OF INDIA RENDERED IN THE CASE OF CATHOLIC SYRIAN BA NK LTD. VS. CIT REPORTED AS 343 ITR 270 (SC). THE CASE OF THE ASSESSE E IS DISTINGUISHABLE FROM THE SAID CASE. THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT HAVE TWO DISTINCT LIMBS. THE FIRST LIMB OF CLAUSE ( VIIA) STATES THAT ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY A NY SCHEDULED BANK/CO-OPERATIVE BANK SHOULD NOT EXCEED 7.5% OF THE TO TAL INCOME BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPT ER VIA. THE SECOND LIMB OF CLAUSE (VIIA) DEALS WITH THE RURAL BRANCHES OF T HE BANK. ACCORDING TO WHICH PROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCHES SHOULD NOT EXCEED 10% OF AGGREGATE ADVA NCES. THE CASE OF THE ASSESSEE IS COVERED BY THE FIRST LIMB OF SECTION 36 (1)(VIIA) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 36 OF PAPER BOOK, WHEREIN THE COMPUTATION OF TOTAL INCOME FOR THE ASSE SSMENT YEAR 2010-11 HAS BEEN GIVEN. THE LD. COUNSEL POINTED OUT THA T THE ASSESSEE HAS CREATED PROVISION OF BAD DEBTS TO THE TUNE OF RS.1,00 ,00,000/- AND THE AMOUNT DEDUCIBLE ACCORDING TO THE FIRST LIMB OF THE PRO VISIONS OF SECTION 36(1)(VIIA) OF THE ACT IS RS.68,50,765/-. THUS, THE ASSE SSEE HAS CLAIMED DEDUCTION WITHIN THE PERMISSIBLE LIMITS. THE LD. COUNSE L FOR THE ASSESSEE IN ORDER TO STRENGTHEN HER ARGUMENTS FURTHER PLACED RELIANCE ON BOARD CIRCULAR NO.464 DATED 18.07.1986 WHICH EXPLAINS THE A MENDMENT MADE BY INCOME TAX (AMENDMENT) ACT, 1986 WITH RESPECT T O SECTION 36(1)(VIIA) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE E XPLANATION-2 TO SECTION 36(1)(VII) OF THE ACT INSERTED BY THE FINANCE ACT, 2013, MAKES IT ABUNDANTLY CLEAR THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS WOULD BE 4 TREATED AS SINGLE ACCOUNT RELATED TO ALL TYPES OF ADVANC ES I.E. RURAL OR OTHERWISE. THUS, IT CAN BE SAFELY CONSTRUED THAT DEDUC TION IS ALLOWABLE IN CASE OF PROVISION FOR NON-RURAL ADVANCES ALSO. ON INTERP RETATION OF STATUTES, THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT REPORTED AS (2010) 328 ITR 81 (BOM). 5. THE SECOND ISSUE IN THE APPEAL RELATES TO INTEREST ON NPA ACCOUNTS. THE LD. COUNSEL SUBMITTED THAT SIMILAR ISSUE W AS RAISED BEFORE THE TRIBUNAL IN BUNCH OF APPEALS, ONE OF WHICH IS ITA NO.387/PN/2014 FOR THE ASSESSMENT YEAR 2010-11 DECIDED ON 28.11.2014. THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. THE THIRD ISSUE IN THIS APPEAL RELATES TO AMORTIZATION O F PREMIUM PAID ON GOVT. SECURITIES HELD UNDER HTM CATEGORY. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT SIMILAR ISSUE WAS RAISED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2009-10 IN ITA NO.690/PN/2013 DE CIDED ON 27.11.2013. THE CO-ORDINATE BENCH OF THE TRIBUNAL PLACED RELIANCE ON THE DECISION IN THE CASE OF NASHIK MERCHANTS CO-OPERATIVE BANK LTD. IN ITA NO.1254/PN/2011 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E. 7. ON THE OTHER HAND, SHRI PANKAJ GARG REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDING OF THE COMMISSIONER OF IN COME TAX (APPEALS). THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE BENEFIT OF SECTION 36 (1)(VIIA) OF THE ACT IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COUR T OF INDIA IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT (SUPRA). T HE HONBLE SUPREME COURT IN THE SAID JUDGEMENT HAS UNAMBIGUOUSLY HELD THAT THE 5 PROVISIONS OF CLAUSE (VIIA) APPLY ONLY TO RURAL ADVANCES. IT IS AN ADMITTED CASE OF THE ASSESSEE THAT ASSESSEE IS NOT HAVING ANY R URAL BRANCHES, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO CLAIM ANY DEDUC TION WHATSOEVER UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. SO FAR AS, THE OTHER TWO GROUNDS RAISED BY THE ASSESSE E IN ITS APPEAL, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANC E ON THE FINDINGS OF THE CIT(A). 8. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF BOTH SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. WE HAVE ALSO EXAMINED THE DECISIONS ON WHICH THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE. IT IS AN UNDISPUTED FACT TH AT THE ASSESSEE IS NOT HAVING ANY RURAL BRANCHES. THE CONTENTION OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT HAS TWO DIST INCT INDEPENDENT COMPONENTS. THE CASE OF THE ASSESSEE IS C OVERED BY THE PROVISIONS CONTAINED IN FIRST LIMB OF CLAUSE (VIIA). THE SECOND LIMB OF CLAUSE (VIIA) RELATES TO RURAL BRANCHES WHICH IS NOT APPLICAB LE IN THE CASE OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS TRIED TO CREATE DISTINCTION BETWEEN THE INSTANT CASE AND CATHOLIC SYRIAN B ANK LTD. VS. CIT (SUPRA). 9. BEFORE WE PROCEED FURTHER, IT IS ESSENTIAL TO RECAPITULAT E THE PROVISIONS OF SECTION 36(1)(VII) AND (VIIA) OF THE ACT, WHICH READS AS UNDER :- 36(1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREI N, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 6 (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF [ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECO VERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR]: [ PROVIDED THAT IN THE CASE OF [AN ASSESSEE] TO WHICH CLAUSE ( VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO AN Y SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHIC H SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROV ISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE.] [EXPLANATION 1. FOR THE PURPOSES OF THIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE AC COUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AN D DOUBTFUL DEBTS MADE IN THE ACCOUNTS OF THE ASSESSEE;] [EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT FOR THE PURPOSES OF THE PROVISO TO CLAUSE (VII ) OF THIS SUB-SECTION AND CLAUSE (V) OF SUB-SECTION (2), THE ACCOUNT REFE RRED TO THEREIN SHALL BE ONLY ONE ACCOUNT IN RESPECT OF PROVISION F OR BAD AND DOUBTFUL DEBTS UNDER CLAUSE (VIIA) AND SUCH ACCOUNT SHALL RELATE TO ALL TYPES OF ADVANCES, INCLUDING ADVANCES MADE BY R URAL BRANCHES;] [(VIIA) [IN RESPECT OF ANY PROVISION FOR BAD AND DO UBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING [* * *] A BANK INCO RPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON - SCHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CL AUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED M ANNER : [ PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF, FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT O F THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR:] [ PROVIDED FURTHER THAT FOR THE RELEVANT ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 A ND ENDING BEFORE THE 1ST DAY OF APRIL, 2005, THE PROVI SIONS OF THE FIRST PROVISO SHALL HAVE EFFECT AS IF FOR THE W ORDS FIVE PER CENT, THE WORDS TEN PER CENT HAD BEEN SUBSTITUTE D :] [ PROVIDED ALSO THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS O PTION, BE ALLOWED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPECIFIED IN THE FOREGOING PROVISIONS, FOR AN AMOUNT NOT EXCE EDING THE INCOME DERIVED FROM REDEMPTION OF SECURITIES IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT: 7 PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UNDER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN THE RETURN OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. ] [EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, RELEVANT ASSESSMENT YEARS MEANS THE FIVE CONSECUTIVE ASSESS MENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2000 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2005;] 10. A BARE READING OF CLAUSE (VII) & (VIIA) WOULD SHOW THAT BO TH CLAUSES DEAL WITH THE DIFFERENT ITEMS. THE PROVISIONS OF CLAUSE (VII) DEA L WITH BAD DEBTS, WHEREAS, PROVISIONS OF CLAUSE (VIIA) DEALS WITH PROVISIO N FOR BAD AND DOUBTFUL DEBTS. THE DISTINCTION WHICH THE LD. COUNSE L FOR THE ASSESSEE HAS TRIED TO CREATE BY DIVIDING THE PROVISIONS O F CLAUSE (VIIA) INTO TWO PARTS IS MERELY SELF-DRAWN. BOTH THE PARTS OF CLAUS E (VIIA) ARE JOINED WITH CONJUNCTION AND. THEREFORE, BOTH THE LIMBS OF CLAUSE (VIIA) HAVE TO BE READ TOGETHER AND NOT AS ALTERNATE. THE HONBLE S UPREME COURT OF INDIA IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT (SUPR A) HAS CATEGORICALLY HELD THAT THE PROVISIONS OF SECTION 36(1)(VII) DE ALS WITH GENERAL DEDUCTION AVAILABLE TO A BANK AND EVEN NON-BANKIN G BUSINESS. THE PROVISIONS OF SECTION 36(1)(VII) OPERATE IN THEIR OWN FIELD AN D ARE NOT RESTRICTED BY THE LIMITATION OF SECTION 36(1)(VIIA) OF THE ACT. A FTER GIVING DETAILED FINDINGS AND ELABORATING THE PROVISIONS OF BOTH THE CLAUSES, THE HONBLE APEX COURT CONCLUDED AS UNDER :- TO CONCLUDE, WE HOLD THAT THE PROVISIONS OF SECTIO N 36(1)(VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS. THE BAD DEBTS WRITTEN OFF IN DEBTS, OTHER THAN THOSE FOR WHICH THE PROVISION IS MADE UNDER CL AUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCT ION TO THE EXTENT OF DIFFERENCE BETWEEN THE DEBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISION FOR BAD AND DOU BTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA). THE PROVISO TO SECTION 3 6(1)(VII) WILL RELATE TO 36(2)(V) OF THE ACT. THUS, THE PROVISO WOULD NOT P ERMIT THE BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO RURAL LOANS WHILE, UNDER SECTION 36(1)(VII), THE ASSESSEE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HAVING BECOME BAD DEBT AND BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YE AR. THIS, OBVIOUSLY, 8 WOULD BE SUBJECT TO SATISFACTION OF THE REQUIREMENT S CONTEMPLATED UNDER SECTION 36(2). 11. THE HONBLE APEX COURT WHILE CONSIDERING THE ISSUE, HAS ALSO EXAMINED THE BOARD CIRCULAR NO.464 (SUPRA). THE HONBLE CO URT IN COURSE OF INTERPRETING THE PROVISIONS OF SECTION AND THE AMENDMENTS THERETO AND THE EXPLANATIONS AND CLARIFICATIONS GIVEN BY CIR CULARS OBSERVED :- THUS, THIS COURT WOULD BE MORE INCLINED TO GIVE AN INTERPRETATION TO THESE PROVISIONS WHICH WOULD SERVE THE LEGISLATIVE OBJECT AND INSTANT, RATHER THAN TO SUBVERT THE SAME. THUS, IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME CO URT OF INDIA IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT (SUPR A), WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, THE FIRST GROUND RAISE D BY THE ASSESSEE IN ITS APPEAL IS REJECTED. 12. THE NEXT GROUND RAISED BY THE ASSESSEE IN APPEAL IS WITH RESPECT TO INTEREST ON NPA. THE ASSESSEE BANK HAS BEEN CONSISTE NTLY FOLLOWING THE PRACTICE OF CREDITING INTEREST ACCRUED ON NPA ACCOUNTS T O OVERDUE INTEREST RESERVE AS PER THE GUIDELINES ISSUED BY RESERV E BANK OF INDIA. THE INTEREST ACTUALLY RECOVERED ON SUCH ACCOUNTS IS CR EDITED TO PROFIT & LOSS ACCOUNT AND DUE TAX IS PAID THEREON. THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS PLA CED RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF ACIT VS. RATANCH AND SHAH SAHAKARI BANK LTD. VIDE ITA NO.387/PN/2014 FOR ASSESSMEN T YEAR 2010-11 DECIDED ON 28.11.2014. WE FIND THAT CO-ORDINATE B ENCH OF THE TRIBUNAL HAS DECIDED BUNCH OF PETITIONS VIDE SINGLE ORDER, WH EREIN THE 9 ISSUE RELATING TO INTEREST ON NON-PERFORMING ASSETS (NPA) WAS DEALT WITH. THE FINDINGS OF THE TRIBUNAL ON THE ISSUE ARE AS UNDER :- 7. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED B Y THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE OMERGA JAN TA SAHAKARI BANK LTD. VIDE ORDER IN ITA NO.350/PN/2013 DATED 31.10.2013. IN THE SAID PRECEDENT, THE TRIBUNAL CONSIDERED THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR L TD., 330 ITR 440 (DEL) AS WELL AS THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MADRAS), WHICH HAD EXPRESSED DIVERGENT VIEWS WITH RESPECT TO THE I SSUE OF ACCRUAL OF INTEREST INCOME ON NPA ADVANCES. IN THE ABSENCE OF ANY JUDGEMENT OF THE JURISDICTIONAL HIGH COURT, A VIEW WHICH WAS FAVOURA BLE TO THE ASSESSEE WAS FOLLOWED BY THE TRIBUNAL AND THE ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD ., (1973) 88 ITR 192 (SC). THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 31.10.2013 (SUPRA) IS REPRODUCED AS UNDER :- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN SO FAR AS THE APPLICABILITY OF SECTION 43D OF THE ACT TO THE ASSESSEE IS CONCERNED, THERE IS A CONVERGENCE OF OPINION BETWEE N THE ASSESSEE AND THE REVENUE TO THE EFFECT THAT THE SAME IS NOT APPL ICABLE TO THE ASSESSEE. OSTENSIBLY, ASSESSEE IS A CO-OPERATIVE BANK CARRYIN G ON BANKING BUSINESS IN TERMS OF A LICENSE GRANTED BY RBI AND IS NOT A SCHEDULED BANK INCLUDED IN SECOND SCHEDULE OF RBI SO AS TO FALL WI THIN THE SCOPE OF SECTION 43D OF THE ACT. NOTABLY, SECTION 43D OF THE ACT PR ESCRIBES THAT INTEREST INCOME ON SUCH CATEGORIES OF BAD AND DOUBTFUL DEBTS AS PRESCRIBED BY THE RBI GUIDELINES SHALL BE CHARGEABLE TO TAX IN THE YE AR IN WHICH SUCH INTEREST INCOME IS CREDITED BY THE ASSESSEE IN THE PROFIT AN D LOSS ACCOUNT OR IN THE YEAR OF ACTUAL RECEIPT, WHICHEVER IS EARLIER. SINC E ASSESSEE IS NOT AN ENTITY COVERED WITHIN THE SCOPE OF SECTION 43D OF THE ACT, THE PRESENT CONTROVERSY CANNOT BE ADJUDICATED IN THE LIGHT OF SECTION 43D O F THE ACT, AND IT IS LIABLE TO BE DECIDED ON GENERAL PRINCIPLES AS TO WHETHER T HE IMPUGNED INCOME HAS ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER C ONSIDERATION. 9. IN THIS CONNECTION, WE FIND THAT THE VISAKHAPATN AM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOPERATIVE U RBAN BANK LTD. (SUPRA) HAS CONSIDERED AN IDENTICAL CONTROVERSY. THE ASSES SEE BEFORE THE VISAKHAPATNAM BENCH WAS A CO-OPERATIVE BANK OPERATI NG UNDER A LICENSE ISSUED BY RBI BUT WAS NOT A SCHEDULED BANK SO AS TO FALL WITHIN THE SCOPE OF SECTION 43D OF THE ACT. THE ISSUE RELATED TO TAXABILITY OF INTEREST INCOME RELATING TO NPAS, WHICH AS PER THE REVENUE W AS LIABLE TO BE TAXED ON ACCRUAL BASIS IN LINE WITH MERCANTILE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE THEREIN. THE ASSESSEE, ON THE OTHER H AND, CONTENDED THAT HAVING REGARD TO THE GUIDELINES ISSUED BY RBI REGAR DING ACCOUNTING OF INTEREST ON NPAS, NO INTEREST INCOME ACCRUED IN RES PECT OF NPAS AND THAT THE SAME WAS TO BE TAXED ONLY ON RECEIPT BASIS. TH E TRIBUNAL OBSERVED THAT THE QUESTION OF TAXABILITY OF INTEREST ON NPAS CLASSIFIED BY RBI, WAS CONSIDERED BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) WHEREIN AFTER CONSIDERING THE DECISION OF THE 10 HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHN OLOGIES LTD. (SUPRA) IT WAS HELD THAT INTEREST INCOME RELATABLE TO NPAS WAS NOT INCLUDIBLE IN TOTAL INCOME ON ACCRUAL BASIS SINCE THE SAME DID NOT ACCR UE TO THE ASSESSEE. THE FOLLOWING DISCUSSION BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD. ( SUPRA) IS WORTHY OF NOTICE :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. THE QUESTION OF TAXABILITY OF I NTEREST ON NPAS HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD (SUPRA); WHEREIN THE HO N'BLE DELHI HIGH COURT TOOK INTO ACCOUNT THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD (SUPRA). IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD, THE ASSESS EE THEREIN WAS A NON BANKING FINANCIAL COMPANY AND IT WAS ALSO BOUND BY THE PRUDENTIAL NORMS DIRECTIONS ISSUED BY THE RES ERVE BANK OF INDIA FOR INCOME RECOGNITION AND ASSET CLASSIFICATI ON. THE ASSESSEE DID NOT INCLUDE THE INTEREST INCOME RELATABLE TO NP A ASSETS IN ITS TOTAL INCOME. THE ASSESSING OFFICER, HOWEVER, ADDED THE SAID INTEREST AS THE INCOME OF THE ASSESSEE BY HOLDING T HAT IT HAD ACCRUED TO THE ASSESSEE EVEN IT WAS NOT REALIZED AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE LEARNED CIT (A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVE R, THE ITAT DELETED THE AFORESAID INCOME. HENCE THE REVENUE PRE FERRED APPEAL BEFORE THE HON'BLE DELHI HIGH COURT. 8.1 AFTER HEARING THE RIVAL SUBMISSIONS, THE HON'BL E DELHI HIGH COURT TOOK NOTE OF SEC.45Q OF RESERVE BANK OF INDIA ACT WHICH READS AS UNDER: CHAPTER IIIB TO OVERRIDE OTHER LAWS. 45Q. THE PROVISIONS OF THIS CHAPTER SHALL HAVE EFFE CT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FO RCE OR ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY SU CH LAW. THE HIGH COURT TOOK NOTE OF THE FACT THAT THE PROVI SION OF 45Q OF RESERVE BANK OF INDIA HAS OVERRIDING EFFECT OVER AN Y OTHER LAW. THEN THE HON'BLE HIGH COURT ALSO CONSIDERED ACCOUNT ING STANDARD AS-9 ON REVENUE RECOGNITION AND ALSO EXTRACTED FOLLOWING RELEVANT PORTION FROM THE SAID ACCOUNTING STANDARD: 9. EFFECT OF UNCERTAINTIES ON REVENUE RECOGNITION 9.1 RECOGNITION OF REVENUE REQUIRES THAT REVENUE IS A MEASURABLE AND THAT AT THE TIME OF SALE OR THE REND ERING OF THE SERVICE, IT WOULD NOT BE UNREASONABLE TO EXPECT ULTIMATE COLLECTION. 9.2 WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLEC TION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF RAIS ING ANY CLAIM, E.G., FOR ESCALATION OF PRICE, EXPORT INCENT IVES, INTEREST ETC., REVENUE RECOGNITION IS POSTPONED TO THE EXTEN T OF UNCERTAINTY INVOLVED. IN SUCH CASES, IT MAY BE APPR OPRIATE TO RECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAI N THAT THE ULTIMATE COLLECTION WILL BE MADE. WHERE THERE IS NO UNCERTAINTY AS TO ULTIMATE COLLECTION, REVENUE IS RE COGNIZED AT THE TIME OF SALE OR RENDERING OF SERVICE EVEN THOUG H PAYMENTS ARE MADE BY INSTALLMENTS. 11 9.3 WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING OF THE SERVICE, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO REFLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINALLY RECORDED. 9.4 AN ESSENTIAL CRITERION FOR THE RECOGNITION OF R EVENUE IS THAT THE CONSIDERATION RECEIVABLE FOR THE SALE OF G OODS, THE RENDERING OF SERVICES OR FROM THE USE OF OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERMINABLE. WHEN SUCH CONSIDERATION IS NOT DETERMINABLE WITHIN REASONABLE LIMITS, THE RECOGNITION OF REVENUE IS POSTPONED. 9.5 WHEN RECOGNITION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS REVENU E OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNIZED. 8.2 THE DELHI HIGH COURT ALSO CONSIDERED THE DECISI ON RENDERED IN THE FOLLOWING CASES: I) CIT VS. ELGI FINANCE LTD., 293 ITR 357 (MAD) II) CIT VS. KKM INVESTMENTS (CAL) SLP DISMISSED B Y SUPREME COURT (310 ITR 4) III) CIT VS. MOTOR CREDIT CO (P) LTD., 127 ITR 572 (MAD) IV) UCO BANK VS. CIT 237 ITR 889 (SC) V) CIT VS. SHOORJI VALLABHDAS & CO 46 ITR 144 (SC) VI) GODHRA ELECTRICITY CO. LTD., VS.CIT 225 ITR 746 VII) CIT VS. GOYAL M G GASES (P) LTD., 303 ITR 159 (DEL) VIII) CIT VS. EICHER LTD., ITA NO.431/2009 DATED 15 .7.2009 (DEL) 8.3 AFTER CONSIDERING THE ACCOUNTING STANDARD 9 AND THE VARIOUS CASE LAW LISTED ABOVE, THE HON'BLE DELHI HIGH COURT HELD THAT THE INTEREST ON NPA ADVANCE CANNOT BE TREATED AS ACCRU ED TO THE ASSESSEE. 8.4 BEFORE THE DELHI HIGH COURT, THE REVENUE TOOK S UPPORT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F SOUTHERN TECHNOLOGIES LTD (SUPRA). THE DELHI HIGH COURT CONS IDERED THE SAID DECISION OF HON'BLE APEX COURT AND EXPLAINED THE SA ME AS UNDER: WE HAVE ALREADY HELD THAT EVEN UNDER THE INCOME TA X ACT, INTEREST INCOME HAD NOT ACCRUED. MOREOVER, THIS SUB MISSION OF MR. SABHARWAL IS BASED ENTIRELY ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGY (S UPRA). NO DOUBT, IN FIRST BLUSH, READING OF THE JUDGMENT G IVES AN INDICATION THAT THE COURT HAS HELD THAT RESERVE BANK OF INDIA ACT DOES NOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. HOWEVER, WHEN WE EXAMINE THE ISSUE INVOLVED THEREIN MINUTELY AND DEEPLY IN THE CONTEXT IN WHICH THAT HAD ARISEN AND CERTAIN OBSERVATIONS OF THE APE X COURT CONTAINED IN THAT VERY JUDGMENT, WE FIND THAT THE P ROPOSITION ADVANCED BY MR.SABHARWAL MAY NOT BE ENTIRELY CORREC T. IN THE CASE BEFORE THE SUPREME COURT, THE ASSESSEE A NBFC DEBITED RS.81,68,516 AS PROVISION AGAINST NPA IN THE PROFIT AND LOSS ACCOUNT, WHICH WAS CLAIMED A S DEDUCTION IN TERMS OF SECTION 36(1) (VII) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW THE DEDUCTION CLAIM ED AS AFORESAID ON THE GROUND THAT THE PROVISION OF NPA W AS NOT IN THE NATURE OF EXPENDITURE OR LOSS BUT MORE IN THE N ATURE OF A 12 RESERVE, AND THUS NOT DEDUCTIBLE UNDER SECTION 36(I )(VII) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, DID NOT BRING TO TAX RS.20,34,605/- AS INCOME (BEING INCOME ACCRUED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING). THE DISPUTE BEFORE THE APEX COURT CENTERED AROUND DEDUCTIBILITY OF PROVISION FOR NPA. AFTER ANALYZING THE PROVISIONS OF THE RESERVE BANK OF INDIA ACT, THEIR LORDSHIPS OF THE A PEX COURT OBSERVED THAT IN SO FAR AS THE PERMISSIBLE DEDUCTIONS OR EXCLUSIONS UNDER THE ACT ARE CONCERNE D, THE SAME ARE ADMISSIBLE ONLY IF SUCH DEDUCTIONS/EXCLUSIONS SATISFY THE RELEVANT CONDITIO NS STIPULATED THEREFORE UNDER THE ACT. TO THAT EXTENT, IT WAS OBSERVED THAT THE PRUDENTIAL NORMS DO NOT OVERRIDE THE PROVISIONS OF THE ACT. HOWEVER, THE APEX COURT MADE A DISTINCTION WITH REGARD TO INCOME REC OGNITION AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENTIAL NORMS, EVEN THOUGH THE SAME DEVIATED FROM MERCANTILE SYSTEM OF ACCOUNTING AND/OR SECTION 45 (SIC. 145) OF THE INCOME TAX ACT. IT CAN BE SAID, THEREFORE, THAT THE APEX COURT APPROVED THE REAL I NCOME THEORY WHICH IS ENGRAINED IN THE PRUDENTIAL NORMS F OR RECOGNITION OF REVENUE BY NBFC. 9. THE HON'BLE SUPREME COURT IN THE CASE OF M/S SOU THERN TECHNOLOGIES LTD (SUPRA) DISSECTED THE MATTER INTO TWO PARTS VIZ., A) INCOME RECOGNITION AND B) PERMISSIBLE DEDUCTION/EXC LUSIONS UNDER THE INCOME TAX ACT. IN SO FAR AS INCOME RECOGNITION IS CONCERNED, THE HON'BLE SUPREME COURT HELD THAT SECTION 145 OF THE INCOME TAX ACT HAS NO ROLE TO PLAY AND THE ASSESSING OFFICER H AS TO FOLLOW RESERVE BANK OF INDIA DIRECTIONS 1998, SINCE BY VIR TUE OF 45Q OF THE RESERVE BANK OF INDIA ACT, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS OF RESERVE BANK OF INDIA VIS--VIS INCOM E RECOGNITION PRINCIPLES IN THE COMPANIES ACT 1956. IN SO FAR AS COMPUTATION OF INCOME UNDER THE INCOME TAX ACT IS CONCERNED, (WHIC H INVOLVES DEDUCTION OF PERMISSIBLE DEDUCTIONS AND EXCLUSIONS) THE ADMISSIBILITY OF SUCH DEDUCTIONS SHALL BE GOVERNED BY THE PROVISIONS OF THE INCOME TAX ACT. THE RELEVANT OBSE RVATIONS OF THE HON'BLE SUPREME COURT ARE EXTRACTED BELOW: APPLICABILITY OF SECTION 145 40. AT THE OUTSET, WE MAY STATE THAT IN ESSENCE RBI DIRECTIONS 1998 ARE PRUDENTIAL/PROVISIONING NORMS I SSUED BY RBI UNDER CHAPTER IIIB OF THE RBI ACT, 1934. THE SE NORMS DEAL ESSENTIALLY WITH INCOME RECOGNITION. THEY FORC E THE NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FINANC IAL ACCOUNTS. THEY FORCE THE NBFCS TO REFLECT TRUE AND CORRECT PROFITS. BY VIRTUE OF SECTION 45Q, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS 1998 VIS--VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIES ACT, 1956. THESE DIRECTIONS CONSTITUTE A CODE BY ITSELF. HOWEV ER, THESE DIRECTIONS 1998 AND THE IT ACT OPERATE IN DIFFERENT AREAS. THESE DIRECTIONS 1998 HAVE NOTHING TO DO WITH COMPU TATION OF TAXABLE INCOME. THESE DIRECTIONS CANNOT OVERRULE THE PERMISSIBLE DEDUCTIONS OR THEIR EXCLUSION UNDER THE IT ACT. THE INCONSISTENCY BETWEEN THESE DIRECTIONS AND COMPANIES ACT IS ONLY IN THE MATTER OF INCOME RECOG NITION AND PRESENTATION OF FINANCIAL STATEMENTS. THE ACCOU NTING POLICIES ADOPTED BY AN NBFC CANNOT DETERMINE THE TA XABLE INCOME. IT IS WELL SETTLED THAT THE ACCOUNTING POLI CIES FOLLOWED BY A COMPANY CAN BE CHANGED UNLESS THE AO COMES TO THE CONCLUSION THAT SUCH CHANGE WOULD RESULT IN UNDERST ATEMENT 13 OF PROFITS. HOWEVER, HERE IS THE CASE WHERE THE AO HAS TO FOLLOW THE RESERVE BANK OF INDIA DIRECTIONS 1998 IN VIEW OF SECTION 45Q OF THE RESERVE BANK OF INDIA AC T. HENCE, AS FAR AS INCOME RECOGNITION IS CONCERNED, SECTION 145 OF THE IT ACT HAS NO ROLE TO PLAY IN TH E PRESENT DISPUTE. 10. TURNING TO THE FACTS OF THE CASE BEFORE US, THE ASSESSEE HEREIN IS A COOPERATIVE BANK AND IT IS NOT IN DISPU TE THAT IT IS ALSO GOVERNED BY THE RESERVE BANK OF INDIA. HENCE THE DI RECTIONS WITH REGARD TO THE PRUDENTIAL NORMS ISSUED BY THE RESERV E BANK OF INDIA ARE EQUALLY APPLICABLE TO THE ASSESSEE AS IT IS APP LICABLE TO THE COMPANIES REGISTERED UNDER THE COMPANIES ACT. THE H ON'BLE SUPREME COURT HAS HELD IN THE CASE OF SOUTHERN TECH NOLOGIES LTD (SUPRA), THAT THE PROVISION OF 45Q OF RESERVE BANK OF INDIA ACT HAS AN OVERRIDING EFFECT VIS--VIS INCOME RECOGNITION P RINCIPLE UNDER THE COMPANIES ACT. HENCE SEC.45 Q OF THE RBI ACT SHALL HAVE OVERRIDING EFFECT OVER THE INCOME RECOGNITION PRINCIPLE FOLLOW ED BY COOPERATIVE BANKS ALSO. HENCE THE ASSESSING OFFICER HAS TO FOLL OW THE RESERVE BANK OF INDIA DIRECTIONS 1998, AS HELD BY THE HON'B LE SUPREME COURT. 10.1 BASED ON THE PRUDENTIAL NORMS, THE ASSESSEE HE REIN DID NOT ADMIT THE INTEREST RELATABLE TO NPA ADVANCES IN ITS TOTAL INCOME. THE HON'BLE DELHI HIGH COURT IN THE CASE OF VASISTH CHA Y VYAPAR LTD (SUPRA) HAS HELD THAT THE INTEREST ON NPA ASSETS CA NNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE. IN THIS REGARD, THE F OLLOWING OBSERVATIONS OF HON'BLE DELHI HIGH COURT IN THE ABO VE CITED CASE ARE RELEVANT: WHAT TO TALK OF INTEREST, EVEN THE PRINCIPLE AMOUN T ITSELF HAD BECOME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME THEREUPON HAS NO T ACCRUED. THE SAID DECISION OF THE HON'BLE DELHI HIGH COURT I S EQUALLY APPLICABLE TO THE ISSUE IN OUR HANDS. ACCORDINGLY W E DO NOT FIND ANY INFIRMITY WITH THE DECISION OF THE LEARNED CIT (A) IN HOLDING THAT THE INTEREST INCOME RELATABLE ON NPA ADVANCES DID NOT A CCRUE TO THE ASSESSEE. ACCORDINGLY WE UPHOLD HIS ORDER. 10. FOLLOWING THE AFORESAID DISCUSSION, WHICH HAS BEEN RENDERED ON AN IDENTICAL ISSUE UNDER SIMILAR CIRCUM STANCES, WE FIND NO REASONS TO INTERFERE WITH THE ULTIMATE CONCLUSION O F THE CIT(A) IN DELETING THE IMPUGNED ADDITION RELATING TO INTEREST INCOME I N RESPECT OF NPAS. 11. SO, HOWEVER, THE LEARNED DEPARTMENTAL REPRESENT ATIVE HAS SUBMITTED THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MAD RAS) HAS DIFFERED WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) ON A SIMILAR ISSUE , I.E. RELATING TO INTEREST INCOME ON NPAS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER POINTED OUT THAT THE HONBLE MADRAS HIGH CO URT FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SOUTHERN TECHNOLOGIES LTD. (SUPRA) IN HOLDING THAT INTEREST ON NPAS WAS ASSESSABLE TO TAX ON ACCRUAL BASIS. WE HAVE CAREFULLY CONSIDE RED THE SUBMISSIONS PUT-FORTH BY THE LEARNED DEPARTMENTAL REPRESENTATIV E BASED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF SAKTHI FINANCE LTD. (SUPRA). THE CONTROVERSY BEFORE THE HONBLE M ADRAS HIGH COURT RELATED TO NON-RECOGNITION OF INTEREST INCOME ON NP AS BY THE ASSESSEE FOLLOWING THE RBI GUIDELINES. THE HONBLE MADRAS H IGH COURT TOOK THE 14 VIEW THAT THE JUDGEMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) ALSO APPLIED TO THE INCOME RECOGNITION NORMS PROVIDED BY RBI AND THEREFORE IT HELD THE INT EREST INCOME ON NPAS IS LIABLE TO BE TAXED ON ACCRUAL BASIS AND NOT IN T ERMS OF RBIS GUIDELINES. BUT THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) HAS TAKEN A VIEW THAT SOUTHERN TECHNOL OGIES LTD. (SUPRA) CASE DID NOT APPLY TO THE INCOME RECOGNITION NORMS PRESC RIBED BY RBI. OSTENSIBLY, THERE IS DIVERGENCE OF OPINION BETWEEN THE HONBLE DELHI HIGH COURT AND THE HONBLE MADRAS HIGH COURT AS NOTED BY THE HONBLE MADRAS HIGH COURT IN ITS ORDER. 12. IN SO FAR AS, PRESENT CASE IS CONCERNED THERE I S NO JUDGMENT OF THE JURISDICTIONAL HIGH COURT. WE ARE FACED WIT H TWO CONTRARY JUDGMENTS OF THE NON-JURISDICTIONAL HIGH COURT. IN SUCH A SITUATION, WE ARE INCLINED TO PREFER A VIEW WHICH IS FAVOURABLE OF TH E ASSESSEE FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC). 13. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, WE ARE INCLINED TO FOLLOW THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD. (SUPRA) AND ACCOR DINGLY THE ORDER OF THE CIT(A) IS LIABLE TO THE AFFIRMED. WE HOLD SO. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 8. IT WAS ALSO A COMMON POINT BETWEEN THE PARTIES B EFORE US THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDE NTICAL TO THOSE CONSIDERED BY US IN THE CASE OF THE OMERGA JANTA SA HAKARI BANK LTD. (SUPRA) AND, THUS FOLLOWING THE SAID PRECEDENT THE PRESENT CLAIM OF THE ASSESSEE DESERVES TO BE UPHELD. THUS, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVENUE HAS TO FAIL ON THIS ASPECT . 13. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO ONE ALREADY DECIDED BY THE CO-ORDINATE BENCH IN THE CASE OF ACIT VS . RATANCHAND SHAH SAHAKARI BANK LTD. (SUPRA). WE DO NOT FIND ANY REASO N TO DEVIATE FROM THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL ON THIS IS SUE. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO CONTR OVERT THE FINDINGS OF THE TRIBUNAL. ACCORDINGLY, THE SECOND GROUND OF APPEAL IS ACCEPTED. 14. THE THIRD AND LAST GROUND RAISED BY THE ASSESSEE IS DISALLOWANCE OF AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES HELD UNDER HTM CATEGORY. 15 WE OBSERVE THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009-10. THERE HAS BEEN NO CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE IN IMPUGNED ASSESSM ENT YEAR. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO RE FUTE THE FINDINGS OF THE TRIBUNAL IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. THUS, THE ADDITION OF RS.1,77,500/- TOWARDS DISALLOWANCE OF AMORTIZATION OF PREMIUM ON GOVT. SECURITIES HELD UNDER HTM CATEGORY IS DELETED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF MAY, 2015 AT PUNE. SD/- SD /- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH MAY, 2015 SUJEET COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I , PUNE 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, PUNE