Assistant Commissioner of Income-tax, V. The Solapur District Central Co-op. Bank Ltd.,Ltd.,

ITA 1419/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7685 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1419/PUN/2016 / ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE-1, SOLAPUR . /APPELLANT VS. THE SOLAPUR DISTRICT CENTRAL CO-OPERATIVE BANK LTD., 207-209, GOLD FINCH PETH, SOLAPUR 413 001 PAN : AAATT9561B . / RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI MUKESH JHA, JCIT / DATE OF HEARING : 03.05.2018 / DATE OF PRONOUNCEMENT: 09.05.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF C IT(A)-7, PUNE, DATED 01-04-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. REVENUE RAISED TOTAL 9 GROUNDS. ALL THESE GROUNDS RE VOLVE AROUND THE SOLITARY ISSUE OF DELETION OF ADDITION BY THE CIT(A) ON AC COUNT OF INTEREST ACCRUED ON NON-PERFORMING ASSETS U/S.43D OF THE I.T. ACT, 1961. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A COOPERATIVE SOCIETY FORMED UNDER MAHARASHTRA STATE COO PERATIVE SOCIETIES ACT, 1961. ASSESSEE FILED THE RETURN OF INCOME O N 29-09-2012 DECLARING TOTAL INCOME OF RS.39,32,53,548/-. ASSESSEE FILED THE REVISED INCOME ON 31-10-2013 DECLARING TOTAL INCOME OF RS.48,56,30,86 0/-. IN 2 THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE H AS SHOWN NPA INTEREST OVERDUE AMOUNTING TO RS.10,08,15,871/- RECEIVABLE FROM VARIOUS PARTIES. HOWEVER, REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE AO DISALLOWED THE SAID SUM OF RS.10,08,15,871/-. A T THE END OF ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT THE AO AS SESSED THE INCOME AT RS.58,64,46,730/-. 4. AGGRIEVED WITH THE ORDER OF AO, ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT(A). CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y RS. 2008-09, 2009-10 & 2011-12 AND THE DECISIONS OF TRIBUNAL IN THE C ASE OF OMERGA JANTA SAHAKARI BANK LTD. DATED 30-10-2013, OSMAN ABAD JANTA SAHAKARI BANK LTD. VIDE ITA NO.795/PN/2011 DATED 3 1-08-2012. CIT(A) ALSO DISCUSSED THE FOLLOWING JUDGMENTAL LAWS ON THIS ISS UE WHILE GIVING RELIEF TO THE ASSESSEE (CONTENTS OF PARA NOS. 6 TO 6.4 OF THE ORDER OF CIT(A) ARE RELEVANT IN THIS REGARD) : 1. CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. 128 DTR 0209 DATED 11-01-2015 2. SOUTHERN TECHNOLOGIES LTD. VS. JCIT 320 ITR 577 (SC ) 3. M/S. VASISTH CHAY VYAPAR LTD. 330 ITR 440 (DELHI) 4. CIT VS. SAKTHI FINANCE LTD. 352 ITR 102 (MADRAS) 5. AGGRIEVED WITH THE ORDER OF CIT(A) REVENUE FILED THE PRE SENT APPEAL RAISING THE SOLITARY ISSUE REFERRED ABOVE. 6. AT THE OUTSET, NARRATING THE ABOVE FACTS BEFORE US, L D. COUNSEL FOR THE ASSESSEE ARGUES THAT PROVISIONS OF SECTION 43D APP LY TO ALL THE BANKS INCLUDING THE COOPERATIVE BANKS. FURTHER, LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STANDS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND OTHER DECISIONS/JUDGMENTS. 7. LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO DUTIFULLY. 3 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS O F THE REVENUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIN D THE CIT(A) DISCUSSED THE ISSUE IN PARA NOS. 6 TO 6.4 OF HIS ORDER AND ALLOWED THE GROUND RELATING TO INTEREST ACCRUED ON NPA A MOUNTING TO RS.10,08,15,871/-. WHILE DOING SO, HE EXPLAINED THE PROVISIONS OF SECTION 43D OF THE ACT AND RELIED ON THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JCIT (COIMBATORE) 320 ITR 577 (SC), JUDGMENT OF HONBLE DELHI HIGH COURT IN TH E CASE OF M/S. VASISTH CHAY VYAPAR LTD. 330 ITR 440 (DELHI) AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YRS. 2008-0 9, 2009-10 & 2011-12. ON PERUSAL OF THE FINDING GIVEN BY THE CIT(A), WE FIND IT RELEVANT TO EXTRACT THE OPERATIONAL PARAS AND THE SAME READ AS UN DER : 6.2 THE CRUX OF JUDICIAL ANALYSIS IS THAT, FIRST TH ERE SHOULD BE NPA. SECONDLY, INTEREST ON NPA SHOULD NOT HAVE BEEN ACCR UED OR REALIZED. THE ONLY INTEREST ON NPA DIRECTLY TAKEN TO BALANCE SHEE T WITHOUT ROUTING THROUGH PROFIT AND LOSS ACCOUNT IS NOT TO BE CONSID ERED AS INCOME OF THE APPELLANT. 6.2.1 THE FIRST EXERCISE IS CHARACTERIZATION OF NPA . THE SECOND EXERCISE WILL BE INTEREST NONE REALIZE OR ACCRUED ON THIS NP AS. IN CASE OF SCHEDULED BANKS AND FINANCIAL INSTITUTION AND PUBLI C COMPANY MENTIONED IN SECTION 43D THE RULES MENTIONED IN 6EA AND 6EB W ILL BE APPLICABLE FOR CHARACTERIZATION OF NPA. AS PER RULE 6EB FOR PUBLIC COMPANY NON RECEIPT OF INTEREST FOR MORE THAN TWO YEARS CHARACTERIZES N PA. FROM THE DECISION OF M/S. VASISTH CHAY VYAPAR LTD NON RECEIPT OF INTE REST FOR PERIOD MORE THAN SIX MONTHS WILL BE CHARACTERIZES NPA AS PER GU IDELINES OF THE RBI. AS PER CBDT CIRCULAR DATED 09/10/1984 THE PERIOD FO R WHICH DEFAULT ON INTEREST SHOULD HAVE BEEN MORE THAN THREE YEARS. AF TER INTRODUCTION OF SECTION 43D WITH EFFECT FROM 1/4/1991 OBVIOUSLY THE CIRCULAR WILL NOT APPLY TO THE ENTITYS MENTIONED IN SECTION 43D. THE ENTITYS WHICH ARE NOT COVERED UNDER SECTION 43D FOR THEM JUDICIAL PRECEDE NTS SHOULD BE FOLLOWED WHICH RELIES ON RBI GUIDELINES WHERE MORE THAN SIX MONTHS DEFAULT AS MENTIONED ABOVE WILL BE CHARACTERIZED AS NPA, THOUGH IT APPEARS THAT CBDT CIRCULAR DATED 09/10/1984 IS STIL L APPLICABLE. 6.2.2 FROM THE FACTS OF THE VASISHTA CHAY VYAPAR ( SUPRA), IT IS VERY CLEAR THAT NO AMOUNT OF INTEREST WAS RECEIVED FOR M ORE THAN TEN YEARS. THE DELHI HIGH COURT HAS OBSERVED THAT, WHEN THERE IS UNCERTAINTY IN RECOVERY IN PRINCIPAL AMOUNT ITSELF WHAT TO TALK AB OUT RECOVERY OF INTEREST. THIS SHOWS THAT, ON ALL ACCOUNTS THE AMOUNT HAD BEC AME NPA. FROM THE FACTS OF THE SAKTHI FINANCE LTD. (SUPRA), IT IS VERY CLEAR THAT INTEREST AMOUNT ON NPA WAS ADDED BACK BY THE ASSESS ING OFFICER. THE MADRAS HIGH COURT OBSERVED THAT , MERE CHARACTERIZA TION OF AN ACCOUNT AS A NPA WOULD NOT BY ITSELF BE SUFFICIENT TO SAY T HAT THERE WAS UNCERTAINTY AS REGARDS RELIABILITY OF INCOME OR INT EREST INCOME THEREON. ACCRUAL OF INTEREST IS A MATTER OF FACT TO BE DECID ED SEPARATELY FOR EACH 4 CASE ON THE BASIS OF EXAMINATION OF THE FACTS AND C IRCUMSTANCES. THIS SHOWS THAT, WHETHER THE AMOUNT HAS BECOME NPA OR NO T ITSELF WAS DOUBTFUL AND THEREFORE THE HIGH COURT DIRECTED AO T O FIND OUT WHETHER AMOUNTS HAD BECOME NPA. 6.2.3 THE ABOVE ANALYSIS SHOWS THAT, WHETHER AMOUN T HAS BECOME NPA OR NOT IS TO BE DECIDED FIRST THEN TREAT MENT OF THE INTEREST THEREON IS TO BE CONSIDERED FOR OFFERING TO INCOME TAX ON THE BASIS OF ACCRUAL OR RECEIPT BASIS. 6.3 FROM THE FACTS OF THE CASE, IT IS APPARENT FRO M THE RECORD THAT APPELLANT HAS RECEIVED INTEREST AFTER RECOVERY OF NPA AN AMOUNT OF RS.4,19,53,662/-. 6.4 RESPECTFULLY FOLLOWING THE DECISION OF ITAT PU NE IN THE CASE OF APPELLANT FOR A.Y. 2008-09, 2009-10 AND 2011-12 THE AMOUNT OF RS.10,08,15,871/- CLAIMED AS NPA IS NOT TO BE TAXED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE GROUND NO.1 OF THE A PPEAL IS ALLOWED. FURTHER ON THE SIMILAR ISSUE, THE TRIBUNAL IN THE ASSESSEE S OWN CASE VIDE ITA NO.106/PN/2015 & CO NO.05/PUN/2016 AND OTHERS FOR A.Y. 2011-12 IN ITS CONSOLIDATED ORDER DATED 04-02-2016 H AS OBSERVED AS UNDER : 14. WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN KOLHAPUR MAHILA SAHAKARI BANK LTD. VS. ITO IN ITA NO.01/PN/2013, RE LATING TO ASSESSMENT YEAR 2009-10, VIDE ORDER DATED 29.01.201 4. THE TRIBUNAL IN TURN FOLLOWING THE RATIO LAID DOWN BY THE PUNE BENC H OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.79 5/PN/2011, ORDER DATED 31.08.2012, HELD AS UNDER:- 2. THE ASSESSEE IS A CO-OPERATIVE BANK ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIV ING LOANS TO MEMBERS. IT HAS FILED ITS RETURN OF INCOME ON 11.0 9.2009 FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT 14,57,840/-. IN THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAD NOT CREDITED INTEREST RECEIVABLE OR AC CRUED ON NON- PERFORMING ASSETS (HEREINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2008-09. THE ASSES SING OFFICER AFTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSE SSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED TO REGULAT E THE INCOME TAX LAW AND THE ASSESSEE WAS LIABLE TO BE ASSESSED ON A CCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BENEFITS EXTE NDED TO SCHEDULE BANK, PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANI ES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO-OP ERATIVE BANK AND (II) THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASS ESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/- ADVANCE CLAIMED TO BE NPA ACCOUNT. THE MATTER WAS CARRIED BEFORE THE FIR ST APPELLATE AUTHORITY WHEREIN, FOLLOWING THE OSMANABAD JANTA SA HAKARI BANK LTD. IN ITA NO.795/PN/2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SAME HAS BEEN OPPOSE D BEFORE US ON BEHALF OF REVENUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT IN OSMANABAD JANTA SAHAKARI BA NK LTD. (SUPRA) THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOU R OF ASSESSEE BY OBSERVING AS UNDER: 5 7. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS DIRECTLY TAKEN THE INTEREST TO THE BALANCE SHEET AN D IT IS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVE R, THE ISSUE OF THE TAXABILITY OF THE INTEREST ON THE STIC KY LOSSES/ADVANCES, IS COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THE COORDINATE BENCHES IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD., VIJAYAWADA (SUPR A) AND KARNAVATI COOPERATIVE BANK LTD. (SUPRA). WE FI ND NO REASON TO INTERFERE WITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY THE SAME IS CONFIRMED. IN THE RESU LT, THE REVENUES GROUND IS DISMISSED. THE ABOVE DECISION HAS BEEN FOLLOWED IN (I) ACIT, C IRCLE-3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BANK LTD. ITA NO.793/PN/2011, (II) ACIT, CIRCLE-3 V/S SIDHESHWAR SAHAKARI BANK LTD. ITA NO.794/PN/2011, (III) ACIT (CENTRAL) V/S LATUR URBAN CO-OPERATIVE BANK LTD. ITA NO.792/PN/2011 AND (IV) ASST. CIT, CIRCLE-1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011. 15. THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. D EOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.53 OF 20 14 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON N PAS IS NOT TAXABLE IN THE HANDS OF ASSESSEE, IN VIEW OF THE GUIDELINES IS SUED BY THE RBI. 16. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST ACCRUED ON NPAS. THE GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS DISMISSED. 9. CONSIDERING THE SETTLED NATURE OF ISSUE RELATING TO TAXA TION OF INTEREST ACCRUED ON NPAS, WE FIND THE SAME STANDS COVER ED IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE AND OTHERS. THEREFORE, WE UPHOLD THE ORDER OF CIT(A) DELETING THE ADDITION. ACCORDINGL Y, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MAY, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 09 TH MAY, 2018 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-7, PUNE 4. CIT-7, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.