The DCIT, Circle-5(3), Ahmedabad V. The Sarangpur Co.Op. Bank Ltd., Ahmedabad

ITA 173/AHD/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1043 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Bad and doubtful debts; Notional interest
• Section: 143(3); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 173/AHD/2016 2007-08 DCIT CIRCLE-5(3) AHMEDABAD THE SARANGPUR CO- OP.BANK LTD. PRITAMNAGAR FIRST DHAL ELLISBRIDGE, AHMEDABAD-380006 PAN: AAAAT 2465 R 2. 174/AHD/2016 2009-10 -DO-REVENUE -DO-ASSESSEE 3. 175/AHD/2016 2011-12 ACIT CIRCLE-11 AHMEDABAD -DO-ASSESSEE REVENUE BY : SHRI RAJDEEP SINGH, DR ASSESSEE BY : SHRI S.N. DIVATIA, AR / DATE OF HEARING 27/06/2016 / DATE OF PRONOUNCEMENT 27/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGA INST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-5, AHMEDABAD IDENTICALLY DATED 16/11/2015 FOR ASSESSM ENT YEARS (AYS) 2007-08, 2009-10 & 2011-12. SINCE COMMON ISSUES (EXCEPT QUANTUM) ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 2 - AND FACTS ARE INVOLVED IN THESE APPEALS, THESE ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. WE THUS PROCEED WITH THE FACTS WITH THE ASSESSEES APPEAL I N ITA NO.173/AHD/2016 FOR AY 2007-08 AS A LEAD CASE. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATER IALS ON RECORD ARE AS UNDER:- 2.1. ASSESSEE IS BANK WHO ELECTRONICALLY FILED ITS RETURN OF INCOME FOR AY 2007-08 DECLARING TOTAL LOSS OF RS.(-)10,26,419/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT') VIDE ORDER DATED 29.12.2015 AND THE ADDITION ON ACCOUNT OF ACCRUED INTEREST ON NPA ADVANCE AMOUNTING TO RS.85,36,517/- WAS MADE BY THE ASSESSING OFFICER (AO). AGGRIEVED BY THE ORDER O F THE AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE O RDER DATED 12/08/2010 (IN APPEAL NO.CIT(A)-XVI/DCIT.CIR.11/182/09-10), CO NFIRMED THE ADDITION ON ACCOUNT OF INTEREST ACCRUED ON NPA. TH EREAFTER, ASSESSEE CARRIED THE MATTER BEFORE THE HONBLE TRIBUNAL WHO VIDE ORDER DATED 25/01/2011 IN ITA NO.2338/AHD/2010 SET ASIDE THE CA SE TO THE FILE OF LD.CIT(A) TO REDECIDE THE ISSUE AS PER THE DIRECTIO NS CONTAINED THEREIN. PURSUANT TO THE DIRECTIONS OF THE ITAT, LD.CIT(A) V IDE HIS ORDER DATED 24/01/2013 IN APPEAL ORDER NO.CIT(A)XVI/DCIT/CIR.11 /412/11-12 UPHELD THE ADDITION MADE BY THE AO AND BY FURTHER E XERCISING POWERS U/S.251 OF THE ACT ENHANCED THE ADDITION MADE BY TH E AO ON ACCOUNT OF ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 3 - ACCRUED INTEREST ON NPA FROM RS.85,36,517/- TO RS.1 ,16,77,000/-. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE CARRI ED THE MATTER BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 21/0 6/2013 IN ITA NOS.529 & 530/AHD/2013 RESTORED THE ISSUE BACK TO A O FOR A FRESH DECISION AS PER THE DIRECTIONS CONTAINED IN THE ORD ER. PURSUANT TO THE DIRECTIONS OF HONBLE TRIBUNAL, AO VIDE ORDER DATED 29/02/2015, PASSED U/S.143(3) R.W.S.254 OF THE ACT, DETERMINED THE TOT AL INCOME AT RS.1,10,45,510/-. AGGRIEVED BY THE ORDER OF AO, AS SESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO VIDE ORDER DATED 16 /11/2015 (IN APPEAL NO.CIT(A)-5/DCIT CIR.5(3)/109/2014-15) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING EFFECTIVE GROUND :- (1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,16,77,000/- MADE ON ACCOUNT OF ACCRUED INTE REST ON NPAS. 2.2. THE AO DURING THE COURSE OF ASSESSMENT PROCEED INGS, NOTICED THAT ASSESSEE HAD NOT OFFERED THE INTEREST ON NPA ACCOUN TS, TO TAX. AO WAS OF THE VIEW THAT ASSESSEE WAS NOT A SCHEDULED BANK AND THEREFORE ASSESSEE COULD NOT CLAIM BENEFIT OF PROVISIONS OF SECTION 43 D OF THE ACT. HE ALSO NOTED THAT THE CONTENTION OF THE ASSESSEE FOR TAXIN G OF REAL INCOME WAS NOT APPLICABLE TO THE ASSESSEE BECAUSE SECTION 145 OF THE ACT PRESCRIBES ONLY TWO METHODS OF ACCOUNTING, I.E. CASH METHOD AN D ACCRUAL METHOD. HE NOTICED THAT SINCE THE ASSESSEE WAS FOLLOWING ME RCANTILE METHOD OF ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 4 - ACCOUNTING AND REFLECTING ALL THE EXPENDITURE BY FO LLOWING ACCRUAL METHOD, ASSESSEE SHOULD HAVE ALSO FOLLOWED THE SAME METHOD FOR CALCULATING THE INCOME. HE ALSO NOTED THAT ASSESS EE WAS NOT ABLE TO EFFECTIVELY ESTABLISH THAT THERE WAS UNCERTAINTY WI TH REGARD TO THE REALISABILITY AND INTEREST FROM THE BORROWERS AS AS SESSEE HAD ALSO FILED LEGAL SUIT OF RECOVERY IN MAJORITY OF THE CASE AND HAD ALSO OBTAINED DECREE FROM THE COURT BUT HAD NOT TAKEN ANY FURTHER ACTION FOR RECOVERY OF THE OUTSTANDING DUES. HE THEREFORE HELD THAT THE AMOUN T OF RS.1,16,77,000/- BEING ACCRUED INTEREST ON NPAS SHOULD BE CONSIDERED AS INCOME AND ACCORDINGLY MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO DECIDE D THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- DECISION: 3.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE APPELLANT. IN THIS CASE ORIGINAL ASSESSMENT U/S.143 (3) WAS MADE ON 29.12.2009 AFTER MAKING ADDITION OF RS.85,36,517/- ON ACCOUNT OF ACCRUED INTEREST ON NON-PERFORMING ASSETS. THE CIT(A) HAS C ONFIRMED THIS SAID ADDITION. THE ITAT VIDE ITS ORDER DATED 25.1.2011 H AS RESTORED THE MATTER TO THE FILE OF CIT(A). THE CIT(A) HAS PASSED ORDER ON 24.1.2013 UPHOLDING THE ADDITION BY ENHANCING IT TO RS. 1,16,77,000/-. THE HON'BLE ITAT HAS RESTORED THE MATTER TO THE FILE OF A.O. VIDE ITS ORDER DATED 21.06.2013 WITH A DIRECTION TO OBTAIN THE CERTIFICATE ABOUT THE STATUS OF BANK AND ASCERTAIN THE STATUS OF EACH PARTY. THE RELEVANT PORTION OF THE ORDER OF TH E ITAT IS REPRODUCED AS UNDER:- 'WITH THESE BRIEF BACKGROUNDS, WE HAVE HEARD BOTH T HE SIDES. ALTHOUGH THE ASSESSEE IS BEFORE US FOR THE SECOND TIME, BUT STIL L WE FEEL THAT SOME OF THE AREAS OF THE DISPUTE HAVE REMAINED UNANSWERED. FIRS T QUESTION WHICH IS YET TO BE ADDRESSED IS WHETHER THE ASSESSEE IS A SCHEDULED BANK OR NOT. IN THIS REGARD, THE ASSESSEE IS EXPECTED TO PLACE ON RECORD THE REQUISITE EVIDENCE, ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 5 - THROUGH WHICH IT CAN BE ASCERTAINED THAT THE ASSESS EE FALLS UNDER ANY OF THE CATEGORY AS PRESCRIBED IN EXPLANATION TO SECTION 43 D OF THE ACT. BECAUSE OF THIS REASON, WE HEREBY DIRECT THE ASSESSEE TO OBTAI N THE REQUISITE CERTIFICATE FROM THE CONCERNED AUTHORITY CLEARLY MENTIONING THE STATUS OF THE ASSESSEE BANK, AND PLACE THE SAME BEFORE THE AO. NEXT IS THE QUESTION OF THE ACCRUAL OF THE INTEREST ON 'NPA '. ALTHOUGH A SCHEDULED BANK IS REQUIRED TO FOLLOW THE PRUDENTIAL NORMS ISSUED BY THE RBI FROM TIME TO TIME, BUT SIMULTANEOUSLY FOR TAXATION PURPOSE, THE TAX PAYER IS REQUIRED TO FOLLOW THE PROVISIONS OF THE I.T. ACT. IN THIS REGARD, WE MAY LIKE TO MENTION THAT THE ITAT, AHMEDABAD IN THE CASE OF KAR NAVATI CO-OP. BANK LTD. VS. DCIT, 134 ITD 486 (AHD) HAS OPINED THAT IN A SI TUATION WHERE A COOPERATIVE BANK HAD FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, BUT NEITHER CREDITED INTEREST IN THE PROFIT & LOSS ACCOUNT NOR OFFERED FOR TAXATION, THE AMOUNT OF INTEREST OF 'NPA ', IN TERMS OF CBDT CIRC ULAR DATED 6.10.1952 NEED NOT TO BE INCLUDED IN THE ASSESSEE'S TAXABLE I NCOME, PROVIDED THE 1TO IS SATISFIED THAT NON SUCH DOUBTFUL DEBTS, THE RECOVER Y OF INTEREST IS PRACTICALLY IMPROBABLE. IN ADDITION TO THIS JUDGMENT, FEW OTHER JUDGMENTS HAVE ALSO BEEN CITED BY THE LEARNED AR PASSED BY THIS VERY TR IBUNAL. HOWEVER, THE LATEST DECISION OF THE HON 'BLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. SAKTHI FINANCE LTD., 31 TAXMANN.COM 305 (MAD) HAS HELD THA T QUOTE...... 'BY A CAREFUL READING OF THE CASE OF SOUTHERN TECHNOLOGIE S LTD., WE ARE OF THE VIEW THAT THE ASSESSEE HAS TO PROVE EACH CASE THAT INTER EST NOT RECOGNIZED OR NOT TAKEN INTO ACCOUNT WAS IN FACT DUE TO UNCERTAINTY I N COLLECTION OF INTEREST AND IT IS FOR THE AO TO EXAMINE FACTS OF EACH INDIVIDUA L CASE'. UNQUOTE. FURTHER, THE HON'BLE COURT VIDE PARA 18 HAS HELD AS UNDER: '18, MERE CHARACTERIZATION OF AN ACCOUNT AS A NPA W OULD NOT BY ITSELF BE SUFFICIENT TO SAY THAT THERE IS UNCERTAINTY AS REGA RDS REALIZABILITY OF INCOME OR INTEREST INCOME THEREON. ACCRUAL OF INTEREST IS A M ATTER OF ACT TO BE DECIDED SEPARATELY FOR EACH CASE ON THE BASIS OF EXAMINATIO N OF THE FACTS AND CIRCUMSTANCES.' RESPECTFULLY FOLLOWING THIS DECISION OF THE HON 'BL E MADRAS HIGH COURT, WE ARE ALSO OF CONSIDERED OPINION THAT THE ACCRUAL OF INTEREST IS A MATTER OF FACT, TO BE DECIDED ON THE BASIS OF EXAMINATION OF THE ST ATUS OF EACH PARTY. WE, THEREFORE, RESTORE THIS ISSUE BACK TO THE STAGE OF THE AO TO BE DECIDED DE NOVO IN THE LIGHT OF THE GUIDELINES ISSUED BY THE HON'BL E MADRAS HIGH COURT, NEEDLESS TO SAY AFTER PROVIDING ADEQUATE OPPORTUNIT Y OF HEARING TO THE ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 6 - ASSESSEE. RESULTANTLY, THE GROUNDS RAISED BY THE AS SESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ' 3.4. IN THE SET-ASIDE PROCEEDINGS, THE ASSESSING OF FICER HAS PASSED ASSESSMENT ORDER DATED 20.2.2015 AND MADE ADDITION OF RS.1,16,77,000/- ON ACCOUNT OF ACCRUED INTEREST ON NON-PERFORMING ASSETS. THE ASSESSING OFFICER HAS MADE ADDITION ON THE GROU ND THAT THE APPELLANT BEING A SCHEDULED BANK, THE PROVISION OF SECTION 43 D WERE NOT APPLICABLE, THE REAL INCOME THEORY WAS NOT APPLICABLE IN VIEW OF ME RCANTILE METHOD OF ACCOUNTING AND THE UNCERTAINTY OF INCOME WAS NOT ES TABLISHED. 3.5. THE AO HAS MADE THE ADDITION IN THE NATURE OF ACCRUED INTEREST ON BAD AND DOUBTFUL DEBTS (NPA) ON THE GROUND THAT SUCH IN TEREST WAS ACCRUED AS PER THE PROVISIONS OF SECTION 145 OF THE I. T. ACT AS T HE APPELLANT WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. 3.6. IT HAS BEEN OBSERVED BY THE AO THAT THE APPE LLANT BANK HAS SHOWN THE NPA UNDER THE HEAD OF 'LOANS AND ADVANCES' AND THE BANK HAS NOT SHOWN THE INTEREST THEREUPON IN THE P & L ACCOUNT. THE AO FUR THER OBSERVED THAT ALTHOUGH THE APPELLANT WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING IN GENERAL, BUT SO FAR AS INTEREST ON NPA IS CONCERNED , IT HAS BOOKED THE INCOME ON RECEIPT BASIS ONLY. THE AO FURTHER OBSERVED THAT SINCE THE NPAS HAVE NOT BEEN WRITTEN OFF BY THE APPELLANT BANK AND IT HAD T HE RIGHT TO RECOVER THE PRINCIPAL AMOUNT AS WELL AS THE INTEREST THEREUPON ON ACCRUAL BASIS AS PER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY IT. THU S, THE INTEREST INCOME OUGHT TO HAVE BEEN RECOGNIZED AS INCOME ASSESSABLE FOR THE YEAR UNDER CONSIDERATION. THUS, THE AO HAS MADE THE ADDITION O F SUCH NOTIONAL INTEREST INCOME. THE AO ALSO OBSERVED THAT THE NORMS AND PRO CEDURE LAID DOWN BY THE RBI WERE IN ORDER TO REGULATE EFFECTIVE CONDUCT OF THE BUSINESS AND TO CONTROL THE MANDATORY ASPECTS OF THE COMPANY. HENCE, THOSE OPERATES IN THE DIFFERENT FIELD AND THESE RBI DIRECTIONS DO NOT OVERRIDE THE PROVISIONS OF I. T. ACT, SINCE THE I. T. ACT IS AN INDEPENDENT CODE IN ITSELF. HE ALSO RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF STATE BANK OF TRAVANCORE VS. CIT (SUPRA). 3.7. ON THE OTHER SIDE, THE APPELLANT HAS CLAIMED T HAT THE INTEREST ON THE NPA HAS NOT ACCRUED AT ALL FOR THE REASON THAT THE RECO VERY OF THE PRINCIPAL AMOUNT ITSELF WAS IN DOUBT, WHEN THE NPA ACCOUNT WAS DOUBT FUL AND STICKY AS PER THE CATEGORIZATION PRESCRIBED BY THE RBI THEN THE INTER EST IS NOT REQUIRED TO BE PROVIDED AT ALL IN THE P & L ACCOUNT. IT ALSO RELIE D UPON THE RBI CIRCULAR OF ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 7 - JULY 02, 2012. AS PER THE CIRCULAR, THE APPELLANT B ANK WAS NOT REQUIRED TO MAKE PROVISION OF INTEREST ON NPA ACCOUNT. THIS CIR CULAR WAS IN CONFORMITY WITH THE SUPREME COURT JUDGMENT IN THE CASE OF UCO BANK. THE APPELLANT RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT I N THE CASE OF UCO BANK VS. ACIT [237 ITR 889] WHICH WAS AFTER THE JUDGMENT IN THE CASE OF STATE BANK OF TRAVENCORE ON WHICH THE AO HAS RELIED UPON. THE APPELLANT ALSO STATED THAT THE INTEREST WAS SAID TO HAVE ACCRUED O NLY WHEN RIGHT TO RECEIVE IS ESTABLISHED. IN THE CASE OF NPA, THE RECOVERY OF PR INCIPAL AMOUNT ITSELF WAS IN DOUBT. THEREFORE, INTEREST ON SUCH DOUBTFUL AMOUNT CANNOT BE SAID TO HAVE BEEN ACCRUED AS PER THE PROVISIONS OF SECTION 145 O F I. T. ACT. IT HAS ALSO RELIED UPON THE JUDGMENT OF BOMBAY HIGH COURT IN TH E' CASE OF STATE BANK OF INDIA (SUPRA), ITAT, AHMEDABAD IN THE CASE OF MAHIL A SEVA SAHAKARI BANK LTD. AND SARDARGANJ MERCANTILE CO-OP, BANK LTD. (SU PRA). FURTHER, RELIANCE WAS ALSO PLACED ON THE RECENT JUDGMENT OF HON'BLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. DEVGIRI NAGRIK SAHAKARI BANK LTD. I N ITA NO. 53 OF 2014 DATED 22/01/2015. THE APPELLANT HAS ALSO RELIED UPO N ON THE JUDGEMNET IN THE CASE OF PRAGATI CO-OP. BANK LTD. (ITA NO.872/AHD/20 12) DATED 21.08.2015. RELIANCE IS ALSO PLACED ON THE JUDGEMENT IN THE CAS E OF URBAN CO-OP. BANK LTD. (ITA NO.471 OF 2013 DATED 30.06.2014) OF HON'B LE KARNATAKA HIGH COURT. 3.8. HAVING CONSIDERED THE FACTS AND SUBMISSIONS, I T IS UNDISPUTED THAT THE APPELLANT BANK HAS CATEGORIZED THE NPA OUT OF ITS L OANS AND ADVANCES AS PER THE NORMS PRESCRIBED IN THE RBI CIRCULAR WHICH IS M ANDATORY TO BE DONE. IT IS NEEDLESS TO MENTION THAT SUCH STICKY LOANS HAVE BEE N TREATED AS NPA ONLY FOR THE REASON THAT THE REPAYMENTS OF THE PRINCIPAL AND INTEREST THEREUPON WAS NOT BEING PAID BY THE BORROWERS TO THE APPELLANT BANK. THUS, IT CANNOT BE SAID THAT THE INTEREST PERTAINING TO THOSE NPAS WOULD CERTAIN LY BE REALIZED FROM SUCH DEFAULTING CUSTOMERS. ON SUCH NPAS, EVEN THE RECOVE RY OF DUES WAS DOUBTFUL AND IN SUCH CIRCUMSTANCES, IT WOULD NOT BE JUSTIFIE D IF THE NOTIONAL INTEREST IS WORKED OUT UPON SUCH NPAS AND THE APPELLANT BANK IS PAID THE TAXES THEREUPON. IN THIS REGARD, THE CONCEPT OF REAL INCO ME THEORY ALSO COMES TO THE RESCUE OF THE APPELLANT. 3.9. CONSIDERING THE VARIOUS DECISIONS AND JUDGMENT S INCLUDING THE EARLIER JUDGMENT GIVEN IN THE CASE OF STATE BANK OF TRAVANC ORE ON WHICH AO RELIED UPON, THE HON'BLE APEX COURT IN THE CASE OF UCO BANK VS. CIT [237 ITR 889] HAS OBSERVED THAT THE NOTIONAL INTEREST UPON T HE STICKY LOANS CANNOT BE TAXED. FOR READY REFERENCE, THE HEAD NOTES OF THE J UDGMENT IS REPRODUCED AS UNDER :- ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 8 - 'SECTION 5, READ WITH SECTION 119 AND 145, OF THE I NCOME TAX ACT, 1961 - INCOME -ACCRUAL OF- ASSESSMENT YEAR 1981-82 - WHETH ER IN VIEW OF CBDT CIRCULAR, DATED 9-10-1984, INTEREST ON A LOAN WHOSE RECOVERY IS DOUBTFUL AND WHICH HAS NOT BEEN RECOVERED BY ASSESSEE-BANK FOR L AST THREE YEARS BUT HAS BEEN KEPT IN A SUSPENSE ACCOUNT AND HAS NOT BEEN BR OUGHT TO PROFIT AND LOSS ACCOUNT OF ASSESSEE, CANNOT BE INCLUDED IN INCOME OF ASSESSEE - HELD YES - WHETHER CBDT CIRCULAR DATED 9-10-1984 IS IN CONFLIC T WITH PROVISIONS OF SECTION 145 - HELD NO. SECTION 119 OF THE INCOME - TAX ACT, 1961 - CENTRAL BOARD OF DIRECT TAXES - POWER TO ISSUE CIRCULARS ETC. - WHETHER, SINCE BOAR D HAS CONSIDERED IT NECESSARY TO LAY DOWN A GENERAL TEST FOR DECIDING W HAT IS A DOUBTFUL DEBT IN CIRCULAR DATED 9-10-1984 AND DIRECTED THAT ALL ITOS SHOULD TREAT SUCH AMOUNTS AS NOT FORMING PART OF INCOME OF ASSESSEE U NTIL REALIZED, THIS DIRECTION BY WAY OF A CIRCULAR CANNOT BE CONSIDERED AS TRAVELLING BEYOND POWERS OF BOARD UNDER SECTION 119 AND SUCH A CIRCUL AR IS BINDING UNDER SECTION 119 - HELD, YES. CIRCULARS AND NOTIFICATIONS - CBDT CIRCULAR NO. 41( V-6), DATED 6-10-1952, CBDT CIRCULAR DATED 30/06/195, CBDT CIRCULAR NO. 11 86, DATED 20/06/1978 AND CBDT CIRCULAR NO. F_ 201/21/84/TTA-II DATED 9-10-1984.' 3.10. SUBSEQUENTLY, THE HON'BLE ITAT 'B' BENCH, AHMEDABAD IN THE CASE O F SARDARGANJ MERCANTILE CO-OP. BANK LTD. VS. ACIT IN ITA NO. 2426/AHD/2012 DT. 15/02/2013 HAVING CONSIDERED THE UCO BANK DECISION, RBI GUIDELINES HAS DECIDED THE ISSUE IN FAVOUR OF T HE APPELLANT BANK BY STATING THAT NO INTEREST ON THE NPA IS CHARGEABLE TO TAX. T HE HON'BLE ITAT HAS OBSERVED THAT THE PROVISIONS OF SECTION 43D IS NOT APPLICABLE AS THE APPELLANT HAS NOT CREDITED THE INTEREST IN P & L ACCOUNT BUT SHOWN IN THE ASSET AND LIABILITIES SIDE IN THE BALANCE SHEET DIRECTLY AND ALSO NOT RECEIVED ACTUALLY. RELEVANT PORTION OF THE DECISION IS REPRODUCED AS U NDER. '4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN CARRYING ON BANKING BUSINESS. DURING A. Y. 2009-10, THE ASSESSEE PASSED BOOK ENTRY FOR INTEREST OF RS.1,58,897/-ON NPA ACCOUNT BY DEBITING TO TIME BAR RED INTEREST RECEIVABLE ACCOUNT AND CREDITING TO PROVISION FOR TIME BARRED INTEREST. BOTH THE ACCOUNTS ARE REFLECTED IN THE BALANCE SHEET ON THE ASSETS SI DE AND LIABILITY SIDE. NO SUCH INTEREST IS CREDITED TO P&L ACCOUNT AS INCOME. HE F URTHER RELIED RBI MASTER CIRCULAR UPDATED 30.06.2007, WHEREIN IT WAS POLICY AS PER THE RBI GUIDELINE ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 9 - INCOME FROM NON PERFORMING ASSETS IS NOT RECOGNIZED ON ACCRUAL BASIS BUT IS BOOKED AS INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. THEREFORE, BANKS SHOULD NOT TAKE TO INCOME ACCOUNT INTEREST ON NON-PERFORMI NG ASSETS ON ACCRUAL BASIS. HE FURTHER HAS DRAWN OUR ATTENTION ON THE PA GE NO. 5 OF THE PAPER BOOK WHICH IS BALANCE SHEET FOR A. Y. 09-10 WHICH SHOWS THAT THE APPELLANT HAD SHOWN THIS INTEREST PROVISION NPA IN ASSET SIDE AND LIABILITY SIDE AND NOT CREDITED IN THE P&L ACCOUNT. THE APPELLANT FURTHER ARGUED THAT UCO BANK V. CIT, 237ITR 889, WHEREIN IT WAS HELD THAT THE QUEST ION WHETHER INTEREST EARNED WHAT HAVE COME TO BE KNOWN AS 'STICKY ' LOAN S, CAN BE CONSIDERED AS INCOME OR NOT UNTIL ACTUAL REALIZATION, IS A QUESTI ON WHICH MAY ARISE BEFORE SEVERAL INCOME TAX OFFICER EXERCISING JURISDICTION IN DIFFERENT PARTS OF THE COUNTRY. UNDER THE ACCOUNTING PRACTICE, INTEREST WH ICH IS TRANSFERRED TO THE SUSPENSE ACCOUNT AND NOT BROUGHT TO THE P & L A/C. OF THE COMPANY IS NOT TREATED AS INCOME. HE FURTHER ARGUED THAT IN CASE O F CIT VS. STATE BANK OF INDIA 262 ITR 662-668, WHCGEIN HON 'BLE BOMBAY HIGH COURT HAS ANSWERED IN FAVOUR OR ASSESSEE AND AGAINST THE REVENUE. THER EFORE, HE REQUESTED TO DELETE THE ADDITION. AT THE OUTSET, ID. SR. D.R. RE LIED UPON THE ORDER OF THE CIT (A) AND A. O. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT IS MAKING THE PROVISION OF INTEREST A S PER THE GUIDELINES ISSUED BY THE R.B.I. HOWEVER, SAME HAS NOT BEEN CREDITED I N THE P&L ACCOUNT AS IT WAS NOTIONAL HAD NOT RECEIVED ACTUALLY BY IT. SECTI ON 43 IS ALSO NOT APPLICABLE AS ASSESSEE HAS NOT CREDITED IN THE P&L ACCOUNT BUT SHOWN IN THE ASSETS AND LIABILITY SIDE IN THE BALANCE SHEET DIRECTLY AND AL SO NOT RECEIVED ACTUALLY. THUS, WE HAVE CONSIDERED VIEW THAT THE CIT(A) WAS N OT JUSTIFYING IN CONFIRMING THE ADDITION. ACCORDINGLY, THE ASSESSEE' S APPEAL IS ALLOWED. ' 3.11. THEREAFTER, THE HON'BLE ITAT 'C' BENCH, AHMEDABAD IN THE CASE OF SHRI MAHILA SEVA SAHAKARI BANK LTD. VS. ACIT (OSD) CIRCLE - 10, IN ITA NO. 62/AHD/2014 DATED 27/03/2015, AFTER CONSIDERING THE JUDGMENT OF UCO BANK, OTHER ITAT DECISIONS AND RBI GUIDELINES HAS A LSO DECIDED THIS ISSUE IN FAVOUR OF THE APPELLANT BANK. THE RELEVANT PORTION OF THE DECISION IS REPRODUCED AS UNDER:- '5.1. HOWEVER, WE FIND THAT UNDER THE IDENTICAL FAC TS, THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. SOLAPUR SIDDH ESHWAR SAHAKARI BANK LTD. IN ITA NOS.222Q&221/PN/2013 FOR AYS 2009-10 & 2010- 11 (SUPRA) HAS EXAMINED THE ISSUE THOROUGHLY BY HOLDING AS UNDER:- ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 10 - 4. THE LEARNED CIT(A) DISAGREED WITH THE ASSESSING OFFICER, AND THUS THE REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEAR ING, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT AN IDENTICAL CONTROVERSY H AS BEEN CONSIDERED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE OMERGA JANTA SAHAKARI BANK LTD. VIDE ORDER IN ITA NO.350/PN/2013 DATED 31.10.2013. IN THE SAID PRECEDENT, THE TRIBUNAL CONSIDERED THE JUD GEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OFM/S VASISTH CHAY VYA PAR LTD., 330 ITR 440 (DEL) AS -WELL AS THE JUDGEMENT OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.C OM 305 (MADRAS), WHICH HAD EXPRESSED DIVERGENT VIEWS WITH RESPECT TO THE I SSUE OF ACCRUAL OF INTEREST INCOME ON NPA ADVANCES; AND, FOLLOWING THE PROPOSIT ION THAT IN THE ABSENCE OF ANY JUDGEMENT OF THE JURISDICTIONAL HIGH COURT, THERE BEING CONTRARY JUDGEMENTS OF THE NON-JURISDICTIONAL HIGH COURTS, A DECISION WHICH WAS FAVOURABLE TO THE ASSESSEE WAS TO BE FOLLOWED IN VI EW OF THE REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. VEGETABLE PRODUCTS LTD., (1973) 88 ITR 192 (SCCG AND, THUS THE TRIBUNA L DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 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 ASSE SSEE IS CONCERNED, THERE IS A CONVERGENCE OF OPINION BETWEEN THE ASSESSEE AND THE REVENUE TO THE EFFECT THAT THE SAME IS NOT APPLICABLE TO THE ASSESSEE. OS TENSIBLY, ASSESSEE IS A CO- OPERATIVE BANK CARRYING ON BANKING BUSINESS IN TERM S OF A LICENSE GRANTED BY RBI AND IS NOT A 'SCHEDULED BANK' INCLUDED IN SECON D SCHEDULE OF RBI SO AS TO FALL WITHIN THE SCOPE OF SECTION 43D OF THE ACT. NO TABLY, SECTION 43D OF THE ACT PRESCRIBES THAT INTEREST INCOME ON SUCH CATEGORIES OF BAD AND DOUBTFUL DEBTS AS PRESCRIBED BY THE RBI GUIDELINES SHALL BE CHARGE ABLE TO TAX IN THE YEAR IN WHICH SUCH INTEREST INCOME IS CREDITED BY THE ASSES SEE IN THE PROFIT AND LOSS ACCOUNT OR IN THE YEAR OF ACTUAL RECEIPT, WHICHEVER IS EARLIER. SINCE ASSESSEE IS NOT AN ENTITY COVERED WITHIN THE SCOPE OF SECTION 4 3D OF THE ACT, THE PRESENT CONTROVERSY CANNOT BE ADJUDICATED IN THE LIGHT OF S ECTION 43D OF THE ACT, AND IT IS LIABLE TO BE DECIDED ON GENERAL PRINCIPLES AS TO WHETHER THE IMPUGNED INCOME HAS ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 9. IN THIS CONNECTION, WE FIND THAT THE VISAKHAPATN AM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD. ( SUPRA) HAS CONSIDERED AN IDENTICAL CONTROVERSY. THE ASSESSEE BEFORE THE V ISAKHAPATNAM BENCH WAS A COOPERATIVE BANK OPERATING UNDER A LICENSE ISSUED B Y RBI BUT WAS NOT A 'SCHEDULED BANK' SO AS TO FALL WITHIN THE SCOPE OF SECTION 43D OF THE ACT. THE ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 11 - ISSUE RELATED TO TAXABILITY OF INTEREST INCOME RELA TING TO NPAS, WHICH AS PER THE REVENUE WAS LIABLE TO BE TAXED ON ACCRUAL BASIS IN LINE WITH MERCANTILE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE THERE IN. THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT HAVING REGARD TO THE GUI DELINES ISSUED BY RBI REGARDING ACCOUNTING OF INTEREST ON NPAS, NO INTERE ST INCOME ACCRUED IN RESPECT OF NPAS AND THAT THE SAME WAS TO BE TAXED O NLY ON RECEIPT BASIS. THE TRIBUNAL OBSERVED THAT THE QUESTION OF TAXABILITY O F INTEREST ON NPAS CLASSIFIED BY RBI, WAS CONSIDERED BY THE HON'BLE DELHI HIGH CO URT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) WHEREIN AFTER CONS IDERING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN T ECHNOLOGIES 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 INTEREST ON NPAS HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VY APAR LTD (SUPRA); WHEREIN THE HON'BLE DELHI HIGH COURT TOOK INTO ACCO UNT THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE O F SOUTHERN TECHNOLOGIES LTD (SUPRA). IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD, THE ASSESSEE THEREIN WAS A NON BANKING FINANCIAL COMPANY AND IT WAS ALSO BOUND BY THE 'PRUDENTIAL NORMS DIRECTIONS' ISSUED BY THE RESERVE BANK OF INDIA FOR INCOME RECOGNITION AND ASSET CLASSIFICATION. THE ASSESSEE DID NOT INCLUDE THE INTEREST INCOME RELATABLE TO NPA ASSETS IN ITS TOTAL INCOME. THE ASSESSING OFFICER, HOWEVER, ADDED THE SAID INTEREST AS THE INCOME OF T HE ASSESSEE BY HOLDING THAT IT HAD 'ACCRUED' TO THE ASSESSEE EVEN IT WAS NOT RE ALIZED AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE LEAR NED CIT (A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE IT AT DELETED THE AFORESAID INCOME. HENCE THE REVENUE PREFERRED APPEAL BEFORE T HE HON 'BLE DELHI HIGH COURT. 8.1 AFTER HEARING THE RIVAL SUBMISSIONS, THE HON'BL E DELHI HIGH COURT TOOK NOTE OF SEC. 45 Q OF RESERVE BANK OF INDIA ACT WHIC H READS AS UNDER: 'CHAPTER IHB TO OVERRIDE OTHER LAWS. 45Q. THE PROVISIONS OF THIS CHAPTER SHALL HAVE EFFE CT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OT HER LAW FOR THE TIME BEING IN FORCE OR ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY SUCH LAW'. THE HIGH ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 12 - COURT TOOK NOTE OF THE FACT THAT THE PROVISION OF 4 5Q OF RESERVE BANK OF INDIA HAS OVERRIDING EFFECT OVER ANY OTHER LAW. THEN THE HON'BLE HIGH COURT ALSO CONSIDERED ACCOUNTING STANDARD 'AS-9' ON 'REVENUE R ECOGNITION' 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 RENDERING OF THE SERVICE, I T 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 RAISING ANY CLA IM, E.G., FOR ESCALATION OF PRICE, EXPORT INCENTIVES, INTEREST ETC., REVENUE RE COGNITION IS POSTPONED TO THE EXTENT OF UNCERTAINTY INVOLVED. IN SUCH CASES, IT M AY BE APPROPRIATE TO RECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAI N THAT THE ULTIMATE COLLECTION WILL BE MADE. WHERE THERE IS NO UNCERTAI NTY AS TO ULTIMATE COLLECTION, REVENUE IS RECOGNIZED AT THE TIME OF SA LE OR RENDERING OF SERVICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALLMENTS. 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 RATHE R 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 GOODS, THE RENDERING OF SERVICES OR FROM THE USE OF OTHERS OF ENTERPRISE RESOURCES IS R EASONABLY 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 REVENUE OF THE P ERIOD IN WHICH IT IS PROPERLY RECOGNIZED'. 8.2 THE DELHI HIGH COURT ALSO CONSIDERED THE DECISI ON RENDERED IN THE FOLLOWING CASES; I) CITVS. ELGI FINANCE LTD., 293IT R 357 (MAD) II) CITVS. KKMINVESTMENTS (CAL) - SLP DISMISSED BY SUPREME COU RT (310 ITR 4) HI) CIT VS. MOTOR CREDIT CO (P) LTD., 127 ITR 572 (MAD) IV) UCO BANK VS. CIT 237 ITR 889 (SC) V) CIT VS. SHOORJI VALIABHDAS & CO 46 (TR 144 (SC) VI) GODHRA ELECTRICITY CO. LTD., VS. CIT 225 ITR 746 VI I) CIT VS. GOYAL M G ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 13 - GASES (P) LTD., 303 ITR 159 (DEL) VIII) CIT VS. RIC HER LTD., ITANO.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 THA T THE INTEREST ON NPA ADVANCE CANNOT BE TREATED AS 'ACCRUED' TO THE ASSES SES, 8.4. BEFORE THE DELHI HIGH COURT, THE REVENUE TOOK SUPPORT OF THE 'DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN T ECHNOLOGIES LTD (SUPRA). THE DELHI HIGH COURT CONSIDERED THE SAID DECISION O F HON'BLE APEX COURT AND EXPLAINED THE SAME AS UNDER: 'WE HAVE ALREADY HELD THAT EVEN UNDER THE INCOME TA X ACT, INTEREST INCOME HAD NOT ACCRUED. MOREOVER, THIS SUBMISSION OF MR. S ABHARWAL IS BASED ENTIRETY ON THE JUDGMENT OF THE SUPREME COURT IN TH E CASE OF SOUTHERN TECHNOLOGY (SUPRA). NO DOUBT, IN FIRST BLUSH, READI NG OF THE JUDGMENT GIVES AN INDICATION THAT THE COURT HAS HELD THAT RESERVE BAN K OF INDIA ACT DOES NOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. HOWE VER, WHEN WE EXAMINE THE ISSUE INVOLVED THEREIN MINUTELY AND DEEPLY IN THE C ONTEXT IN WHICH THAT HAD ARISEN AND CERTAIN OBSERVATIONS OF THE APEX COURT C ONTAINED IN THAT VERY JUDGMENT, WE FIND THAT THE PROPOSITION ADVANCED BY MR. SABHARWAL MAY NOT BE ENTIRELY CORRECT. 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 AS DEDUCTION IN TERMS OF SECTION 36(1) (VII) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW THE IT A N O.62/AHD/2014 SHRI MAHILA SEWA SAHKARI BANK LTD. VS. ACIT (OSD) ASST.YEAR - 2 010-11 - 19 - DEDUCTION CLAIMED AS AFORESAID ON THE GROUND THAT THE PROVISI ON OF NPA WAS NOT IN THE NATURE OF EXPENDITURE OR LOSS BUT MORE IN THE NATUR E OF A 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 (BEIN G INCOME ACCRUED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING). THE DISPUTE B EFORE THE APEX COURT CENTERED AROUND DEDUCIBILITY OF PROVISION FOR NPA. AFTER ANALYZING THE PROVISIONS OF THE RESERVE BANK OF INDIA ACT, THEIR LORDSHIPS OF THE APEX COURT OBSERVED THAT IN SO FAR AS THE PERMISSIBLE DEDUCTIO NS OR EXCLUSIONS UNDER THE ACT ARE CONCERNED, THE SAME ARE ADMISSIBLE ONLY IF SUCH DEDUCTIONS/EXCLUSIONS SATISFY THE RELEVANT CONDITIONS STIPULATED THEREFOR E UNDER THE ACT. TO THAT EXTENT, IT WAS OBSERVED THAT THE PRUDENTIAL NORMS D O NOT OVERRIDE THE PROVISIONS OF THE ACT. HOWEVER, THE APEX COURT MADE A DISTINCTION WITH REGARD TO 'INCOME RECOGNITION' AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENT/A NORMS, EVEN, THOUGH THE SAME DEVIATED FROM ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 14 - MERCANTILE SYSTEM OF ACCOUNTING AND/OR SECTION 45 ( SIC. 145) OF THE INCOME TAX ACT. IT CAN BE SAID, THEREFORE, THAT THE APEX C OURT APPROVED THE 'REAL INCOME' THEORY WHICH IS ENGRAINED IN FIE PRUDENTIAL NORMS FOR 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/EXCLUSIONS UNDER THE INCOME T AX ACT. IN SO FAR AS INCOME RECOGNITION IS CONCERNED, THE HON'BLE SUPREM E COURT HELD THAT SECTION 145 OF THE INCOME TAX ACT HAS NO ROLE TO PL AY AND THE ASSESSING OFFICER HAS TO FOLLOW RESERVE BANK OF INDIA DIRECTI ONS 1998, SINCE BY VIRTUE OF 45Q OF THE RESERVE BANK OF INDIA ACT, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS OF RESERVE BANK OF INDIA VIS--VIS INC OME RECOGNITION PRINCIPLES IN THE COMPANIES ACT 1956. IN SO FAR AS COMPUTATION OF INCOME UNDER THE INCOME TAX ACT IS CONCERNED, (WHICH INVOLVES DEDUCT ION OF PERMISSIBLE DEDUCTIONS AND EXCLUSIONS) THE ADMISSIBILITY OF SUC H DEDUCTIONS SHALL BE GOVERNED BY THE PROVISIONS OF THE INCOME TAX ACT. T HE RELEVANT OBSERVATIONS 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 ISSUED BY RBI UNDER C HAPTER IIIB OF THE RBI ACT, 1934. THESE NORMS DEAL ESSENTIALLY WITH INCOME RECOGNITION. THEY FORCE THE NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FI NANCIAL ACCOUNTS. THEY FORCE THE NBFCS TO REFLECT 'TRUE AND CORRECT' PROFI TS. BY VIRTUE OF SECTION 45Q, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTION S 1998 VIS-A-VIS 'INCOME RECOGNITION' PRINCIPLES IN THE COMPANIES ACT, 1956. THESE DIRECTIONS CONSTITUTE A CODE BY ITSELF. HOWEVER, THESE DIRECTI ONS 1998 AND THE IT ACT OPERATE IN DIFFERENT AREAS. THESE DIRECTIONS 1998 H AVE NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME. THESE DIRECTIONS CAN NOT OVERRULE THE 'PERMISSIBLE DEDUCTIONS' OR 'THEIR EXCLUSION' UNDER THE IT ACT. THE INCONSISTENCY BETWEEN THESE DIRECTIONS AND COMPANIE S ACT IS ONLY IN THE MATTER OF INCOME RECOGNITION AND PRESENTATION OF FI NANCIAL STATEMENTS. THE ACCOUNTING POLICIES ADOPTED BY AN NBFC CANNOT DETER MINE THE TAXABLE INCOME. IT IS WELL SETTLED THAT THE ACCOUNTING POLI CIES FOLLOWED BY A COMPANY CAN BE CHANGED UNLESS THE AO COMES TO THE CONCLUSIO N THAT SUCH CHANGE WOULD RESULT IN UNDERSTATEMENT OF PROFITS. HOWEVER, HERE IS THE CASE WHERE THE AO HAS TO FOLLOW THE RESERVE BANK OF INDIA DIRECTIO NS 1998 IN VIEW OF SECTION 45Q OF THE RESERVE BANK OF INDIA ACT. HENCE, AS FAR AS INCOME RECOGNITION IS ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 15 - CONCERNED, SECTION 145 OF THE IT ACT HAS NO ROLE TO PLAY IN THE PRESENT DISPUTE. 10. TURNING TO THE FACTS OF THE CASE BEFORE US, THE ASSESSES HEREIN IS A COOPERATIVE BANK AND IT IS NOT IN DISPUTE THAT IT I S ALSO GOVERNED BY THE RESERVE BANK OF INDIA. HENCE THE DIRECTIONS WITH RE GARD TO THE PRUDENTIAL NORMS ISSUED BY THE RESERVE BANK OF INDIA ARE EQUAL LY APPLICABLE TO THE ASSESSES AS IT IS APPLICABLE TO THE COMPANIES REGIS TERED UNDER THE COMPANIES ACT. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF SOUTHERN TECHNOLOGIES LTD (SUPRA), THAT THE PROVISION OF 45Q OF RESERVE BANK OF INDIA ACT HAS AN OVERRIDING EFFECT VIS-A-VIS INCOME RECOG NITION PRINCIPLE UNDER THE COMPANIES ACT. HENCE SEC.45Q OF THE RBI ACT SHALL H AVE OVERRIDING EFFECT OVER THE INCOME RECOGNITION PRINCIPLE FOLLOWED BY C OOPERATIVE BANKS ALSO. HENCE THE ASSESSING OFFICER HAS TO FOLLOW THE RESER VE BANK OF INDIA DIRECTIONS 1998, AS HELD BY THE HON 'BLE SUPREME CO URT. 10.1 BASED ON THE PRUDENTIAL NORMS, THE ASSESSEE HE REIN DID NOT ADMIT THE INTEREST RELATABLE TO NPA ADVANCES IN ITS TOTAL INC OME. THE HON'BLE DELHI HIGH COURT IN THE CASE OF VASISTH CHAY VYAPAR LTD (SUPRA) HAS HELD THAT THE INTEREST ON NPA ASSETS CANNOT BE SAID TO HAVE ACCRU ED TO THE ASSESSEE. IN THIS REGARD, THE FOLLOWING OBSERVATIONS OF HON'BLE DELHI HIGH COURT IN THE ABOVE 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 NOT 'ACCRUED'. THE SAID DECISION OF T HE HON'BLE DELHI HIGH COURT IS EQUALLY APPLICABLE TO THE ISSUE IN OUR HAN DS. ACCORDINGLY WE 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 B EEN RENDERED ON AN IDENTICAL ISSUE UNDER SIMILAR CIRCUMSTANCES, WE FIN D NO REASONS TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELET ING THE IMPUGNED ADDITION RELATING TO INTEREST INCOME IN RESPECT OF NPAS. 11. SO, HOWEVER, THE LEARNED DEPARTMENTAL REPRESENT ATIVE HAS SUBMITTED THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS . SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MADRAS) HAS DIFFERED WIT H THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 16 - (SUPRA) ON A SIMILAR ISSUE, I.E. RELATING TO INTERE ST INCOME ON NPAS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER POINTED OUT THAT THE HON'BLE MADRAS HIGH COURT FOLLOWED THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) IN HOLDI NG THAT INTEREST ON NPAS WAS ASSESSABLE TO TAX ON ACCRUAL BASIS. WE HAVE CAR EFULLY CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE BASED ON THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN TH E CASE OF SAKTHI FINANCE LTD. (SUPRA). THE CONTROVERSY BEFORE THE HON'BLE MA DRAS HIGH COURT RELATED TO NON-RECOGNITION OF INTEREST INCOME ON NPAS BY TH E ASSESSEE FOLLOWING THE RBI GUIDELINES. THE HON'BLE MADRAS HIGH COURT TOOK THE VIEW THAT THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) ALSO APPLIED TO THE INCOME RECOGNITION NORMS PROVIDED BY RBI AND THEREFORE IT HELD THE .INTEREST INCOME ON NPAS IS LIABLE TO BE TAXED ON ACCRUAL BASIS AND NOT IN TERMS OF RBI'S GUIDELINES. BUT THE HON'BLE DELHI HIGH COURT IN THE CASE OFM/S VASISTH CHAY VYAPAR LTD. (S UPRA) HAS TAKEN A VIEW THAT SOUTHERN TECHNOLOGIES LTD. (SUPRA) CASE DID NO T APPLY TO THE INCOME RECOGNITION NORMS PRESCRIBED BY RBI. OSTENSIBLY, TH ERE IS DIVERGENCE OF OPINION BETWEEN THE HON'BLE DELHI HIGH COURT AND TH E HON'BLE MADRAS HIGH COURT AS NOTED BY THE HON'BLE 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 WITH TWO CO NTRARY JUDGMENTS OF THE NON-JURISDICTIONAL HIGH COURT. IN SUCH A SITUATION, WE ARE INCLINED TO PREFER A VIEW WHICH IS FAVOURABLE OF THE ASSESSEE FOLLOWING THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OFCITVS. VEGETABL E PRODUCTS LTD. (1973) 88ITR 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 O F THE DURGA COOPERATIVE URBAN BANK LTD. (SUPRA) AND ACCORDINGLY THE ORDER O F THE CIT(A) IS LIABLE TO THE AFFIRMED. WE HOLD SO. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED.' 5. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDENTICAL TO THOSE CONSIDERED BY US IN THE CASE OF THE OMERGA JANTA SAHAKARI BANK LTD. (SU PRA), FOLLOWING THE SAID PRECEDENT THE PRESENT CLAIM OF THE ASSESSEE DESERVE S TO BE UPHELD. THUS, THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE REVE NUE HAS TO FAIL ON THIS ASPECT. ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 17 - 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ' 5.2. WE ALSO FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SARDARGANJ MERCANTILE CO-OP.BANK LTD. VS. ACIT (SUP RA) HAS DELETED ADDITION BY OBSERVING AS UNDER:- '5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT IS MAKING THE PROVISION OF INTEREST A S PER THE GUIDELINES ISSUED BY THE R.B.I. HOWEVER, SAME HAS NOT BEEN CREDITED I N THE P&L ACCOUNT AS IT WAS NOTIONAL HAD NOT RECEIVED ACTUALLY BY IT. SECTI ON 43 IS ALSO NOT APPLICABLE A ASSESSEE HAS NOT CREDITED IN THE P&L ACCOUNT BUT SHOWN IN THE ASSETS AND LIABILITY SIDE IN THE BALANCE SHEET DIRECTLY AND AL SO NOT RECEIVED ACTUALLY. THUS, WE HAVE CONSIDERED VIEW THAT THE CIT(A) WAS N OT JUSTIFYING IN CONFIRMING THE ADDITION. ACCORDINGLY, THE ASSESSEE' S APPEAL IS ALLOWED. 6. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED. ' 5.3 THE HON'BLE COORDINATE BENCH HAS NOTED THAT THE RE IS A DIVERGENT VIEW BETWEEN THE HON 'BLE DELHI HIGH COURT IN THE CASE O FM/S. VASISTH CHAY VYAPAR LTD. REPORTED AT 330 ITR 44 0(DELHI AND THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD. RE PORTED AT (2013) 31 TAXMANN.COM 305 (MAD.), IN RESPECT OF APPLICATION O F THE JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF SOUTHERN TECHNOLOGY LTD. (SUPRA) ON INCOME RECOGNITION NORMS PRESCRIBED BY R.B.I. TH E HON 'BLE COORDINATE BENCH IN VIEW ( OF THE FACT THAT THERE WERE DIVERGENT VIEWS OF HON' BLE DELHI HIGH COURT AND HON 'BLE MADRAS HIGH COURT, APPLIED THE RATIO OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. REPORTED AT (1973) 88ITR 192 (SC). IN THE PRESENT CASE ALSO, TH ERE IS NO JUDGEMENT BY THE HON'BLE JURISDICTIONAL HIGH COURT, THEREFORE FOR TH E SAME REASONING, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THE AO IS HEREBY DIRECTED TO DELETE THE ADDITION. THUS, GROUND OF ASSESSEE'S APP EAL IS ALLOWED. ' 3.12. RECENTLY, HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/ S. DEOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APP EAL NO. 53 OF 2014 AND OTHERS DATED 22/01/2015 HAS DISMISSED THE REVENUE APPEALS ON THE IDENTICAL ISSUE WITH THE FOLLOWING OBSERVATIONS:- '8. LEARNED COUNSEL FOR RESPONDENT SUBMITS THAT, LEARNED TRIBUNAL HAS RIGHTLY DISMISSED THE APPEALS OF THE REVENUE BY CONFIRMING THE ORDER PASSED ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 18 - BY THE CIT(A). THERE IS NO SUBSTANTIAL QUESTION OF LAW INVOLVED IN THESE APPEALS AND THUS ALL THE APPEALS ARE LIABLE TO BE D ISMISSED. 9. THE INCOME TAX APPELLATE TRIBUNAL HAS REFERRED T HE CASE OF M/S. VASISTH CHAY VYAPAR LIMITED 330 ITR 440(DELHI). IN THIS CAS E, THE REVENUE RE LIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. SUPRA. THE LEARNED INCOME TAX APP ELLATE TRIBUNAL HAS REPRODUCED THE OBSERVATIONS MADE BY THE DELHI H IGH COURT WHILE REFERRING THE SAID CASE OF M/S.SOUTHERN TECHNOLOGIES LIMITED SUPRA. THE ASSESSEE HEREIN BEING A COOPERATIVE BANK ALSO G OVERNED BY THE RESERVE BANK OF INDIA AND THUS THE DIRECTIONS WITH REGARD T O THE PRUDENTIAL NORMS ISSUED BY THE RESERVE BANK OF INDIA ARE EQUALLY A PPLICABLE TO THE CO- OPERATIVE BANKS. THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED SUPRA HELD THAT, PROVISI ONS OF SECTION 45Q OF RESERVE BANK OF INDIA ACT HAS AS AN OVERRIDING EFFECT VIS-A-VIS INCOME RECOGNITION PRINCIPLE UNDER THE COMPANIES ACT. HENCE, SECTION 45Q OF THE RBI ACT SHALL HAVE OVERRIDING EFFECT OVER THE INCOM E RECOGNITION PRINCIPLE FOLLOWED BY CORPORATIVE BANKS,. HENCE, THE ASSESSIN G OFFICER HAS TO FOLLOW THE RESERVE BANK OF INDIA DIRECTIONS 1998, AS HELD BY T HE HON 'BLE SUPREME COURT. 10. THE HONOURABLE APEX COURT IN THE CA SE OF UCO BANK CASE (SUPRA) HAD AN OCCASION TO CONSIDER THE NATURE OF CBDT CIRC ULAR AND HON'BLE APEX COURT HAS THUS HELD THAT BOARD HAS PO WER, INTER ALIA, TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE A FAIR EN FORCEMENT OF ITS PROVISIONS, BY ISSUING CIRCULAR IN EXERCISE OF ITS STATUTORY POWER S UNDER SECTION 119 OF THE ACT AND WHICH ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT, IT IS BENEFICIAL POWER GIVEN TO THE BOARD FOR PROPE R ADMINISTRATION OF FISCAL LAW SO THAT UNDUE HARDSHIP MAY NOT BE CAUSED TO TH E ASSESSEE AND THE FISCAL LAWS BE CORRECTLY APPLIED. FURTHER A SIMILAR ISSUE WAS RAISED ABOUT INTEREST ACCRUED ON A 'STICKY' LOAN WHICH WAS NOT RECOVERED BY THE ASSESSEE BANK FOR THE LAST THREE YEARS AND TRANSFERRED TO THE SUSPENS E ACCOUNT, WOULD OR WOULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR T HE PARTICULAR ASSESSMENT YEAR. HON'BLE APEX COURT HAS OBSERVED THAT: 'THE ME THOD OF ACCOUNTING WHICH IS FOLLOWED BY THE ASSESSEE BANK IS MERCANTIL E SYSTEM OF ACCOUNTING. HOWEVER, THE ASSESSEE CONSIDERS INCOME BY WAY OF IN TEREST PERTAINING TO DOUBTFUL LOANS AS NOT REAL INCOME IN THE YEAR IN WH ICH IT ACCRUES, BUT ONLY WHEN IT IS REALIZED. A MIXED METHOD OF ACCOUNTING I S THUS FOLLOWED BY THE ASSESSEE-BANK. THIS METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS IN ACCORDANCE WITH ACCOUNTING PRACTICE. THE ASSESSEE'S METHOD OF ACCOUNTING, ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 19 - TRANSFERRING THE DOUBTFUL DEBT TO AN INTEREST SUSPE NSE ACCOUNT AND NOT TREATING IT AS PROFIT UNTIL ACTUALLY RECEIVED, IS IN ACCORDA NCE WITH ACCOUNTING PRACTICE UP TO ASSESSMENT YEAR 1978-79 THE TAXABILITY OF INT EREST ON DOUBTFUL DEBTS CREDITED TO SUSPENSE ACCOUNT WILL BE DECIDED IN THE LIGHT OF THE BOARD'S EARLIER CIRCULAR DATED 6-10-1952, AS THE SAID CIRCULAR WAS WITHDRAWN ONLY IN JUNE, 1978. THE NEW PROCEDURE UNDER THE CIRCULAR OF 9-10 -1984 WILL BE APPLICABLE FOR AND FROM THE ASSESSMENT YEAR, 1979-80. ALL PEND ING DISPUTES ON THE ISSUE SHOULD BE SETTLED IN THE LIGHT OF THESE INSTRUCTION S. THEREFORE, UP TO THE ASSESSMENT YEAR 1978-79, THE CBDT'S CIRCULAR OF 6-1 0-1952 WOULD BE APPLICABLE; WHILE FROM THE ASSESSMENT YEAR 1979-80, THE CBDT'S CIRCULAR OF 9- 10-1984 IS MADE APPLICABLE. IN THE PRESENT CASE, THE ASSESSMENT WAS MADE ON THE BASIS OF THE CBDT'S CIRCULAR ON 9-10-1984, S INCE THE ASSESSMENT PERTAINS TO THE ASSESSMENT YEAR 1981-82 TO WHICH TH E CIRCULAR OF 9-10-1984 IS APPLICABLE. IF, THE BOARD HAS CONSIDERED IT NECESSA RY TO LAY DOWN A GENERAL TEST FOR DECIDING WHAT IS A DOUBTFUL DEBT, AND DIRE CTED THAT ALL ASSESSING OFFICER'S SHOULD TREAT SUCH AMOUNTS AS NOT FORMING PART OF THE INCOME OF THE ASSESSEE UNTIL REALIZED, THIS DIRECTION BY WAY OF A CIRCULAR CANNOT BE CONSIDERED AS TRAVELING BEYOND THE POWERS OF THE BO ARD UNDER SECTION 119 OF THE INCOME TAX ACT. SUCH A CIRCULAR IS BINDING UNDE R SECTION 119. THE CIRCULAR OF 9-10-1984, THEREFORE, PROVIDES A TEST F OR RECOGNIZING WHETHER A CLAIM FOR INTEREST CAN BE TREATED AS A DOUBTFUL CLA IM UNLIKELY TO BE RECOVERED OR NOT. THE TEST PROVIDED BY THE SAID CIRCULAR IS T O SEE WHETHER, AT THE END OF THREE YEARS, THE AMOUNT OF INTEREST HAS, IN FACT, B EEN RECOVERED BY THE BANK OR NOT. IF IT IS NOT RECOVERED FOR A PERIOD OF THREE Y EARS, THEN IN THE FOURTH YEAR AND ONWARDS THE CLAIM FOR INTEREST HAS TO BE TREATE D AS DOUBTFUL CLAIM WHICH NEED NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE UNTIL IT IS ACTUALLY RECOVERED. IN THE PRESENT CASE, THE CIRCULARS WHICH HAVE BEEN IN FORCE ARE MEANT TO ENSURE THAT WHILE ASSESSING THE INCOME ACC RUED BY WAY OF INTEREST ON A 'STICKY' LOAN, NOTIONAL INTEREST WHICH IS TRANS FERRED TO A SUSPENSE ACCOUNT PERTAINING TO DOUBTFUL LOANS WOULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE, IF FOR THREE YEARS SUCH INTEREST IS NOT A CTUALLY RECEIVED. THE VERY FACT THAT THE ASSESSEE, ALTHOUGH GENERALLY USING A MERCA NTILE SYSTEM OF ACCOUNTING, KEEPS SUCH INTEREST AMOUNTS IN A SUSPENSE ACCOUNT A ND DOES NOT BRING THESE AMOUNTS TO THE P&L A/C GOES TO SHOW THAT THE ASSESS EE IS FOLLOWING A MIXED SYSTEM OF ACCOUNTING BY WHICH SUCH INTEREST IS INCL UDED IN ITS INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. LOOKING TO THE METHOD OF ACCOUNTING SO ADOPTED BY THE ASSESSEE IN SUCH CASES, THE CIRCULARS WHICH HAVE BEEN ISSUED ARE CONSISTENT WITH THE PROVISIONS OF SECTION 145 AND A RE MEANT TO ENSURE THAT ASSESSEES OF THE KIND SPECIFIED WHO HAVE TO ACCOUNT FOR ALL SUCH AMOUNTS OF INTEREST ON DOUBTFUL LOANS ARE UNIFORMLY GIVEN THE BENEFIT UNDER THE CIRCULAR ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 20 - AND SUCH INTEREST AMOUNTS ARE NOT INCLUDED IN THE I NCOME OF THE ASSESSEE UNTIL ACTUALLY RECEIVED IF THE CONDITIONS OF THE CIRCULAR ARE SATISFIED. THE CIRCULAR OF 9-10-1984, ALSO SERVES ANOTHER PRACTICAL PURPOSE OF LAYING DOWN A UNIFORM TEST FOR THE ASSESSING AUTHORITY TO DECIDE WHETHER THE INTEREST INCOME WHICH IS TRANSFERRED TO THE SUSPENSE ACCOUNT IS, IN FACT, AR ISING IN RESPECT OF A DOUBTFUL OR 'STICKY' LOAN. THIS IS DONE BY PROVIDING THAT NO N-RECEIPT OF INTEREST FOR THE FIRST THREE YEARS WILL NOT BE TREATED AS INTEREST O N A DOUBTFUL LOAN. BUT IF AFTER THREE YEARS THE PAYMENT OF INTEREST IS NOT RECEIVED , FROM THE FOURTH YEAR ONWARDS IT WILL BE TREATED AS INTEREST ON A DOUBTFU L LOAN AND WILL BE ADDED TO THE INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. THERE IS NO INCONSISTENCY OR CONTRADICTION BETWEEN THE CIRCULAR SO ISSUED AND SE CTION 145 OF THE INCOME TAX ACT. IN FACT, THE CIRCULAR CLARIFIES THE WAY IN WHICH THESE AMOUNTS ARE TO BE TREATED UNDER THE ACCOUNTING PRACTICE FOLLOWED B Y THE LENDER. THE CIRCULAR, THEREFORE, CANNOT BE TREATED AS CONTRARY TO SECTION 145 OF THE INCOME TAX ACT OR ILLEGAL IN ANY FORM. IT IS MEANT FOR A UNIFORM A DMINISTRATION OF LAW BY ALL THE INCOME-TAX AUTHORITIES IN A SPECIFIC SITUATION AND, THEREFORE, VALIDLY ISSUED UNDER SECTION 119 OF THE INCOME TAX ACT. AS SUCH, T HE BOMBAY HIGH COURT CIRCULAR WOULD BE BINDING ON THE DEPARTMENT. THE RE LEVANT CIRCULARS OF CBDT CANNOT BE IGNORED. THE QUESTION IS NOT WHETHER A CI RCULAR CAN OVERRIDE OR DETRACT FROM THE PROVISIONS OF THE ACT; THE QUESTIO N IS WHETHER THE CIRCULAR SEEKS TO MITIGATE THE RIGOUR OF A PARTICULAR SECTIO N FOR THE BENEFIT OF THE ASSESSEE IN CERTAIN SPECIFIED CIRCUMSTANCES. SO LON G AS SUCH A CIRCULAR IS IN FORCE IT WOULD BE BINDING ON THE DEPARTMENTAL AUTHO RITIES IN VIEW OF THE PROVISIONS OF SECTION 119 TO ENSURE A UNIFORM AND P ROPER ADMINISTRATION AND APPLICATION OF THE INCOME TAX ACT. ' 11. THE LEARNED COUNSEL FOR RESPONDENT HAS PLACED R ELIANCE IN A CASE OF MERCANTILE BANK LTD., BOMBAY VS. THE COMMISSIONER O F INCOME TAX, BOMBAY CITY III REPORTED IN (2006) 5 SCC 221, WHERE SIMILA R QUESTION WAS RAISED BEFORE THE APEX COURT. THE QUESTION WAS WHETHER THE ASSESSEE IS LIABLE TO BE TAXED UNDER INCOME TAX ACT, 1961 IN RESPECT OF THE INTEREST ON DOUBTFUL ADVANCES CREDITED TO THE INTEREST ON DOUBTFUL ADVAN CES CREDITED TO THE INTEREST SUSPENSE ACCOUNT. IN THIS CASE, THE UCO BANK'S CASE (SUPRA) WAS ALSO REFERRED AND THE HON'BLE APEX COURT HAS ALLOWED THE APPEAL T O THE EXTENT OF QUESTION RAISED AS AFORESAID. FURTHERMORE, THE RESPONDENT CO OPERATIVE BANKS, AS UNDERSTOOD BY SECTION 43 OF THE INCOME TAX ACT ON T HE SCHEDULED BANK. 12. LEARNED COUNSEL FOR THE APPELLANTS /REVENUE PLACED RELIANCE ON THE JUDGMENT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD . VS. JOINT COMMISSIONER OF INCOME TAX, COIMBATORE REPO RTED IN 2010 (2) SCC ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 21 - 548. HOWEVER, THIS JUDGMENT PERTAINS TO NON BANKING FINANCIAL COMPANIES. UCO BANK CASE (SUPRA) AND MERCANTILE BANK ( SUPRA) CASE SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE AND ISSUES INVOLVED. WE THEREFORE, DO NOT FIND IT NECESSARY TO INTERFERE IN THE JUDGMENT OF THE APPELLATE TRIBUNAL. WE HOLD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THESE APPEALS. 13. SO FAR AS INCOME TAX APPEAL NOS. 53/2014 AND 54/2014 ARE CONCERNED, THE ISSUE WAS ALSO RAISED IN THE APPEALS BEFORE THE TRIBUNAL WITH REGARD TO THE ADDITION MADE BY THE ASSESSING OFFICER REPRESENTING THE FORFEITED DIVIDEND. THE LEARNED TRIBUNAL HAS RIGHTLY DEALT WITH THIS IS SUE AND OBSERVED THAT, UNCLAIMED DIVIDEND IN QUESTION AMOUNTS TO EXCESS PR OVISIONS FOR DIVIDEND MADE BY THE ASSESSEE ON AN EARLIER OCCASION WHICH H AS BEEN REVERSED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND TRANSF ERRED TO A RESERVE ACCOUNT. THE PROVISIONS OF DIVIDEND MADE EARLIER WA S NOT A CHARGE ACTION PROFITS BUT IT WAS APPROPRIATION OF THE PROFITS AVA ILABLE POST TAXATION. WE FIND NO ERROR IN THE AFORESAID OBSERVATIONS. FURTHERMORE , IN THE APPEALS AS MENTIONED ABOVE, THE REVENUE HAS ONLY CHALLENGED TH E DELETION OF THE ADDITIONS ON ACCOUNT OF THE INTEREST ON STICK ADVAN CES. 3.13. ON THE IDENTICAL ISSUE, THERE ARE NUMBER OF O THER DECISIONS OF VARIOUS AUTHORITIES IN FAVOUR OF THE CO-OPERATIVE BANKS STA TING THAT INTEREST ON NPA IS NOT CHARGEABLE ON ACCRUAL BASIS IN THE CASE OF CO-O PERATIVE BANKS. FEW OF SUCH DECISIONS ARE CITED AS UNDER:- DCIT VS. SURAT NATIONAL CO-OP. BANK LTD [ITA NO. 2793/AHD/2012 DATED 23/08/2013 BY HON'BLE ITAT B'B ENCH, AHMEDABAD] ACIT VS. THE OMERGA JANTA SAHAKARI BANK LTD. [ITA NO. 350/PN/2013 DATED 31/10/2013 BY HON'BLE ITAT 'A' BE NCH, PUNE] ACIT VS. PUNJAB STATE CO-OP. BANK LTD. [2013] 34 TAXMANN. CO M 128 (CHANDIGARH TRIBUNAL) DATED 06/03/2013. KARNAVATI CO-OP BANK LTD. VS. DCIT, (ITAT AHMEDABAD) IN ITA NO. 2939/AHD/2010 DT. 30/11/2011 3.14. IN VIEW OF THE AFORESAID DISCUSSION, IT IS OB SERVED THAT FOR THE NOTIONAL INTEREST INCOME ON ACCRUAL BASIS ON THE NPAS, CANNO T BE BROUGHT TO TAX. FURTHER, THE JURISDICTIONAL ITAT IN THE CASE OF KAR NAVATI CO-OP. BANK LTD. HAS HELD THAT NO INTEREST ON ACCRUAL BASIS ON NPAS CAN BE TAXED EVEN IN CASES OF UNSCHEDULED BANKS. IT WAS ALSO OBSERVED THAT AS PER THE RBI GUIDELINES DATED 02/07/2012 OF WHICH RELEVANT PARA IS REPRODUCED FOR READY REFERENCE AS UNDER ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 22 - ALSO STATES THAT IT WAS MANDATORY UPON THE APPELLAN T TO NOT TO CHARGE THE INTEREST ON ACCRUAL BASIS. '3. INCOME RECOGNITION 3.1. INCOME RECOGNITION POLICY 3.1.1. THE POLICY OF INCOME RECOGNITION HAS TO BE O BJECTIVE AND BASED ON THE RECORD OF RECOVERY. INTERNATIONALLY INCOME FROM NON -PERFORMING ASSETS (NPA) IS NOT RECOGNIZED ON ACCRUAL BASIS BUT IS BOOKED AS INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. THEREFORE, THE BANKS SHOULD NOT CHARGE AND TAKE TO INCOME ACCOUNT INTEREST ON ANY NPA.' 3.15. FURTHER, FOLLOWING THE THEORY OF REAL INCOME, QUESTION OF TAXABILITY OF ANY NOTIONAL INCOME LIKE ACCRUED INTEREST ON NPA WO ULD NOT ARISE, MORE PARTICULARLY WHEN THE RECOVERY OF THE PRINCIPAL LOA N AMOUNT IS DOUBTFUL. EVEN THE HON'BLE SUPREME COURT IN THE CASE OF UCO BANK, DISTINGUISHING THE JUDGMENT OF STATE BANK OF TRAVANCORE HAS HELD THAT THE CIRCULARS ISSUED EARLIER WERE NOT APPLICABLE IN VIEW OF SECTION 43D SUBSTITUTED W.E.F. 01/04/2000 AND THE SAID SECTION REQUIRES TO FOLLOW RBI GUIDELINES AND TO TAX INTEREST ON NPA ACCOUNT ONLY WHEN REALIZED. FURTHER , THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DEVGIRI NAGRIK SA HAKARI BANK LTD. (SUPRA) HAS TREATED THE COOPERATIVE BANKS AS SCHEDULED BANK S. IN PARA - 11 OF THE JUDGMENT, THEY HAVE OBSERVED AS UNDER:- 'FURTHERMORE, THE RESPONDENT CO-OPERATIVE BANKS AS UNDERSTOOD BY SECTION 43D OF THE ACT ARE THE SCHEDULED BANKS.' 3.16. THE ASSESSING OFFICER HAS OBSERVED THAT THE A SSESSEE HAS NOT BEEN ABLE TO EFFECTIVELY ESTABLISH THAT THERE WAS UNCERTAINTY AS REGARDS REALISABILITY OF OUTSTANDING DUES I.E. PRINCIPAL AMOUNT AND INTEREST FROM THE BORROWERS. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT THOUGH THE ASSESSEE HAS FILED LEGAL SUITS FOR RECOVERY AND HAS ALSO OBTAINED DECREE BUT COULD NOT BE SERVED DUE TO NON-AVAILABILITY OF THE BORROWERS. THE AO HAS REJEC TED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO EFFECTIVELY DEMONSTRATE WITH COGENT EVIDENCES THAT THE INCOME HAS NOT BEEN RESUL TED OR ACCRUED TO THE ASSESSEE. 3.17. THE APPELLANT HAS CONTENDED THAT THE APPELLAN T HAD FURNISHED A CHART SHOWING COMPLETE PARTICULARS RELATING TO THE NPAS S UCH AS DATE OF NPA, DATE OF SUITE FILE, STATUS OF COURT PROCEEDINGS, THE POS ITION AS TO REALIZATION ETC. IT IS ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 23 - FURTHER SUBMITTED THAT IN MOST OF THE CASES THERE I S NO REALIZATION OF DUES INSPITE OF DECREE FOR LAST MANY YEARS. THE APPELLAN T HAS ALSO CONTENDED THAT THE APPELLANT BANK IS NOT IN POSITION TO REALIZE MO NEY FROM NPAS FOR NUMBER OF YEARS EVEN AFTER A DECREE OBTAINED. IN SUCH A SI TUATION, IT IS CONCLUSIVELY ESTABLISHED THAT THERE ARE NO CHANCES OF RECOVERY O F OUTSTANDING DUES. 3.19. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT. TH E APPELLANT HAS FURNISHED DETAILS OF EACH PARTY DURING THE COURSE OF ASSESSME NT PROCEEDINGS. IN MOST OF THE CASES THE APPELLANT BANK HAS FILED SUITS AND IN SOME CASES GOT DECREE ALSO FOR RECOVERY. EVEN AFTER OBTAINING DECREE THE APPEL LANT BANK IS NOT ABLE TO RECOVER THE DUES FROM PARTIES. THE AO FAILED TO APP RECIATE THIS FACT AND SIMPLY HELD THAT THE ASSESSEE HAS NOT FAILED TO EFF ECTIVELY DEMONSTRATE WITH LEGAL EVIDENCES THAT THE INCOME H SNOT BEEN RESULTE D OR ACCRUED TO THE ASSESSEE. THE APPELLANT HAS FURNISHED DETAILS AND E VIDENCES BEFORE THE AO REGARDING THE EFFORTS MADE BY IT. CONSIDERING THE O VERALL FACTS OF THE CASE, I AM INCLINED TO ACCEPT THE VIEWS OF THE APPELLANT TH AT THE INCOME ON NPAS COULD NOT BE SAID TO BE REALIZABLE UNDER SUCH CIRCU MSTANCES. 3.18. IN VIEW OF THE AFORESAID DISCUSSION, THE APPE LLANT BANK IS NOT LIABLE TO BE TAXED ON THE NOTIONAL INTEREST ON THE NPAS BASED UP ON THE ACCRUAL ACCOUNTING THEORY AND RESPECTFULLY FOLLOWING THE JUDGMENTS OF HON'BLE SUPREME COURT IN THE CASE OF UCO BANK AND JURISDICTIONAL ITAT IN THE CASE OF SHRI MAHILA SEVA SAHAKARI BANK LTD. AND SARDARGUNJ MERCANTILE CO-OP. BANK LTD. BESIDES RECENT JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DEVGIRI NAGRI SAHAKARI BANK LTD. AND DECISIONS OF VARIOUS OTHER A UTHORITIES, THE ADDITION MADE BY THE AO IS FOUND UNJUSTIFIED, AND HENCE, THE SAME IS DELETED. 3. AGGRIEVED BY THE ORDER OF LD.CIT()A, NOW THE REV ENUE IS IN APPEAL BEFORE US. 3.1. BEFORE US, THE LD.SR.DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND, LD.AR REITERATED THE SUBMISSIONS MADE B EFORE THE AO AND SUPPORTED THE ORDER OF THE LD.CIT(A). HE FURTHER S UBMITTED THAT ON IDENTICAL FACTS, THE COORDINATE BENCH OF THIS TRIBU NAL (ITAT B BENCH AHMEDABAD) IN ITA NO.872/AHD/2012 FOR AY 2008-09 IN THE CASE OF ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 24 - ACIT VS. THE PRAGATI CO-OP.BANK LTD., ORDER DATED 2 1/08/2015 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE PLACED THE COP Y OF THE AFORESAID DECISION. HE THEREFORE SUBMITTED THAT IN VIEW OF T HE AFORESAID FACTS, THE APPEAL OF THE REVENUE NEEDS TO BE DISMISSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO AC CRUING THE INCOME ON NPA ACCOUNTS. WE FIND THAT THE LD.CIT(A) BY A WELL -REASONED ORDER AND FOLLOWING THE DECISIONS RENDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL AND THE DECISIONS RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S.DEOGIRI NAGARI SAHAKARI BANK LTD. (IN INCOME TAX APPEAL NO.53 OF 2014, ORDER DATED 22/01/2015) H AS HELD THAT NOTIONAL INTEREST INCOME ON ACCRUAL BASIS ON THE NP A ACCOUNTS CANNOT BE BROUGHT TO TAX. BEFORE US, REVENUE HAS NOT BROUGH T ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID SET OF FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THUS, THE GROUND OF REVENUE IS DISMISSED. 5. SO FAR AS APPEALS OF THE REVENUE FOR AYS 2009-10 & 2011-12 ARE CONCERNED, BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASES ARE IDENTICAL TO THAT OF ITA NO.173/AHD/2016 FOR AY 2007-08(SUPRA), WHICH WE HAV E DECIDED HEREINABOVE IN FAVOUR OF ASSESSEE. WE THEREFORE FO R THE SIMILAR REASONS ITA NOS. 173,174 & 175/AHD/2016 DCIT VS. THE SARANGPUR CO-OP.BANK LTD. ASST.YEARS 2007-08, 2009-10 & 2011-12 RESPECTIVELY - 25 - STATED HEREINABOVE WHILE DECIDING THE REVENUES APP EAL FOR A.Y. 2007- 08 IN ITA NO.173/AHD/2016 (SUPRA) AND FOR SIMILAR R EASONS DISMISS THE GROUND OF REVENUES APPEALS IN ITA NOS.174 & 175/A HD/2016 FOR AYS 2009-10 AND 2011-12. 6. IN THE COMBINED RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27/07/2016 SD/- SD/- ( KUL BHARAT ) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER ORDER PRONOUNCED ON 27/07/2016 AHMEDABAD; DATED 21/ 07 /2016 SD/- SD/- S.K.Y. A.C. (JM) (AM) .. ,.../ T.C. NAIR, SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A) AHMEDABAD-5 5. +,-'&' , &' , % / DR, ITAT, AHMEDABAD 6. -012 / GUARD FILE. / BY ORDER, #+' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD