M/S BHAGYODAYA FRIENDS URBAN CO-OP BANK LTD., V. PRINCIPOAL C.I.T.-1, Nagpur

ITA 181/NAG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1292 (ITAT-NAGPUR)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Reasonable cause; Bad and doubtful debts; Condonation of delay
• Section: 143(3); 37(1); 145; 27; 37; 263

Judgement Text

1 ITA NO. 181/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 181/NAG/2016 ASSESSMENT YEAR : 2010 - 11. M/S BHAGYODAYA FRIENDS URBAN PR. COMMISSIONER OF INCOME - TAX - 1, CO - OP. BANK LTD., WARUD, VS. NAGPUR. DIST. AMRAVATI. PAN AAGFB0179B. APPELLANT. RESPONDE NT. APPELLANT BY : SHRI K.P. DEWANI. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 2 3 - 11 - 2016 DATE OF PRONOUNCEMENT : 28 TH DEC., 2016 O R D E R. PER SHAMIM YAHYA, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED PR. CIT - 1, NAG PUR DATED 17 - 03 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE ORDER PASSED UNDER SECTION 263 OF I.T. ACT, 1961 IS ILLEGAL, INVALID AND BAD IN LAW. 2. THE HONBLE PR . COMMISSIONER OF INCOME - TAX - I ERRED IN HOLDING THAT THE ORDER PASSED IN THE CASE OF ASSESSEE U/S 143(3) OF I.T. ACT, 1961 ON 27/11/2 - 12 IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. 3. THE HONBLE PR. COMMISSIONER OF INCOME TAX - I ERRED IN SETTIN G ASIDE THE FOLLOWING ISSUES TO BE DECIDED AFRESH BY A.O. FOR MAKING ANY ADDITION/DISALLOWANCE AT THE HANDS OF ASSESSEE. A) RS.10,000/ - ON ACCOUNT OF EDUCATION FUND. B) RS. 2,58,127/ - ON ACCOUNT OF CONTINGENCY FUND. C) RS.26,14,907/ - ON ACCOUNT OF OVERDUE INTEREST PROVISION. 2 ITA NO. 181/NAG/2016. 4. THE HONBLE PR. COMMISSIONER OF INCOME TAX - 1 ERRED IN DIRECTING TO A.O. TO MAKE ADDITION OF RS.89,26,118/ - ON ACCOUNT OF CLAIM OF INTEREST ON NPA IN THE PROFIT AND LOSS ACCOUNT. 5. THE ADDITION MADE BY CIT AT RS.89,26,118/ - OUT OF INTEREST ON NPA IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 2. WE FIND THAT THERE IS A DELAY OF 296 DAYS IN THIS CASE. THE REASONABLE CAUSE ATTRIBUTED FOR THE DELAY HAS BEEN SUBMITTED AS UNDER : IN THE CASE OF ASSESSEE , ORDER U/S 263 OF LT ACT 1961 HAS BEEN PASSED DATED 17/03/2015, THE ORDER PASSED ULS 263 OF LT ACT 1961 HAS BEEN SERVED ON ASSESSEE ON 02/04/2015 , THE DUE DATE OF SUBMISSION OF APPEAL AGAINST ORDER PASSED ULS 263 OF LT ACT 1961 WAS 02/06/2015 . ASSESSEE HAD FORWARDED DOCUMENTS FOR PREPARATION OF APPEAL TO THE OFFICE OF CHARTERED ACCOUNTANT, V.S. JADHAO & ASSOCIATES IN M I D OF APRIL 2015 . THE DOCUMENTS . WERE HANDED OVER FOR PREPARAT I ON OF APPEAL TO SMT . SHRUTI S . JOSHI . SHE HAD MISPLACED AND MIXED UP THE PAPERS WITH OTHER DOCUMENTS ON HER TABLE A ND IT HAD ESCAPED FROM HER ATTENTION TO PREPARE APPEAL . SOMETIME IN MARCH 2016 SHE NOTICED THAT APPEAL HAS REMAINED TO BE FILED. THE APPEAL WAS PREPARED AND FILED IN THE OFFICE OF THE REGISTRAR OF INCOME TAX TRIBUNAL , NAGPUR ON 23/03/2 016 . THUS THERE IS DELAY OF 294 DAYS IN FILING APPEAL BEFORE ITA T . THE AFFIDAVIT OF SMT . SHRUTI JOSHI WORKING WITH THE OFFICE OF SHRI V . S. JADHAO AFFIRMING THE ABOVE FACTS IS ENCLOSED TO SUBSTANTIATE THE REQUEST FOR CONDONATION OF DELAY IN FILING OF APPEAL . 2. IT IS RESPECTFULLY SUBMITTED THAT DELAY IN SUBMISSION OF APPEAL IS ON ACCOUNT OF MISTAKE AT THE OFFICE OF COUNSEL OF ASSESSEE AND THERE IS NO NEGLIGENCE ON PART OF ASSESSEE OR ANY MALAFIDE INTENTION TO DELAY THE FILLI NG OF APPEAL . THE ASSESSEE IS CO - OPERATIVE BANK AND IS MANAGED BY ELECTED HONORARY MEMBERS. 3. THE ASSESSEE PLACES RELIANCE ON THE DECISION OF M/S. RAIPUR FERRO ALLOYS PRIVATE LTD. IN ITA NOS.103, 253 & 254/NAG/2001 VIDE ORDER DATED 30/04/2003 FOR CONDONATI O N OF DELAY IN FILING THE APPEAL . 4. THE ASSESSEE PLACES RELIANCE ON THE VARIOUS DECISIONS REFERRED TO IN THE AFORESAID APPELLATE ORDER. IT IS SUBMITTED THAT DELAY ON ACCOUNT OF MISTAKE IN THE OFFICE OF COUNSEL IS SUFFICIENT AND REASONABLE CAUSE FOR DELAY IN SUBMISSION OF APPEAL . 5. IN VIEW OF ABOVE, IT IS HUMBLY PRAYED THAT DELAY IN FILLING OF APPEAL BE CONDONED AND SAME BE ADJUDICATED ON MERITS. THE ADDITIONS CHALLENGED IN APPEAL ARE COVERED MATTER BY JUDGEMENTS ON THE DISPUTED ISSUE IN FAVOUR OF ASSESSEE. IT IS SUBMITTED THAT IN CONDONING THE DELAY THERE WILL BE NO PREJUDICE CASE OF REVENUE RATHER IT WOULD MEET THE ENDS OF SUBSTANTIAL JUSTICE. FURTHER MORE AN AFFIDAVIT FROM THE CONCERNED PERSON SMT. SHRUTI S. JOSHI HA S 3 ITA NO. 181/NAG/2016. ALSO BEEN SUBMITTED. 3. UPON CAREFUL CONSIDERATION AND HEARING THE LEARNED D.R. , CONSIDERING THE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT INTEREST OF JUSTICE DEMANDS THAT THE DELAY BE CONDONED AND THE SAME IS CONDONED AS SUCH. 4. IN THIS CASE THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 27 - 11 - 2012. LATER ON LEARNED CIT OBSERVED THAT THE AO WAS IN ERROR IN RESPECT OF THE FOLLOWING ISSUES AND THE ASSESSMENT ORDER WAS PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. (I) TH E ASSESSEE HAD DEBITED AN AMOUNT OF RS.10,000/ - ON ACCOUNT OF EDUCATION FUND AND RS.2,58,127/ - ON ACCOUNT OF CONTINGENCY FUND. THESE EXPENSES APPEARED TO BE CAPITAL IN NATURE WHICH SHOULD HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER. (II) AN AMOUNT OF RS.89,26 ,118/ - ON ACCOUNT OF INTEREST CAPITALIZED HAD BEEN DEBITED BY THE ASSESSEE TO ITS P & L A/C. DURING SCRUTINY, IT WAS STATED BY THE ASSESSEE THAT INTEREST RECEIVABLE ON LOANS GIVEN WAS CREDITED TO P & L A/C. HOWEVER, SINCE SAME WAS NOT ACTUALLY RECEIVED DUR ING THE YEAR, THE SAME WAS DEBITED TO P & L A/C UNDER THE HEAD INTEREST CAPITALIZED. SINCE THE BANK FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, THE AMOUNT OF RS.89,26,118/ - DEBITED TO P & L A/C UNDER THE HEAD INTEREST CAPITALISED SHOULD HAVE BEEN DISALLO WED. THIS HAS NOT BEEN DONE BY THE ASSESSING OFFICER WHILE PASSING ORDER U/S 143(3) OF I.T. ACT. (III) IN THE BALANCE SHEET, UNDER THE HEAD OTHER LIABILITIES, THERE WAS OVERDUE INTEREST PROVISION OF RS.2,13,14,261/ - AS ON 31.03.2010 WHEREAS CORRESPONDING FIGURE OF THE PROCEEDING YEAR WAS RS.1,86,99,354/ - . THUS THERE WAS AN INCREASE IN OVERDUE INTEREST BY RS.26,14,907/ - WHICH SHOULD HAVE BEEN DISALLOWED. THE SAME HAS NOT BEEN DISALLOWED BY THE ASSESSING OFFICER. 5. UPON RECEIPT OF ASSESSEES SUBMISSION, LEARNED CIT HELD AS UNDER : I) ON THE ISSUE OF DEBIT OF RS.10,000/ - TO THE P & L ACCOUNT ON ACCOUNT OF EDUCATION FUND, LEARNED CIT NOTED THE SUBMISSION THAT THE S AME HAS BEEN PAID TO THE STATE FEDERAL SOCIETY AND IS A CONTRIBUTION TOWARDS THE EDUCATION FUN D MODIFIED IN THIS BEHALF BY 4 ITA NO. 181/NAG/2016. THE STATE GOVERNMENT. HOWEVER, LEARNED CIT NOTED THAT NO EVIDENCE HAS BEEN FURNISHED. HE REMITTED THE MATTER TO THE AO AND DIRECTED THE ASSESSEE TO MAKE HIS SUBMISSIONS ALONG WITH NECESSARY EVIDENCE BEFORE THE AO. II) ON THE IS SUE OF CONTINGENCY EXPENSES OF RS.2,58,127/ - DEBITED TO THE P & L ACCOUNT, LEARNED CIT NOTED THE SUBMISSIONS THAT THE SAME IS AN EXPENDITURE ON UNEXPECTED/CONTINGENT EVENTS I.E. UNFORESEEN EVENTS AND CERTAIN MISCELLANEOUS EXPENSES. ON THIS ISSUE ALSO THE L EARNED CIT REMITTED THE MATTER TO THE AO DIRECTING THE ASSESSEE TO MAKE HIS SUBMISSIONS A LONG WITH NECESSARY EVIDENCES BEFORE THE AO. III) ON THE ISSUE OF DEBIT OF RS.89,26,118/ - , LEARNED CIT NOTED THE ASSESSEES SUBMISSION THAT THE SAME REPRESENTS THE INT EREST RECEIVABLE ON LOAN ACCOUNT IN RESPECT OF WHICH THE INCOME IS ALREADY CREDITED TO P & L ACCOUNT. THAT THIS AMOUNT OF INTEREST WHICH IS NOT ACTUALLY RECEIVED BY THE ASSESSEE AND IS THEREFORE, DEBITED TO THE P & L ACCOUNT. LEARNED CIT DID NOT AGREE WIT H THIS. HE HELD AS UNDER : IT IS VERY CLEAR FROM THE FACTS OF THE CASE THAT A DEBIT HAS BEEN P A SSED MERELY BE C A U S E THE I N TER E S T CHARGED O F R S . 89,26 , 118 1 - HAS NOT BEEN RECEIVED DURING THE YEAR . IT I S N O T A CA S E OF B A D DEBT . IT IS A L SO N O T A C A SE THAT THE RIGHT TO RECEIVE THE S A ID SUM HA S BEEN EX T ING U I S HE D . THIS DEBIT OF INTERES T IS ALSO NOT WH OL L Y AND E X CLUSI V ELY FOR THE P UR POS E S O F THE AS SESSEE ' S B USINESS. I T H E REFORE HOLD TH A T T H I S INTEREST D E B I TED IS N OT A LL O W A B L E A S A N EX PEND I T U R E U / S 3 7( 1 ) O F TH E IT AC T, 1 961 . RESULTANTLY , . I DIRECT TH E ASSESS IN G O FF I C ER T O MAKE A N A DDITIO N OF RS . 89,26,118 / - IN TH E C A SE. THE ASSESSING OFFICE R S H A LL MODI F Y THE AS SESSMENT O R DE R DA TED 27 1 11 / 2012 ACCORD ING L Y. IV) AS REGARDS THE ISSUE OF OVERDUE INTEREST OF RS.16,14,907/ - , LEARNED CIT HELD AS UNDER : 7 . A S R EG A R DS THE ISSUE OF I N C R EA SE IN OVERDUE INTEREST O F RS . 26,14,907 / - IT HAS B E EN S T A T E D B E FO RE M E THAT THE SAID IN C R EA SE IN PROVISION IS IN PROPORTION TO THE LOAN ACCOUNT WHICH TURNS BAD / IRRECOVERABLE AND ON WHICH INTEREST AT A PRESCRIBED RATE WAS RECEIVABLE. H OWEV ER , TH E SA ID INTEREST WAS NOT RECEIVED DURING THE YE A R A ND HENCE THE PROVISION HAS BE E N M A DE . ON TH I S ISSUE ALS O NO DETAILS AND EVIDENCES HAVE BEEN FURNISHED. IN ORDER 5 ITA NO. 181/NAG/2016. TH A T A F A IR O P PO R T UNITY IS AV A ILABLE TO THE A SSESSEE TO JUSTI FY IT S CLAIM UNDER THE PROVISIONS O F SEC TI O N 3 7( I ) , I DEEM IT TIT T O SE T A SIDE THIS MATTER TO T HE TILE O F T HE ASSESSING OFFICER WH O S H A LL P R OV IDE AN O PP O R T U NIT Y O F BEING H E A RD TO T HE A S SESS EE A ND EX AM I N E ITS CL A I M UNDE R T HE P R O V ISIO NS OF SE C TI O N 3 7 ( I ) . T H E ASSESSEE S H AL L M AK E HIS SUB M ISSION A L ON G W I TH NE CES SAR Y EV IDENCE BE FO R E T HE A S SESS ING O F FICER . 6. THEREAFTER LEARNED CIT MADE THE FOLLOWING CONCLUDING REMARKS : IN SUM, THE ASSESSING OFFICER IS DIRECTED TO MAKE AN ADDITION OF RS.89,26,118/ - BEING EXPENSES DEBITED TO THE P & L A/C NOT ALLOWABLE U/S 37(1) OF THE IT ACT, 1961 AND ON REMAINING ISSUES THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE AND DECIDE THE SAME UNDER THE PROVISIONS OF THE ACT. 7. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEES SUBMISSIONS ARE SUMMARISED AS UNDER : GROUND NO. 1 & 2: JURISDICTION U/S 263 OF INCOME TAX ACT, 1961. A) THE HONBLE CIT HAS DIRECTED TO MAKE ADDITION AT RS.89,26,118/ - BEING INTEREST CAPITALIZED DEBITED TO PROFIT & LOSS A/C NOT ALLOWABLE AS DEDU CTION U/S 37(1) OF I.T. ACT, 1961 AND HAS SET ASIDE THE ISSUE IN RESPECT TO CONTRIBUTION OF RS.10,000/ - ON ACCOUNT OF EDUCATION FUND RS.2,58,127/ - ON ACCOUNT OF CONTINGENT FUND AND RS.26,14,907/ - ON ACCOUNT OF OVERDUE INTEREST ON NPA ADVANCE. B) THE AO HAD M ADE COMPLETE INQUIRIES AS REGARDS TO EXPENDITURE CLAIMED AND HAD ACCEPTED THE SAME IN ASSESSMENT FRAMED U/S 143(3) OF I.T. ACT, 1961. THE EXPENDITURE CLAIMED IS ALLOWABLE DEDUCTION.AO HAS TAKEN POSSIBLE VIEW OF THE MATTER. THE ORDER PASSED BY AO CANNOT BE TERMED AS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. RELIANCE ON: I) (2007) 295 ITR 0282 (SC) CIT VS. MAX INDIA LTD. 6 ITA NO. 181/NAG/2016. C) THE A . O . HAS COMPLETED THE ASSESSMENT PROCEEDINGS ULS 143(3) OF I . T . ACT 1961 AND HAS ALLOWED THE EXPENDITURE OF RS.10,0001 - ON ACCOUNT OF EDUCATION FUND RS. 2,58,127/ - ON ACCOUNT OF CONTINGENCY FUND. THE SUM OF RS. 89,26,1181 - REPRESENTS AMOUNT WRITTEN OFF AS BAD DEBT WHICH WAS SHOWN AS INCOME IN BOOKS OF ACCOUNT IN EARLIER YEARS AND IS NOT RECOVERABLE. THE DETAILS OF ALLOW ABLE CLAIM AS EVIDENT FROM COPY OF LEDGER ACCOUNT OF PARTIES WAS VERIFIED BY A.C. IN REGULAR ASSESSMENT PROCEEDINGS. D) THERE IS NO MISTAKE IN THE ORDER OF A.C. AND THUS THERE IS NO VALID ASSUMPTION OF JURISDICTION BY HON'BLE CIT ULS 263 OF INCOME TAX AC T 1961. 2. GR . NO.3 : THE HON'BLE CIT SET ASIDE THE FOLLOWING ISSUES TO BE DECIDED AFRESH BY A. C. A) RS. 10,0001 - ON ACCOUNT OF EDUCATION FUND . B) RS. 2,58,127/ - ON ACCOUNT OF CONTIGUOUS FUND. C) RS .26, 14,907/ - ON ACCOUNT OF OVERDUE INTEREST PROVISION. A) REGULAR ASSESSMENT HAS BEEN FRAMED BY A.C. ULS 143(3) R . W.S. 263 OF I . T . ACT 1961 VIDE ORDER DATED 0810912015. THE A . C. HAS ALLOWED THE DEDUCTION OF RS.10 , 0001 - ON ACCOUNT OF EDUCATION FUND AND RS.2,58,127/ - ON ACCOUNT OF CONTINGENCY FUND. B) THE A. O . HAS MADE ADDITION OF RS.26,14,907/ - IN RESPECT TO OVERDUE INTEREST . IT IS SEEN THAT AFORESAID AMOUNT OF OVERDUE INTEREST IS IN RESPECT TO NPA ADVANCES. IT IS SETTLED PROPOSITION OF LAW THAT INTEREST INCOME RELATABLE TO NPA IS 7 ITA NO. 181/NAG/2016. NOT INCLUDIBLE ON ACCRUED BASIS. SINCE THE I NTEREST INCOME HAS NOT ACCRUED TO ASSESSEE AS DEBT ITSELF IS DOUBTFUL THERE IS NO CASE FOR SUCH ADDITION. C) INTEREST ON NPA ACCOUNTS IS NOT CREDITED TO PROFIT & LOSS ACCOUNT . CONTRA ENTRY IS MADE IN BALANCE SHEET AS COMPLIANCE FOR INFORMATION TO BE DISCLOSED IN FINANCIAL STATEMENT . D) THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY T H E DECISION OF HON'BLE ITAT, NAGPUR BENCH, NAGPUR. RELIANCE ON: I) ITA NO.233/NAG/2013 FOR ASSTT . YEAR 2009 - 10 VIDE ORDER DATED 05/06/2015 IN CASE OF THE WASH I M URBAN CO - OP. BANK LTD . 3 . GR . NO 4 : ADDITION AT RS.89,26, 118/ - IN RESPECT TO INTEREST CAPITALIZED ON NPA ACCOUNT . A) DETAILS OF AMOUNT WRITTEN OFF AS BAD DEBIT. B) LEDGER ACCOUNT OF CUSTOMERS. C) LEDGER ACCOUNT OF INTEREST CAPITALIZED. D) THE ASSESSEE HAD DECLARED ACCRUED INTEREST INCOME IN PAST ASSTT. YEARS AND DEBITED THE SAME TO ACCOUNT OF VARIOUS DEBTORS. THE DEBTORS HAVE BECOME BAD AND CHANCES OF RECOVERY ARE GRIM AND DOUBTFUL. THE ASSESSEE HAS WRITTEN OFF AMOUNT OF INTERE ST DEBITED TO ACCOUNT OF PARTIES BY WRITING OFF SAME IN PROFIT & LOSS A/C AND GIVING CREDIT OF SAME TO THE ACCOUNT OF DEBTORS. THE AFORESAID CLAIM OF 8 ITA NO. 181/NAG/2016. ASSESSEE IS THUS CLEARLY ALLOWABLE U/S 36(1)(VII) OF I.T. ACT, 1961. THE REQUISITE CONDITION FOR GRANT OF ALLOWANCE STANDS SATISFIED ON THE BASIS SOF EVIDENCE ON RECORD. RELIANCE ON: I) 323 ITR 397 (SC) CIT VS. TR F LTD. THE ISSUE IN DISPUTE AS TO CLAIM OF AFORESAID SUM SQUARELY COVERS BY THE DECISION OF HONBLE APEX COURT AND THUS DIRECTION OF HONBLE CIT TO MAKE ADDITION OF SAME AT THE HANDS OF ASSESSEE IS UNJUSTIFIED AND UNSUSTAINABLE. E) CIT HAS OBSERVED THAT IS IS NOT ALLOWABLE U/S 37(1) OF I.T. ACT, 1961. CIT HAS NOT RECORDED ANY FINDING THAT IT IS NOT ALLOWABLE AS BAD DEBTS. ENTRIES IN BOOKS CLEARLY DEMONSTRATE THAT SAME IS ALLOWABLE AS BAD DEBT. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. 10. AS REGARDS THE ISSUE OF DEBIT OF RS.10,000/ - ON ACCOUNT OF EDUCATION FUND AND DEBIT OF RS.2,58,127/ - ON ACCOUNT OF CONTINGENCY FUND, WE FIND THAT THE LEARNED C IT HAS OBSERVED THAT APPARENTLY EXPENDITURE APPEARED TO BE CAPITAL IN NATURE. ON ASSESSEES NOT FURNISHING THE NECESSARY EVIDENCE OF THE EXPENDITURE BEING REVENUE IN NATURE, LEARNED CIT HAS REMITTED THE MATTER TO THE FILE OF THE AO AND DI RECTED THE ASSESSEE TO GIVE HIS SUBMISSIONS AND EVIDENCES BEFORE HIM. IN OUR CONSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE ISSUE THERE IS NO INFIRMITY IN THE DIRECTION OF LEARNED CIT IN THIS REGARD. HENCE WE UPHOLD THE ORDER OF LEARNED CIT FOR THE ABOVE ISSUE. 11. AS REGARDS THE ISSUE OF DEBIT OF RS. 89,26,118/ - IN RESPECT TO INTEREST CAPITALIZED ON NPA ACCOUNT, IT IS THE ASSESSEES SUBMISSION THAT THE ASSESSEE HAS 9 ITA NO. 181/NAG/2016. WRITTEN OFF THIS AMOUNT OF INTEREST DEBITED TO THE ACCOUNT OF PARTIES BY WRITING OFF THE SAME IN PROFIT AND LOSS ACCOUNT AND GIVING CREDIT OF SAME TO THE ACCOUNT OF DEBTORS. IT HAS BEEN SUBMITTED THAT THE AFORESAID CLAIM IS CLEARLY ALLOWABLE U/S 36(1)(VII) OF I.T. ACT. LEARNED COUNSEL HAS FURTHER SUBMITTED THAT THE ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. TRF LTD. 323 ITR 397 FOR THE PROPOSITION THAT WRITING OF THE DEBT IN THE PROFIT AND LOSS ACCOUNT AND THE BOOKS OF ACCOUNT IS SUFFICIENT FOR ALLOWANCE OF BAD DEBT. WE FIND OURSELVES PRINCIPALLY IN AGREEMENT WITH THIS PROPOSITION. HOWEVER, THIS ASPECT NEEDS FACTUAL VERIFICATION OF THE BOOKS AND HENCE WE REMIT THIS ISSUE TO THE FILE OF THE AO TO EXAMINE THE ISSUE IN THE LIGHT OF THE ASSESSEES SUBMISSION AS ABOVE AND DECIDE AS PER LAW EXPOUNDED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. TRF LTD. (SUPRA). 12. AS REGARDS THE DISALLOWANCE OF PROVISION OF RS.26,14,907/ - ON ACCOUNT OF OVERDUE INTEREST, IT HAS BEEN SUBMITTED THAT THE SAME IS IN RESPECT OF NPA ADVANCES. IT HAS BEEN SUBMITTED T HAT IT IS SETTLED PROPOSITION OF LAW THAT THE INTEREST INCOME RELATABLE TO NPA IS NOT IN CLUDIBLE ON ACCRUED BASIS. IT HAS FURTHER SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, NAGPUR BENCH IN ITA NO.233/NAG/2013 FOR A SSTT. YEAR 2009 - 10 VIDE ORDER DATED 05 - 06 - 2015 IN THE CASE OF THE WASHIM URBAN CO - OP . BANK LTD. WE FIND THAT IN THE AFORESAID CASE THE ITAT HAS HELD AS UNDER : 6. IN THE LIGHT OF THE ABOVE FACTUAL AND LEGAL ARGUMENTS RAISED BEFORE US, WE HAVE TO ADDRESS THE CONTROVERSY THAT WHETHER THE ASSESSEE IS ELIGIBLE FOR THE EXCEPTION AS PRESCRIBED UNDER SECTION 43D OF I.T. ACT. AT THE OUTSET, WE MAY LIKE TO REFER THE DECISIO N OF KARNAVATI CO - OP BANK LTD. 114 ITR (TRIB.) 175 (AHM) WHEREIN THE ISSUE WAS IDENTICAL THAT WHETHER INTEREST ON ACCRUAL BASIS IN RESPECT OF NON PERFORMING ASSETS (NPA) OF A COOPERATIVE BANK ARE TO BE TAXED OR NOT. IT WAS HELD THAT IN A SITUATION WHEN THE ASSESSEE IS A COOPERATIVE BANK, HOWEVER, GOVERNED BY RBI GUIDE LINES THEN THE PROVISIONS OF SECTION 43D IS TO BE APPLIED. EVEN THE ITAT, PUNE BENCH IN THE CASE OF OMERGA JANTA SAHAKARI BANK LTD. 166 TTJ 375 HAS HELD THAT THE ASSESSEE, A COOPERATIVE BANK, 10 ITA NO. 181/NAG/2016. OPERATING UNDER THE LICENSE FROM RBI AND GOVERNED BY THE CIRCULARS OF RESERVE BANK OF INDIA IS ENTITLED FOR RELIEF. ON THE BASIS OF THOSE CIRCULARS, THE SAID COOPERATIVE BANK HAD NOT ACCOUNTED FOR THE INTEREST INCOME OF NPA. IT WAS HELD THAT INTEREST INCO ME RELATABLE TO NPA WAS NOT INCLUDIBLE ON ACCRUAL BASIS SINCE THE INTEREST INCOME HAD NOT ACCRUED TO THE ASSESSEE IN THAT PERIOD. BOTH THE TRIBUNALS HAVE ALSO DISCUSSED A DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF SOUTHERN TECHNOLOGIES LTD . 320 ITR 577 (SC). THE HONBLE COURT HAS EXPRESSED THAT IN ESSENCE RBI DIRECTIONS WERE PRUDENTIAL NORMS ISSUED WHICH DEALS ESSENTIALLY IN RESPECT OF RECOGNITION OF INCOME. THE GUIDELINES WERE IN RESPECT OF NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FI NANCIAL ACCOUNTS. BY VIRTUE OF SECTION 45Q AN OVERRIDING EFFECT IS GIVEN TO SAID DIRECTIONS VIS - A - VIS PRINCIPLES OF INCOME RECOGNITION. THE HONBLE COURT HAS OBSERVED THAT THE ACCOUNTING POLICIES ADOPTED BY NBFC CANNOT DETERMINE THE TAXABILITY OF INCOME. IT WAS HELD THAT THE ASSESSING OFFICER HAS TO CONSIDER THE DIRECTIONS OF RESERVE BANK OF INDIA AS PER SECTION 45Q OF RESERVE BANK OF INDIA ACT AND EXAMINE THE ISSUE AS PER THE PRUDENTIAL NORMS ISSUED BY RBI IN CONNECTION WITH THE INCOME RECOGNITION OF A BANK. THE COURT HAS ALSO COMMENTED THAT IN SUCH A SITUATION THE PROVISIONS OF SECTION 145 HAD NO ROLE TO PLAY. 7. THEREFORE, WE HEREBY CONCLUDE THAT IN A SITUATION WHEN THE BENCHES OF THE TRIBUNAL HAVE FOLLOWED THE DECISIONS OF HONBLE HIGH COURTS AND HON BLE SUPREME COURT, THEREFORE, THE DECISION OF ITAT, LUCKNOW BENCH BEING ON DIFFERENT FACTS IS NOT APPLICABLE ON THE FACTS OF THIS CASE, SPECIALLY WHEN THE RESPECTED COORDINATE BENCH LUCKNOW (HAMIRPUR DIST. COOPERATIVE BANK 148 ITR 233) HAS ALSO ENDORSED THE VIEW OF SOUTHERN TECHNOLOGIES (SUPRA), AS PER THE FOLLOWING OBSERVATIONS: ACCRUAL (OR OTHERWISE) OF AN INCOME (OR EXPENDITURE) IS MATTER OF FACT, TO BE DECIDED SEPARATELY FOR EACH CASE, ON THE BASIS OF THE ASSESSMENT OF THE OBTAINING FACTS AND CIRCU MSTANCES. THE SAME CANNOT BE STATED AS AN ACCOUNTING POLICY WHICH BY ITS VERY NATURE IS TO BE APPLIED UNIFORMLY, EXCEPT WHERE IT IS STATED IN BROAD TERMS, BEARING THE NECESSARY INGREDIENTS OF THE QUALIFYING CRITERION, I.E. EXISTENCE OF A REASONABLE CER TAINTY AS TO ULTIMATE REALIZATION AT THE TIME OF RAISING THE CLAIM OR EVEN AS AT THE END OF THE ACCOUNTING PERIOD. CLEARLY, THE SAME WOULD REQUIRE AN ASSESSMENT OF THE RELEVANT FACTS, AND INCOME TO THAT EXTENT SHALL NOT BE RECOGNIZED UNLESS THERE IS REAS ONABLE CERTAINTY OF 11 ITA NO. 181/NAG/2016. REALIZATION. THE SAME WOULD NECESSARILY REQUIRE EXAMINATION OF THE FACTS AND CIRCUMSTANCES OF EACH CASE, AND TAKING A DECISION HAVING REGARD THERETO. THIS STANDS ENDORSED BY THE HONBLE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LT D. (SUPRA). THE ADOPTED ACCOUNTING POLICY, I.E., RECOGNIZING INCOME ON NPA ACCOUNTS ONLY SUBJECT TO REALIZATION, DOES NOT SERVEAS A VALID QUALIFYING CATEGORY AS THERE COULD BE OTHER MITIGATING FACTORS, MAKING IT REASONABLE TO EXPECT REALIZATION DESPITE THE ACCOUNT BEING A NPA. FURTHER, ON FACTS, IT IS FOUND THAT THERE HAS BEEN IN FACT RECOGNITION OF INCOME, AND THE ASSESSEES CLAIM IS ONLY QUA PROVISION FOR BAD AND DOUBTFUL DEBTS WITH REFERENCE TO TOTAL ASSETS, INCLUDING THE INTEREST INCOME BOOKED AND DEBITED TO THE ACCOUNT OF RESPECTIVE BORROWER, AND QUA WHICH THE ASSESSEE IS ENTITLED TO AND HAS CLAIMED DEDUCTION U/S 36(1)(VIIA) 8. AN ORDER OF ITAT, AHMEDABAD BENCH HAS ALSO BEEN CITED BEFORE US PRONOUNCED IN THE CASE OF KARNAVATI COOPERATIVE BAN K 144 TTJ 769 (AHD) WHEREIN THE IDENTICAL ISSUE HAS BEEN DEALT WITH AT LENGTH AND THE CBDT INSTRUCTIONS HAVE ALSO BEEN CONSIDERED. IT IS ALSO WORTH TO MENTION THAT IN THIS DECISION AS WELL THE CASE OF SOUTHERN TECHNOLOGIES 320 ITR 577 (SC) HAS BEEN DISCUSS ED AND FOLLOWED. WE HAVE ALSO NOTED THAT THE DECISION OF U.CO. BANK 237 ITR 889 (SC) WAS ALSO DISCUSSED FOR THE LEGAL PROPOSITION THAT A BENEFICIAL CIRCULAR IS NOT TO BE TREATED AS INCONSISTENT WITH THE PROVISIONS OF STATUTE AND BINDING ON THE AUTHORITIES. ACCORDING TO THE HONBLE COURT, THE INTEREST IN RESPECT OF STICKY ADVANCES ARE TO BE TAXED ONLY WHEN ACTUALLY RECEIVED AS PRESCRIBED BY CBDT CIRCULAR. 8.1 THERE IS ONE MORE DECISION OF ITAT, BENGALORE BENCH - B, BENGALORE BEARING ITA NO.1528/BANG/1013 ASS TT. YEAR 2009 - 10 ORDER DATED 13 TH OF FEB., 2015 PRONOUNCED IN THE CASE OF ACIT V/S. BAGALKOT DISTRICT CENTRAL COOPERATIVE BANK WHEREIN IT WAS HELD THAT THE COOPERATIVE BANK BEING GOVERNED BY RBI GUIDELINES, THE PROVISIONS OF SECTION 43D OF THE ACT ARE ALSO APPLICABLE TO SUCH COOPERATIVE BANKS AND THERE IS NOTHING IN THE SECTION WHICH MAKES THE INTEREST INCOME OF COOPERATIVE BANK FROM NPAS TAXABLE ON ACCRUAL BASIS. 9. WE, THEREFORE, HOLD THAT THE DECISIONS AS CITED BEFORE US SQUARELY COVER THE ISSUE IN F AVOUR OF THE ASSESSEE. WE HEREBY CONFIRM THE FINDING OF LEARNED CIT(APPEALS) AND DISMISS THIS GROUND OF THE REVENUE. 13. FROM THE ABOVE IT IS CLEAR THAT NO ADDITION IS REQUIRED FOR OVERDUE INTEREST ON NPA. LEARNED CIT HAS CLEARLY ERRED IN DIRECTING THAT T HE SAME BE BROUGHT TO 12 ITA NO. 181/NAG/2016. TAX. IN OUR CONSIDERED OPINION, LEARNED CIT WAS NOT JUSTIFIED IN EXERCISING HIS POWER OF REVISION QUA THIS ISSUE. FIRSTLY THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION AS ABOVE. SECONDLY EVEN IF THERE WERE TWO VIEWS POSSIBLE, THE AO HAS ADOPTED ONE OF THE VIEWS WHICH CANNOT BE SAID TO BE MALAFIDE OR NON ACCEPTABLE. IN SUCH SITUATION, EXERCISE OF JURISDICTION BY THE LEARNED CIT IS NOT VALID. THIS IS SUPPORTED BY THE HONBLE APEX COURT EXPOSITION IN THE CASE OF CIT VS. MAX INDIA LTD. 295 ITR 282 FOR THE PROPOSITION THAT WHEN TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. EXAMINING THE PRESENT ISSUE ON THE TOUCH STONE OF ABOVE, WE FIND THAT THE VIEW ADOPTED BY THE AO IS SUSTAINABLE IN LAW. HENCE ASSUMPTION OF JURISDICTION BY HE LEARNED CIT QUA THIS ISSUE I S INVALID AND NOT SUSTAINABLE. HENCE WE QUA SH THE 263 ORDER OF THE LEARNED CIT QU A THE ISSUE OF PROVISION OF INTEREST OF OVERDUE INTEREST FOR NPA. 14. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DEC., 2016. SD/ - SD/ - (RA M LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 28 TH DEC. , 2016. 13 ITA NO. 181/NAG/2016. COPY FORWARDED TO : 1. M/S BHAGYODAYA FRIENDS URBAN CO - OP. BANK LTD., MOGHE COMPLEX, AMRAVATI ROAD, WARUD, DIST. AMRAVATI. 2. A.C.I.T., AMRAVATI CIRCLE, AMRAVATI. 3. PR. C.I.T. - 1 , NAGPUR. . 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.