The Mehsana Dist. Central Co.op. Bank Ltd., Mehsana V. Asstt. Commissioner of Income Tax,Mehsana Circle, Mehsana

ITA 1846/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8589 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M G PATEL
• Section: 145; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 1846/AHD/2015 (ASSESSMENT YEAR: 2012-13) THE MEHSANA DIST. CENTRAL CO-OP. BANK LTD. RAJ MAHEL ROAD, MEHSANA- 384001 V/S THE ACIT, MEHSANA CIRCLE, MEHSANA (APPELLANT) (RESPONDENT) PAN: AAAAT1109N APPELLANT BY : SHRI M.G. PATEL, AR RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 05 -04-201 8 DATE OF PRONOUNCEMENT : 09 -04-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A, GANDHINAGAR, AHMEDABAD DATED 23.04.2015 PERTAINING TO A.Y. 2012-13. ITA NO. 1846 /AHD/2015 . A.Y. 2012-13 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 19,27,060/- ON ACCOUNT OF INTEREST ON NONPERFORMING ASSETS U/S. 43D OF THE ACT. 3. THE ASSESSEE IS INTO BANKING BUSINESS. DURING THE C OURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO S UBMIT LIST OF PERSONS TO WHOM LOANS AND ADVANCES WERE GIVEN BY THE BANK AND INTEREST INCOME HAS NOT BEEN OFFICERED. ASSESSEE FILED A DETAILED REPLY ST ATING THAT AN AMOUNT OF RS. 19,27,060/- ON ACCOUNT OF INTEREST OF NONPERFORMING ASSETS HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THE A.O. WA S OF THE OPINION THAT SUCH INTEREST HAS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND AFTER ISSUING A SHOW CAUSE NOTICE AND CONSIDERING THE REPLY OF THE ASSESSEE, THE A.O. ADDED RS. 19,27,060/- TO THE INCOME OF THE ASSESSEE. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 5. WE FIND THAT THIS ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF SHRI MAHILA SEWA SAHAKARI MA NDLI LTD. 395 ITR 324. THE RELEVANT FINDINGS OF THE HONBLE COURT READ AS UNDE R:- 28. IN THE LIGHT OF THE VIEW ADOPTED BY THE COURT, IT IS NOT NECESSARY TO ENTER INTO ANY DETAILED DISCUSSION AS REGARDS THE APPLICABILIT Y OR OTHERWISE OF THE CBDT CIRCULAR TO THE FACTS OF THE PRESENT CASE. THE SUPR EME COURT IN UCO BANK, (SUPRA) HAS HELD THAT SUCH CIRCULARS ARE NOT MEANT FOR CONT RADICTING OR NULLIFYING ANY PROVISION OF THE STATUTE. THEY ARE MEANT FOR PROPER ADMINISTRATION OF THE STATUTE, THEY ARE DESIGNED TO MITIGATE THE RIGOURS OF THE AP PLICATION OF A PARTICULAR PROVISION OF THE STATUTE IN CERTAIN SITUATIONS BY A PPLYING A BENEFICIAL INTERPRETATION TO THE PROVISION IN QUESTION SO AS T O BENEFIT THE ASSESSEE AND MAKE THE APPLICATION OF THE FISCAL PROVISION, IN THAT CA SE, IN CONSONANCE WITH THE CONCEPT OF INCOME AND IN PARTICULAR, NOTIONAL INCOM E AS ALSO THE TREATMENT OF SUCH NOTIONAL INCOME UNDER THE ACCOUNTING PRACTICE. THE COURT, ACCORDINGLY, DID ITA NO. 1846 /AHD/2015 . A.Y. 2012-13 3 NOT FIND ANY INCONSISTENCY OR CONTRADICTION BETWEEN THE CIRCULAR SO ISSUED AND SECTION 145 OF THE INCOME-TAX ACT. IN THE AFORESAID PREMISE, UNTIL THE CIRCULAR IS REVOKED, THE SAME CONTINUES TO BE IN FORCE AND THE SAME HAVING BEEN ISSUED TO MITIGATE THE HARDSHIPS CAUSED TO THE CLASS OF ASSES SEES COVERED BY THE CIRCULAR, SUCH ASSESSEES WOULD BE ENTITLED TO THE BENEFIT THE REOF. MERELY BECAUSE BY VIRTUE OF THE PROVISIONS OF SECTION 43D OF THE ACT, A CERT AIN CLASS OF ASSESSEES IS GIVEN BENEFIT UNDER THE PROVISIONS OF THE ACT WOULD NOT M EAN THAT THE SAME WOULD OVERRIDE THE CIRCULAR. 29. ON BEHALF OF THE APPELLANT IT HAS BEEN CONTENDE D THAT SECTION 43D OF THE ACT ITSELF RECOGNIZES RECOGNITION OF TAXABILITY OF SUCH INTEREST AND THAT WHEN A SPECIFIC PROVISION IN THE NATURE OF SECTION 43D OF THE ACT H AS BEEN MADE, AND ENTITIES LIKE THE ASSESSEE ARE EXCLUDED FROM THE PURVIEW THEREOF, THE ASSESSEE CANNOT INDIRECTLY CLAIM BENEFIT WHICH WOULD AMOUNT TO A BE NEFIT SIMILAR TO THAT UNDER SECTION 43D OF THE ACT. IN THIS REGARD, IT MAY BE N OTED THAT THE BENEFIT CLAIMED BY THE ASSESSEE IS NOT UNDER ANY PROVISION OF THE INCO ME-TAX ACT. 1961. THE ASSESSEE BEING BOUND BY THE RBI GUIDELINES WHICH ARE ISSUED UNDER THE PROVISIONS OF THE RB1 ACT HAS NOT SHOWN THE INTEREST ON NPA AS INCOME . BY VIRTUE OF THE PROVISIONS OF SECTION 45Q OF THE RBI ACT, THE PROVISIONS OF CH APTER IIIB THEREOF HAVE AN OVERRIDING EFFECT OVER OTHER LAWS INCLUDING THE INC OME-TAX ACT, 1961. THEREFORE, NOTWITHSTANDING THE PROVISIONS OF SECTION 43D OF TH E ACT, SINCE THE PROVISIONS OF SECTION 45Q OF THE RBI ACT HAVE AN OVERRIDING EFFEC T VIS-A-VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIES ACT, THE ASSESSING OFFI CER IS BOUND TO FOLLOW THE RBI DIRECTIONS SO FAR AS INCOME RECOGNITION IS CONCERNE D. THE CONTENTION THAT THE ASSESSEE CANNOT INDIRECTLY CLAIM THE BENEFIT WHICH WOULD AMOUNT TO A BENEFIT SIMILAR TO THAT UNDER SECTION 43D OF THE ACT, THERE FORE, DOES NOT MERIT ACCEPTANCE. 30. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, BEFOR E THE ASSESSING OFFICER THE ASSESSEE HAD INTER ALIA SUBMITTED THAT INTEREST ON NPA WAS NOT CHARGED AS MANDATORILY STIPULATED UNDER INCOME RECOGNITION AND ASSET CLASSIFICATION NORMS OF THE RESERVE BANK OF INDIA. IT HAS ALSO BEEN SUBM ITTED THAT THE CBDT CIRCULAR BEARING F .NO.201/21/84-ITA-II, DATED 9.10.1984 ISS UED UNDER SECTION 119 OF THE ACT FOR ALL BANKING AND NON-BANKING FINANCIAL COMPA NIES STATING THAT IF THE INTEREST HAS NOT BEEN RECEIVED FOR THREE YEARS, THE SAME WILL NOT BE TAXED AS AN INCOME EVEN ON ACCRUAL BASIS EVEN IF INTEREST HAS B EEN CREDITED TO 'INTEREST SUSPENSE ACCOUNT' WOULD BE APPLICABLE IN ITS CASE. T HE ASSESSING OFFICER BRUSHED ASIDE THE SUBMISSION BASED UPON THE CIRCULAR OF 198 4, ON THE GROUND THAT THE SAME IS APPLICABLE ONLY TO BANKING COMPANIES AND NO T TO CO-OPERATIVE BANKS, ON A MISCONCEPTION OF LAW THAT A CO-OPERATIVE BANK IS NOT A BANKING COMPANY. IN THIS REGARD IT MAY BE NOTED THAT THE EXPRESSION 'BAN KING COMPANY' HAS BEEN DEFINED UNDER SECTION 5(C) OF THE BANKING REGULATIO N ACT, 1949 TO MEAN ANY COMPANY WHICH TRANSACTS THE BUSINESS OF BANKING IN INDIA. PART V OF THE BANKING REGULATION ACT BEARS THE HEADING 'APPLICATION OF TH E ACT TO COOPERATIVE ITA NO. 1846 /AHD/2015 . A.Y. 2012-13 4 SOCIETIES'. SECTION 56 THEREOF PROVIDES THAT THE PRO VISIONS OF THE ACT, AS IN FORCE FOR THE TIME BEING, SHALL APPLY TG, OR IN RELATION TO CO-OPERATIVE SOCIETIES AS THEY APPLY TO, OR IN RELATION TO BANKING COMPANIES SUBJE CT TO THE MODIFICATIONS STATED THEREUNDER. CLAUSE (A) OF SECTION 56, TO THE EXTENT THE SAME IS RELEVANT FOR THE PRESENT PURPOSE, PROVIDES THAT THROUGHOUT THE ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - (I) REFERENCES TO A 'BANKING COMPANY' OR 'THE COMPANY' OR 'SUCH COMPANY' SHALL BE CONSTRUED AS REFERENCES TO A CO-OP ERATIVE BANK. SECTION 2(I) OF THE RBI ACT PROVIDES THAT 'CO-OPERATIVE BANK', 'CO-O PERATIVE CREDIT SOCIETY', 'DIRECTOR', 'PRIMARY AGRICULTURAL CREDIT SOCIETY', ' PRIMARY CO-OPERATIVE SOCIETY' AND 'PRIMARY CREDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949. EVIDENTLY THEREFORE, THE EXPRESSION 'BANKING COMPANY' WOULD TAKE WITHIN ITS S WEEP A CO-OPERATIVE BANK. THE ASSESSING OFFICER HAS THEREAFTER ENTERED INTO A DISCUSSION ON THE PROVISIONS OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002, WHICH PROVIDES FOR ENF ORCEMENT OF SECURITY INTEREST OF BANKS AND FINANCIAL INSTITUTIONS AND HAS OBSERVED T HAT IN THE INSTANT CASE, NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO PROVE ITS EFFORTS MADE IN A BID TO RECOVER SUCH DEBTS WHICH ARE CLASSIFIED AS NPA AND OTHER CATEGORIES. THE ASSESSING OFFICER HAS ALSO ENTERED INTO A DISCUSSIO N AS REGARDS THE QUALITY OF MANAGEMENT, ETC., WITHOUT EVEN EXAMINING AS TO WHET HER OR NOT THERE WAS ANY PROBABILITY OF INTEREST BEING RECEIVED ON THE NPAS. THE COMMISSIONER (APPEALS) HAS PLACED RELIANCE UPON THE DECISION OF THE SUPREM E COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED (SUPRA) AND HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT UNDER COMMERCIAL AC COUNTING, INTEREST ON NPAS CANNOT BE CHARGED. ON THE QUESTION OF APPLICABILITY OF THE CBDT CIRCULAR DATED 9.10.1984, THE COMMISSIONER (APPEALS) HELD THAT THE SAME WOULD NOT BE APPLICABLE FOR THE REASON THAT THE PROVISIONS OF SE CTION 43D OF THE ACT ARE CLEAR AND CANNOT BE OVERRIDDEN THROUGH DELEGATED LEGISLAT ION VIZ. CIRCULARS AND NOTIFICATIONS. THE COMMISSIONER (APPEALS) WAS FURTH ER OF THE OPINION THAT THE STATUTORY PROVISIONS WERE BROUGHT ON THE ACT MUCH L ATER THAN THE SAID CIRCULAR (WHICH WAS ISSUED IN 1984) AND THEREFORE THE SAID C IRCULAR WOULD NOT HAVE ANY EFFECT OR BINDING FORCE UPON THE ASSESSING OFFICER. THE VIEW ADOPTED BY THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) IS CLEARLY CONTRARY TO THE VIEW EXPRESSED BY THIS COURT HEREINABOVE. THE TRIBUNAL W AS THEREFORE, WHOLLY JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSION ER (APPEALS) CONFIRMING THE ASSESSMENT ORDER. 6. AS THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE S ET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITI ON OF RS. 19,27,060/-. ITA NO. 1846 /AHD/2015 . A.Y. 2012-13 5 7. APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 09- 04- 20 18 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUN TANT MEMBER AHMEDABAD: DATED 09/04/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD