The Janalaxmi Co.op bank Ltd., Nashik V. Commissioner of Income-tax - 1,

ITA 1955/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1790 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! # $% , & ' BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ( / ITA NO. 1955/PN/2014 ) * +* / ASSESSMENT YEAR : 2010-11 THE JANALAXMI CO-OP. BANK LTD., SAMRUDDHI, GADKARI CHOWK, NASHIK PAN : AAAAT3312K ....... / APPELLANT ) / V/S. COMMISSIONER OF INCOME TAX 1, NASHIK / RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI AJIT KORDE / DATE OF HEARING : 11-05-2016 / DATE OF PRONOUNCEMENT : 20-05-2016 , / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX-I, NASHIK DATED 24-09-2014 PA SSED U/S. 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T) FOR THE ASSESSMENT YEAR 2010-11. 2 ITA NO. 1955/PN/2014, A.Y. 2010-11 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BANKIN G BUSINESS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2010-11 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCR UTINY AND ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED TO THE ASSE SSEE ON 19-08-2010. DURING THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFICER ISSUED QUESTIONNAIRE TO THE ASSESSEE AND THE ASSE SSEE VIDE COMMUNICATION DATED 05-03-2013 REPLIED TO THE SAME. O NE OF THE QUERY RAISED BY THE ASSESSING OFFICER WAS WITH RESPECT TO INTEREST ON NON-PERFORMING ASSETS ` 2,64,59,614/- DEBITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER SATISFIED WITH THE REPLY OF T HE ASSESSEE DID NOT MAKE ANY ADDITION WITH REGARD TO THE INTEREST ON NON- PERFORMING ASSETS IN THE INCOME RETURNED BY THE ASSESS EE. HOWEVER, THE COMMISSIONER OF INCOME TAX ISSUED NOTICE U/S. 263 ON 20-09-2014 ON THE GROUND THAT NO PROPER ENQUIRY/VERIFICATION WAS CA RRIED OUT BY THE ASSESSING OFFICER IN RESPECT OF INTEREST EXPENSES AND NPAS CLAIMED BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX HELD TH AT ANY PROVISION TOWARDS ANY UNASCERTAINED LIABILITY IS NOT AN ALLOWA BLE DEDUCTION UNDER THE PROVISION OF ACT, THEREFORE, ENTIRE PRO VISION TOWARDS INTEREST EXPENDITURE AMOUNTING TO ` 2,64,59,614/- NEEDS TO BE DISALLOWED. THE COMMISSIONER OF INCOME TAX VIDE IMPUGNED OR DER SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO PASS FRESH ORDERS AFTER CONDUCTING PROPER ENQUIRIES/VERIFICATION ON THE AFOREMENTIONED ISSUE. 3. SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ISSUE RELATING TO INTEREST ARISING ON NON-PERFORM ING ASSETS HAS 3 ITA NO. 1955/PN/2014, A.Y. 2010-11 BEEN SETTLED BY THE HON'BLE SUPREME COURT OF INDIA IN TH E CASE OF UCO BANK VS. COMMISSIONER OF INCOME TAX REPORTED AS 154 CT R 88 (SC). THE HON'BLE BOMBAY HIGH COURT HAS ALSO IN THE CASE OF DE OGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO. 53 OF 2014 DECIDED ON 22-01-2015 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SIMILARLY SITUATED VARIOUS ASS ESSEES VIDE COMMON ORDER DATED 04-02-2016 HAS DELETED THE ADDITION MADE ON ACCOUNT OF INTEREST ACCRUED ON NPAS. THE LD. COUNSEL PLAC ED ON RECORD A COPY OF THE ORDER OF TRIBUNAL IN ITA NO. 1815/PN/2014 IN THE CASE OF ACIT VS. SHRI CHHATRAPATI RAJASHRI SHAHU URBAN CO-OP. BA NK LTD. WHEREIN VARIOUS OTHER APPEALS OF SIMILARLY SITUATED ASSESSE ES WERE DECIDED VIDE COMMON ORDER DATED 04-02-2016. 4. SHRI AJIT KORDE REPRESENTING THE DEPARTMENT FAIRLY AD MITTED THAT THE ISSUE RAISED IN THE APPEAL HAS BEEN ADJUDICATED BY T HE HON'BLE JURISDICTIONAL HIGH COURT HOLDING THAT INTEREST ACCRUED ON NPA IS NOT TAXABLE AND THE TRIBUNAL HAS BEEN TAKING CONSISTENT VIEW IN FAVOUR OF THE ASSESSEE. HOWEVER, THE LD. DR CONTENDED THAT THE FACT WHETHER THE INTEREST IS ON ACCOUNT OF NPA AND THE QUANTUM OF INTERES T NEEDS TO BE ASCERTAINED. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. A PERUSAL OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE A CIT DATED 05-03-2013 AT PAGES 7 TO 12 OF THE PAPER BOOK SHOWS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS GIVE N DETAILED REPLY 4 ITA NO. 1955/PN/2014, A.Y. 2010-11 TO THE QUERY RAISED BY ASSESSING OFFICER IN RESPECT OF INTE REST ON NON- PERFORMING ASSETS. THEREFORE, ONCE THE ISSUE HAS BEEN CO NSIDERED BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS P ROVISIONS OF SECTION 263 OF THE ACT CANNOT BE INVOKED UNLESS TWIN CON DITIONS I.E. (I) THE ASSESSMENT ORDER IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, ARE SATISFIED. IN THE PRESENT CASE T HE REASONS GIVEN BY COMMISSIONER OF INCOME TAX TO HOLD THE ASSESSMENT OR DER IS ERRONEOUS IS NOT TENABLE. 6. BE THAT AS IT MAY, THE ISSUE RELATING TO INTEREST ON S TICKY LOANS HAS BEEN RECURRING BEFORE THE TRIBUNAL IN VARIOUS CASES. THE TRIBUNAL AFTER FOLLOWING THE DECISION OF HON'BLE SUPREME COURT OF INDIA AND THE JUDGMENT RENDERED BY THE HON'BLE JURISDICTIONAL HIGH COU RT HAS BEEN CONSISTENTLY HOLDING THAT NO ADDITION CAN BE MADE ON ACC OUNT OF INTEREST ACCRUED ON NPAS. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI CHHATRAPATI RAJASHRI SHAHU URBAN CO-OP. BANK LTD. (SUPRA) ARE REPRODUCED HERE-IN-BELOW: 14. WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN KOLHAPUR MAHILA SAHAKARI BANK LTD. VS. ITO IN ITA NO.01/PN/2013, RE LATING TO ASSESSMENT YEAR 2009-10, VIDE ORDER DATED 29.01.201 4. THE TRIBUNAL IN TURN FOLLOWING THE RATIO LAID DOWN BY THE PUNE BENC H OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.79 5/PN/2011, ORDER DATED 31.08.2012, HELD AS UNDER:- 2. THE ASSESSEE IS A CO-OPERATIVE BANK ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIVING LOANS TO MEMBERS. IT HAS FILED ITS RETURN OF INCOME ON 11.09.2009 FOR THE YE AR UNDER CONSIDERATION DECLARING TOTAL INCOME AT 14,57,840/-. IN THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT CREDITED INTEREST RECEIVABLE OR ACCRUED ON NON-PERFORMING ASSETS (HER EINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIA L YEAR 2008-09. THE ASSESSING OFFICER AFTER REJECTING THE VARIOUS CONTE NTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED T O REGULATE THE INCOME 5 ITA NO. 1955/PN/2014, A.Y. 2010-11 TAX LAW AND THE ASSESSEE WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BENEFITS EXTE NDED TO SCHEDULE BANK, PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANIES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO-OPERATIVE BANK AND (I I) THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT C ASH SYSTEM. ULTIMATELY THE ASSESSING OFFICER TAXED ON ACCRUED I NTEREST OF 25,20,022/- ADVANCE CLAIMED TO BE NPA ACCOUNT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREI N, FOLLOWING THE OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN /2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT IN OSMANABAD JANTA SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSE E BY OBSERVING AS UNDER: 7. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS DIRECTLY TAKEN THE INTEREST TO THE BALANCE SHEET AND IT IS N OT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ISSUE OF THE TAXABILITY OF THE INTEREST ON THE STICKY LOSSES/ADV ANCES, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE COORDINATE BENCHES IN THE CASE OF THE DURGA COOPERA TIVE URBAN BANK LTD., VIJAYAWADA (SUPRA) AND KARNAVATI COOPERA TIVE BANK LTD. (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY THE SAME IS CONFIRMED. IN THE RESULT, THE REVENUES GROUND IS DISMISSED. THE ABOVE DECISION HAS BEEN FOLLOWED IN (I) ACIT, C IRCLE-3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BANK LTD. ITA NO.793/PN/2011, (II) ACIT, CIRCLE-3 V/S SIDHESHWAR SAHAKARI BANK LTD. ITA NO.794/PN/2011, (III) ACIT (CENTRAL) V/S LATUR URBAN CO-OPERATIVE BANK LTD. ITA NO.792/PN/2011 AND (IV) ASST. CIT, CIRCLE-1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011. 15. THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. D EOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.53 OF 20 14 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON N PAS IS NOT TAXABLE IN THE HANDS OF ASSESSEE, IN VIEW OF THE GUIDELINES IS SUED BY THE RBI. 16. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS . ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF 6 ITA NO. 1955/PN/2014, A.Y. 2010-11 INTEREST ACCRUED ON NPAS. THE GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS DISMISSED. 7. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE ORDER O F TRIBUNAL DISCUSSED ABOVE, WE SET ASIDE THE IMPUGNED ORDER AND ALLO W THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 20 TH DAY OF MAY, 2016. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 20 TH MAY, 2016 RK ,-#./0+. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. # # $ / THE CIT-I, NASHIK 4. %&' () , # () , * *+, , / DR, ITAT, B BENCH, PUNE. 5. '-. /0 / GUARD FILE. // % // TRUE COPY// #1 / BY ORDER, 2 (, / PRIVATE SECRETARY, # () , / ITAT, PUNE