Assistant Commissioner of Income tax, V. M/s. The Deola Merchant Co-operative Bank Ltd, Nashik

ITA 2992/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0037 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 30-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO.2992/PUN/2016 / ASSESSMENT YEAR : 2013-14 ACIT, CIRCLE-1, NASHIK . /APPELLANT VS. M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD. BHAGYODAYA, AT & POST-DEOLA TAL.- DEOLA, NASHIK-422 001 PAN : AAAAT4787E . / RESPONDENT / APPELLANT BY : SHRI SUDHENDU DAS / RESPONDENT BY : SHRI ABHAY AVCHAT / DATE OF HEARING : 10.09.2018 / DATE OF PRONOUNCEMENT: 19.09.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF C IT(A)-1, NASHIK, DATED 06-10-2016 FOR THE ASSESSMENT YEAR 2013-14. 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER : 1.1 WHETHER ON THE FACTS AND CI R CUMSTANCES OF THE CASE AND IN LAW , THE L D . CIT ( A) WAS RIGHT IN ALLOW I NG THE INTEREST EXPENDITURE OF RS . 1,16 , 55 , 721/ - DEBITED IN THE P & L A/C AS INTEREST ON NON PERFORM I NG ASSETS WITHOUT OBTAINING THE NECESSARY VERIFICATION WITH REGARD TO ISSUE OF INTEREST ON NPAS BY CATEGORIZATION OF NPAS AS PER RULE 6EA(E) READ W ITH CLAUSE (A) OF SECTION 43D . 1.2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A) WAS RIGHT IN ALLOWING THE INTEREST EXPENDITU RE OF RS . 1,16,55,721/- TO THE ASSESSEE RELYING UPON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DEOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO . 53 OF 2014 & ORS . , WITHOUT APPRECIATING THE FACT THAT , IN THAT CASE THE ISSUE OF INTEREST ON NPAS BY CATEGORIZATION OF NPAS A S PER RULE 6EA(E) READ W I TH CLAUSE (A) OF SECTION 43D WAS NOT EXAMINED . 1.3 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN ALLOWING THE I NTEREST EXPENDITURE OF RS.1,16,55,721/- WITHOUT APPRECIATING THE DECISION OF ITAT, PUNE BEN CH IN THE CASE OF COSMOS BANK LTD. VS . DCIT, CIRCLE - 7, ITA NO . 460 & 461/PN/2012 DT . 23 . 01 . 2014 , WHEREIN THE STAND OF THE REVENUE THAT CATEGORIZATIO N ON INTEREST OF NPAS HAS ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 2 TO BE DONE IN TERMS OF SEE. 43D(A) OF THE IT. ACT R . W.R. 6EA OF THE I.T. RULES WAS UPHELD . 1.4 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD . CIT(A) WAS RIGHT IN ALLOWING THE INTEREST EXPENDITU RE OF RS . 1 , 16,55,721/- , DESPITE THE FACT THAT DURING THE ASSESSMENT PROCEED INGS THE ASSESSEE WAS SPECIFICALLY ASKED BY THE AO TO PROVIDE THE DETAILS PROVISION TOWARDS INTEREST EXPENDITURE ON ACCOUNT OF NPAS AND THE ASS ESSEE FAILED TO DISCHARGE HIS ONUS OF PROVIDING THE DETAILS O F CATEGOR I ZATION ON I NTEREST ON NPAS IN TERMS OF SEC . 43D(A) OF THE IT . ACT R.W.R . 6EA OF THE I T. RULES. 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED . 3. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER OR D ELETE ANY GROUND OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS A COOPERATIVE SOCIETY AND ENGAGED IN THE BANKING BUSINESS. ASSESSEE FILED THE R ETURN OF INCOME ON 28-09-2012 DECLARING TOTAL INCOME OF RS.63,09,580/-. T HE CORE ISSUE RAISED IN THIS APPEAL RELATES TO DISALLOWANCE OF INTEREST OVE RDUE PROVISION AMOUNTING TO RS.1,16,55,721/-. DURING THE ASSESSMENT PRO CEEDINGS, AO DISALLOWED THE SAME AS PER THE DISCUSSION GIVEN IN PARA N OS. 7 AND 7.1 OF THE ASSESSMENT ORDER. WE PROCEED TO EXTRACT THE SAME AS UNDER : 7. DISALLOWANCE OF INTEREST OVERDUE PROVISION : TH E ASSESSEE HAD CLAIMED INTEREST OVERDUE PROVISION AMOUNTING TO RS.1,16,55, 721/- IN THE PROFIT AND LOSS ACCOUNT FOR FY 2012-13. THE ASSESSEE WAS CALL ED UPON TO PRODUCE THE DETAILS OF SUCH PROVISION CLAIMED. THE AR MADE SUB MISSION DT.29-01-2016. AS PER THE SUBMISSION THE ASSESSEE HAS STATED THAT THE PROVISION IS CREATED ON NON PERFORMING ADVANCES. OVERDUE INTEREST IS LI STED AND TOTAL OF THE UNREALIZED INTEREST IS TAKEN. THE ASSESSEE STATED THAT IT FOLLOWS RBI GUIDELINES IN THIS RESPECT. THE ATTENTION OF THE A R WAS DRAWN TO THE FACT THAT THE ASSESSEE HAS NOT ACTUALLY INCURRED ANY EXPENDIT URE IN THIS RESPECT AND SUCH A PROVISION IS NOT ALLOWED UNDER ANY PROVISION OF THE INCOME TAX ACT, 1961. THE AR WAS HENCE ASKED TO EXPLAIN WHY THE SA ME SHOULD NOT BE DISALLOWED. 7.1 THE AR MADE ANOTHER SUBMISSION ON THE SAME DAY. THE SUBMISSION HAS BEEN CONSIDERED. THE CONTENTION OF THE ASSESSE E IS THAT IT IS FOLLOWING GUIDELINES OF RBI AND SUCH A PROVISION SHOULD BE AL LOWED. THE FACT REMAINS THAT THE ASSESSEE HAS NOT INCURRED ANY SUCH EXPENDI TURE ON WHICH PROVISION HAS BEEN MADE. FURTHER, THE ASSESSEE HAS CLAIMED A PROVISION WHICH IS NOT ALLOWABLE UNDER ANY PROVISION OF THE INCOME TAX ACT , 1961. THE ASSESSEE HAS CLAIMED A PROVISION U/S.36(1)(VIIA) WHICH HAS A LREADY BEEN ALLOWED AS PER LAW IN PRECEDING PARAS. THIS PROVISION IS NOT ALLOWABLE AS PER THE INCOME TAX ACT, 1961 AND IS HEREBY DISALLOWED. THE PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C) R.W.S. 274 OF THE INCOME TAX ACT, 1961 INITIATED SEPARATELY FOR CONCEALMENT AND FURNISHING INACCURATE PARTICULA RS OF INCOME. (ADDITION OF RS.1,16,55,721/-) ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 3 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE JANALAXMI CO-OP. BANK LTD VS. CIT IN ITA NO.1955/PUN/2014 FOR THE A.Y. 2010-11 DECIDED ON 20.05.201 6 GRANTED RELIEF TO THE ASSESSEE. FURTHER, THE CIT(A) ALSO DELETED TH E ADDITION MADE BY THE AO U/S.14A OF THE ACT. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL CHALLENGING THE DELETION OF ADDITIO N OF RS.1,16,55,721/- WITH THE GROUNDS EXTRACTED ABOVE. 6. AT THE OUTSET, LD. DR FOR THE REVENUE SUBMITTED THAT THE GROUNDS ARE NOT DRAFTED PROPERLY AND THE CORE ISSUE RELATES TO REC OGNITION OF INTEREST INCOME ON NPAS. GROUNDS ARE ARGUMENTATIVE ONES. HE DU TIFULLY RELIED ON THE ARGUMENTATIVE GROUNDS RAISED BY THE REVENUE IN THE APPEAL AND ALSO RELIED ON THE ORDER OF AO. FURTHER, LD. DR SUBMITTED (ST ATEMENT OF FACTS) THAT THE ASSESSEE CLAIMED INTEREST OVERDUE PROVISION AMO UNTING TO RS.1,16,55,721/- IN THE PROFIT AND LOSS ACCOUNT FOR F.Y.2012- 13 AND THE PROVISION OF INTEREST IS CREATED WITH REFERENCE TO THE NON PERFORMING ADVANCES. THE SAID PROVISION IS TOTAL OF THE UNREALIZED INTE REST WITH REFERENCE TO THE NPAS AND THE ASSESSEE DID NOT INCUR A NY SUCH EXPENDITURE. LD. DR RELIED ON THE FOLLOWING JUDGMENTS AND OTHER CASES W HERE THE REVENUE PREFERRED APPEALS BEFORE THE HONBLE HIGH COURT : 1. SHAKTI FINANCE LTD. 31 TAXMAN.COM 305 2. SOUTHERN TECHNOLOGIES LTD. VS. JCIT 2 SCC 548 LD. DR FURTHER SUBMITTED THAT WITHOUT OBTAINING THE NECES SARY VERIFICATION WITH REGARD TO ISSUE OF INTEREST ON NPAS, I.E. CATEGORIZATIO N OF NPAS QUA THE PROVISIONS OF RULE 6EA(E) READ WITH CLAUSE (A) OF SECTION 43D OF THE ACT. HE ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 4 FURTHER STATED THAT SECTION 43D OF THE ACT IS HELD TO BE APPLICABLE TO COOPERATIVE BANK. LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) COSMOS BANK LTD. VS. DCIT, ITA NOS.460 & 461/PN/2012 D ATED 23.01.2014. II) SARANGPUR COOPERATIVE BANK LTD. VS. DCIT, ITA NO.86/AD D/2014 DATED 25.06.2015 7. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ISSUE RAISED BY THE REVENUE IS C OVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY VIRTUE OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. DEOGIR I NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.53 OF 2014 & O RS. LD. COUNSEL THEREFORE PRAYED FOR DISMISSING THE APPEAL OF THE R EVENUE. THE RATIO OF THE JUDGMENT IS THAT NO INTEREST ON NPAS IS TAXABLE. 8. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS O F THE REVENUE. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED ON BY BOTH T HE SIDES. WE FIND THE REVENUE RAISED GROUNDS IMPROPERLY. RELYING ON THE ISSUES DECIDED BY THE CIT(A), WE FIND THE CORE ISSUE RELATES TO THE TAXABILITY OF THE INTEREST ON NPAS, CATEGORISED SO AS PER THE RBI NORMS. IN THIS REGARD, WE PE RUSED THE CONTENTS OF PARA NO. 7.2 OF THE ORDER OF CIT(A) AND FIND T HE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, WE FIND IT RELEVANT TO EXTRACT THE SAID OPERATIONAL PARA AND THE SAME READS AS UNDER : 7.2. I HAVE CONSIDERED THE FACTS OF THE CASE, THE S UBMISSION OF THE APPELLANT, THE ORDER OF THE ASSESSING OFFICER AND THE ORDER OF THE HONBLE ITAT. ON THE SAME ISSUE, THE HONBLE TRIBUNAL IN THE CASE OF THE JANALAXMI CO-OP BANK LTD FOR A.Y.2010-11 HELD INTERALIA AS UNDER: 6. BE THAT AS IT MAY, THE ISSUE RELATING TO INTERES T ON STICKY 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 HIG H COURT HAS BEEN CONSISTENTLY HOLDING THAT NO ADDITION CAN BE MADE O N ACCOUNT OF ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 5 INTEREST ACCRUED ON NPAS. THE RELEVANT EXTRACT OF T HE FINDINGS OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI CHHATRAPATI R AJASHRI 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 B ENCH OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, ORDER DATED 31.08.2012, HELD AS UND ER:- '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-PERF ORMING ASSETS (HEREINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2008-09. THE ASSESSING OFFICER AFTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED TO REGULATE THE INCOME 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, PU BLIC COMPANIES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO-OPERATIVE BANK AND (II) THE ASSESSEE WAS FOLLOWING MERCANTILE SYST EM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASSESSING OFFIC ER TAXED ON ACCRUED INTEREST OF 25,20,022/- ADVANCE CLAIMED TO BE NPA ACCOUNT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN, FOLLOWING THE OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SAME HAS BEEN 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 W ITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY TH E SAME IS CONFIRMED. IN THE RESULT, THE REVENUE'S GROUND IS D ISMISSED.' 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. IT A NO.794/PN/2011, (III) ACIT (CENTRAL) V/S LATUR URBA N CO-OPERATIVE BANK LTD. ITA NO.792/PN/2011 AND (IV) ASST. CIT, CI RCLE-1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011 .' 15. THE HON'BLE BOMBAY HIGH COURT IN CIT VS. M/S. D EOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.5 3 OF 2014 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 6 ACCRUED ON NPAS IS NOT TAXABLE IN THE HANDS OF ASSE SSEE, IN VIEW OF THE GUIDELINES ISSUED BY THE RBI. 16. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUE D ON NPAS. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN DELET ING THE ADDITION MADE ON ACCOUNT OF ITA NO. 1955/PN/2014, A.Y. 2010- 11 INTEREST ACCRUED ON NPAS. THE GROUND OF APPEAL NO.1 RAISED B Y THE REVENUE IS DISMISSED.' 7. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE O RDER OF TRIBUNAL DISCUSSED ABOVE, WE SET ASIDE THE IMPUGNED ORDER AND ALLOW TH E APPEAL OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE TRIB UNAL THE FACTS REMAINING THE SAME, THE ASSESSING OFFICER IS DIRECTED TO DELETE T HE ADDITION OF RS.1,16,55,721/-. FROM THE ABOVE DECISION OF THE CIT(A), WE FIND THE CIT(A) RE LIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE JANALAXMI CO-OP. B ANK LTD. FOR THE A.Y. 2010-11 WHICH INTURN RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN I TA NO.795/PN/2011, DATED 31-08-2012. CIT(A) ALSO MADE A REFE RENCE TO ANOTHER ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. D EOGIRI NAGARI SAHAKARI BANK LTD. IN ITA NO.817 AND 1114/PN/2011. THIS DECISION OF THE TRIBUNAL IS AFFIRMED BY THE JURISDICTIONAL HIGH COURT IN THE INC OME TAX APPEAL NO.53 OF 2014 AND OTHERS. THE HONBLE HIGH COURT HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON NPAS IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE IN VIEW OF THE GUIDELINES ISS UED BY THE RBI. FOR THE SAKE OF COMPLETENESS, WE PROCEED TO EXTRACT THE FIND ING GIVEN BY THE HIGH COURT AND THE SAME READS AS UNDER : 9. THE INCOME TAX APPELLATE TRIBUNAL HAS REFERRED THE CASE OF M/S. VASISTH CHAY VYAPAR LIMITED 330 ITR 440 (DELHI). I N THIS CASE, THE REVENUE RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. SUPRA. THE LEARNED INCOME TAX AP PELLATE TRIBUNAL HAS REPRODUCED THE OBSERVATIONS MADE BY THE DELHI HIGH COURT WHILE REFERRING THE SAID CASE OF M/S. SOUTHERN TECHNOLOGIES LIMITED SUPR A. THE ASSESSEE HEREIN BEING A CO-OPERATIVE BANK ALSO GOVERNED BY THE RESE RVE BANK OF INDIA AND THUS THE DIRECTIONS WITH REGARD TO THE PRUDENTIAL N ORMS ISSUED BY THE RESERVE BANK OF INDIA ARE EQUALLY APPLICABLE TO THE CO-OPER ATIVE BANKS. THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED SUPRA HELD THAT PROVISIONS OF SECTION 45Q OF RESERVE BANK OF INDIA ACT HAS ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 7 AN OVERRIDING EFFECT VIS-A-VIS INCOME RECOGNITION P RINCIPLE UNDER THE COMPANIES ACT. HENCE, SECTION 45Q OF THE RBI ACT S HALL HAVE OVERRIDING EFFECT OVER THE INCOME RECOGNITION PRINC IPLE FOLLOWED BY COOPERATIVE BANKS. HENCE, THE ASSESSING OFFICER HAS TO FOLLOW THE RE SERVE BANK OF INDIA DIRECTIONS 1998, AS HELD BY THE HONB LE SUPREME COURT. 10. THE HONOURABLE APEX COURT IN THE CASE OF UCO BA NK CASE (SUPRA) HAD AN OCCASION TO CONSIDER THE NATURE OF CBDT CIRCULAR AND HONBLE APEX COURT HAS THUS HELD THAT BOARD HAS POWER, INTER ALIA, TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE A FAIR ENFORCEMENT OF ITS PROVISIONS , BY ISSUING CIRCULAR IN EXERCISE OF ITS STATUTORY POWERS UNDER SECTION 119 OF ACT WHICH ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT, I T IS A BENEFICIAL POWER GIVEN TO THE BOARD FOR PROPER ADMINISTRATION OF FISCAL LA W SO THAT UNDUE HARDSHIP MAY NOT BE CAUSED TO THE ASSESSEE AND THE FISCAL LA WS MAY BE CORRECTLY APPLIED. FURTHER A SIMILAR ISSUE WAS RAISED ABOUT INTEREST ACCRUED ON A STICKY LOAN WHICH WAS NOT RECOVERED BY THE ASSESS EE-BANK FOR THE LAST THREE YEARS AND TRANSFERRED TO THE SUSPENSE ACCOUNT, WOUL D OR WOULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE PART ICULAR ASSESSMENT YEAR, .................... 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 TH E ASSESSEE IS LIABLE TO BE TAXED UNDER INCOME TAX ACT, 1961 IN RESPECT OF THE INTEREST ON DOUBTFUL ADVANCES CREDITED TO THE INTEREST SUSPENSE ACCOUNT. IN THIS CASE, THE UCO BANKS CASE (SUPRA) WAS ALSO REFERRED AND THE H ONBLE APEX COURT HAS ALLOWED THE APPEAL TO THE EXTENT OF QUESTION RAISED AS AFORESAID. FURTHERMORE, THE RESPONDENT CO-OPERATIVE BANKS, AS UNDERSTOOD BY SECTION 43 C OF THE INCOME TAX ACT ON THE SCHEDULED BANK. 12. LEARNED COUNSEL FOR THE APPELLANTS/REVENUE PLAC ED RELIANCE ON THE JUDGMENT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JOINT COMMISSIONER OF INCOME TAX, COIMBATORE REPORTED IN 2010 (2) SCC 548 . HOWEVER, THIS JUDGMENT PERTAINS TO NON BANKING FINANCIAL COMPANIE S. UCO BANK CASE (SUPRA) AND MERCANTILE BANK (SUPRA) CASE SQUARELY A PPLIES TO THE FACTS OF THE PRESENT CASE AND ISSUED INVOLVED. WE THEREF ORE, DO NOT FIND IT NECESSARY TO INTERFERE IN THE JUDGMENT OF THE APPEL LATE TRIBUNAL. WE HOLD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THESE APPEALS. THE HONBLE JURISDICTIONAL HIGH COURT HAS ANALYSED THE AP PLICABILITY OF THE RATIO OF THE JUDGMENT OF SUPREME COURT IN THE CAS E OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) AND FOUND INAPPLICABLE TO THE N ON-BANKING FINANCIAL COMPANIES. IT IS ALSO EVIDENT THAT OVERRIDING EFFECT OF THE PROVISIONS OF THE RBI ACT IN MATTERS OF RECOGNITION OF INTER EST INCOME RELATING TO STICKY LOANS IS ALSO DECIDED IN FAVOUR OF THE AS SESSEE IN VIEW OF OTHER SUPREME COURT JUDGMENTS IN THE CASE OF UCO BANK AND MERCANTILE BANK (SUPRA). CIT(A) ALSO FOLLOWED THE ITATS DECISIONS (SUPRA) WHILE GIVING ITA NO.2992/PUN/2016 M/S. THE DEOLA MERCHANT CO-OPERATIVE BANK LTD., 8 RELIEF TO THE ASSESSEE. THEREFORE, IN OUR OPINION, WE FIND NO REASON TO INTERFERE WITH THE DECISION OF THE CIT(A) IN THIS REGARD. W E THEREFORE UPHOLD THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDIT ION. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (VIKAS AWASTHY) (D.KARU NAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 19 TH SEPTEMBER, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-1, NASHIK. 4. / THE PR. CIT-1, NASHIK. 5. , , / DR B, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.