THE MALKAPUR URBAN CO-OPT. BANK LTD., Nagpur V. DY. CIT- AKOLA CIRCLE, Akola

ITA 32/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2178 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: SURE N DURUGKAR
• Keywords: Bad and doubtful debts

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH: NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 3 2 /NAG/20 1 5 ASSESSMENT YEAR: 20 0 8 - 09 THE MALKAPUR URBAN CO - OP BANK LTD., K.N.D. ASSOCIATES, 502 - 503, SATYAM APTS., DHANTOLI, NAGPUR - 12 PAN: - A AALT0274F VS DY. COMMISSIONER OF INCOME TAX AKOLA CIRCLE, AKOLA (APPELLANT) (RESPONDENT) I.T.A. NO. 33 /NAG/201 5 ASSESSMENT YEAR: 20 08 - 09 ASST. COMMISSIONER OF INCOME TAX 1 ST FLOOR, AAYAKAR BHAWAN, MURTIZAPU R ROAD,AKOLA CIRCLE, AKOLA VS THE MALKAPUR URBAN CO - OP BANK LTD., DHANASHREE, BULDANA ROAD, MALKAPUR PAN: - AAALT0274F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SURE N DURUGKAR , A.R. RESPONDENT BY SHRI A.R. NINAWE , D.R. DATE OF HEARING: 0 9 - 0 6 - 201 6 DATE OF PRONOUNCEMENT: - 16 / 0 6 /2016 O R D E R PER SHAMIM YAHYA , A .M. TH E S E CROSS APPEAL S BY THE REVENUE AND ASSESSEE AR ISE S ORDER OF THE LD.CIT(A) DATED 1 6 . 1 0 .2014 AND PERTAIN S TO ASSESSMENT YEAR 20 0 8 - 09 . THE GROUNDS OF APPEAL RAISED IN ASSESSEE S APPEAL READ AS UNDER: - 1) THE ORDER PASSED BY HON'BLE COMMISSIONER OF INCOME TAX (APPEALS - I ) , NAGPUR IS ILLEGAL, INVALID AND BAD IN LAW. 2) THE LEARNED HON'BLE COMMISSIONER OF INCOME TAX (APPEALS - L},NAGPUR ALLOWING ONLY RS. 88,41,318/ - AGAINST THE CLAIM OF ASSESSEE OF RS.1,79,28,606/ - OF GROUND NO. 3 & 4 OF THE GROUNDS OF APPEALS IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2 I TA NO. 3 2 & 33 /NAG/ 20 1 5 3) THE LEARNED HON'BLE COMMISSIONER OF INCOME TAX (APPEALS 1), NAGPUR OUGHT NOT TO HAVE ADDED SUM RS. 90,87, 288/ - BEING UNREALIZED ACCRUED IN TEREST ON NPA TO INCOME OF THE ASSESSEE. 4) THE ADDITION TO THE INCOME RETURNED AT RS.90,87,288/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 5) THE LEARNED HON'BLE COMMISSIONER OF INCOME TAX (APPEALS - I),NAGPUR OUGHT NOT TO HAVE ADDED SUM OF RS.8,48, 148/ - B EING INTEREST REVERSAL ON ACCOUNT OF UNREALIZED INTEREST ON ADDITIONAL NPA TO INCOME OF THE ASSESSEE. 6) THE ADDITION TO THE INCOME RETURNED AT RS.8,48,148/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 7) THE LEARNED HON'BLE COMMISSIONER OF INCOME TAX (APPEA LS - L), NAGPUR OUGHT NOT TO HAVE ADDED SUM RS.6,49,149/ - BEING ALLOWABLE DEDUCTION U/S 36 (1) (VIIA) TO INCOME OF THE ASSESSEE. 8) THE ADDITION TO THE INCOME RETURNED AT RS.6,49,149/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 9) THE ASSESSEE DENIES LIABILIT Y TO BE ASSESSED TO INTEREST U/ S 234B, 234C AND 234D OF INCOME TAX, 1961. WITHOUT PREJUDICE THE LEVY OF INTEREST UNDER SECTION 234B, 234C AND 234D IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 2 . THE GROUNDS OF APPEAL RAISED IN REVENUES APPEAL READ AS UNDE R: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN HOLDING THAT IN VIEW OF THE CBDT CIRCULAR DATED 09/10/1984, THE INTEREST ON NPAS WHICH WAS OUTSTANDING FOR MORE THAN 3 YEARS WAS NOT TAXABLE AND CONSEQUENTLY TH E LD.CIT(APPEALS) ERRED IN ALLOWING THE RELIEF TO THE EXTENT OF RS.88.41 LACS SUBJECT TO FURTHER VERIFICATION BY THE AO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN HOLDING THAT THE BENEFIT OF THE CBDT CIRCULAR 09/10/1984 WAS AVAILABLE TO THE NON - SCHEDULED BANKS CARRYING ON THE BUSINESS UNDER THE LICENCE ISSUED BY THE RBI. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN NOT APPRECIATING THE CHANGED POSITION OF LAW THAT THE SAID CBDT CIRCULAR HAD BECOME REDUNDANT IN VIEW OF THE SPECIFIC AMENDED PROVISION 3 I TA NO. 3 2 & 33 /NAG/ 20 1 5 OF SEC.43D ABOUT TAXABILITY OF THE ACCRUED INTEREST ON NPAS EITHER ON RECEIPT OR CREDIT BASIS AND AMENDED PROVISIONS OF SEC.145(1) PRESCRIBING EITHER MERCANTILE OR CASH SYST EM OF ACCOUNTING STATUTORILY TO BE FOLLOWED BY THE ASSESSEE AND THAT CHOICE OF FOLLOWING THE HYBRID SYSTEM OF ACCOUNTING WAS NO MORE AVAILABLE TO THE ASSESSEE. 4. THE LD. CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE AMENDED POSITION OF THE LAW THAT THE SPEC IFIC PROVISIONS WERE INTRODUCED IN SEC.36(1) OF THE I.T. ACT, 1961 TO ALLOW THE CLAIM OF THE BAD DEBTS TO THE ASSESSEE CARRYING ON THE BANKING BUSINESS. 5. THE LD.CIT(A) ERRED IN LAW ON NOT FOLLOWING THE RATIO OF THE HONBLE LUCKNOW ITAT BENCH DECISION I N THE CASE OF M/S. HAMIRPUR DISTRICT CO - OPERATIVE BANK LTD., VS. DCIT (25 TAXMANN.COM 306) WHEREIN ON SIMILAR FACTS, THE HONBLE ITAT HAS HELD THAT THE ACCRUED INTEREST ON NPAS WAS BASED UPON THE HONBLE SC JUDGEMENT IN THE CASE OF M/S. SOUTHERN TECHNOLOGI ES LTD. (320 ITR 577). 6. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE HAD CHANGED THE METHOD OF ACCOUNTING TO ACCOUNT FOR THE ACCRUED INTEREST ON NPAS W.E.F. A.Y. 2008 - 09 ONWARDS FOR THE ONLY REASON THAT SUCH INTEREST INCOME HAD BE COME TAXABLE DUE TO WITHDRAWAL OF THE DEDUCTION U/S.80P TO THE CO - OPERATIVE BANK W.E.F. A.Y.2007 - 08 ONWARDS. HENCE THE CHARGE OF SYSTEM OF ACCOUNTING WAS NOT BONAFIDE . 3. AT THE OUTSET, IN THIS CASE THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING GROUND NO.7 AND 8 OF ASSESSEE S APPEAL. HENCE THE SE ISSUES ARE DISMISSED. 3. IN THIS CASE, THE APPELLANT IS A NON SCHEDULED CO - OPERATIVE BANK WORKING UNDER THE DIRECTIONS OF RESERVE BANK OF INDIA. THE APPELLANT FILED ITS RETURN OF INCOME FOR A.Y.2010 - 11 ON 30.09.2011 DECLARING TOTAL INCOME OF RS.2,03,08,610/ - . THIS RETURN WAS PROCESSED U/S.143 (1). THIS CASE WAS SELECTED FOR SCRUTINY UNDER CASS. IT WAS CONCLUDED BY THE ASSESSING OFFICER THAT THERE WAS A NET ACCRUED UNREALIZED NPA INTEREST OF RS.4,48,35,364/ - OF THE YEAR 2010 - 11 WHICH WAS DIRECTLY CREDITED TO THE BALANCE SHEET AND EQUAL AMOUNT WAS CREDITED TO THE OVERDUE INTEREST RESERVE A/C. WITHOUT ROUTING THE CREDIT/DEBIT OF THESE ENTRIES IN THE PROFIT & LOSS A/C . THE AO DID NOT ACCEPT TH E PLEA THAT THE 4 I TA NO. 3 2 & 33 /NAG/ 20 1 5 ACCRUED OVERDUE INTEREST AMOUNT OF RS.4,48,35,364/ - ON NPA HAS NOT BEEN OFFERED TO TAX ON THE GROUND THAT ASSESSEE WAS ACCOUNTING THE NPA INTEREST OF CASH/ACTUAL REALIZATION BASIS AND THIS METHOD WAS CONSISTENTLY FOLLOWED. 4. UPON ASSESSEE S APPEAL THE LD. CIT(A) HELD AS UNDER : - 9.3 CONSIDERING THE FACTS OF THE PRESENT CASE, IT WOULD BE NECESSARY TO COMPUTE THE INCOME THAT IS TO BE BROUGHT TO TAX BEING INTEREST ON CERTAIN AMOUNT CLASSIFIED AS NPAS IN VIEW OF THE BOARDS ABOVE REFERRED CIR CULAR DATED 09.10.1984. THE AR OF THE APPELLANT ON 21.05.2014 HAS PROVIDED THE BIFURCATION OF THE INTEREST ACCRUED ON NPAS AND THE FIGURES OF INTEREST ATTRIBUTABLE TO SUCH NPAS, WHICH ARE OUTSTANDING FOR LESS THAN 3 YEARS AND ABOVE 3 YEARS AS UNDER: - SUM MARY OF NPA & OVERDUE INTEREST FOR FY 2009 - 10 PARTICULARS NO. OF A/CS. O/S. BALANCE INTEREST UPTO 1 YEAR 174 5,89,55,551/ - 98,71,610/ - 1 TO 2 YEARS 60 7,74,25,915/ - 1,44,11,350/ - 2 TO 3 YEARS 107 1,54,15,635/ - 27,15,370/ - 3 YEARS & ABOVE 445 8,64,26,73 4 1,78,36,834/ - TOTAL 23,82,23,835/ - 4,48,35,364/ - ACCORDINGLY, AS PER THE ABOVE DETAILS SUBMITTED BY THE A.R. OF THE APPELLANT, IT IS SEEN THAT OUT OF THE TOTAL ACCRUED INTEREST ON NPAS OF RS.4,48,35,364/ - AN AMOUNT OF RS.2,69,98,530/ - ONLY IS LIABLE T O BE TAXED AS INTEREST CHARGED BUT NOT RECEIVED ON SUCH NPAS WHICH FALLS WITHIN THE PERIOD OF LESS THAN 3 YEARS. THE FIGURES PROVIDED BY THE AR OF THE APPELLANT AS MENTIONED ABOVE, ARE CERTIFIED BY THE AR OF THE APPELLANT HIMSELF. THE AO, HOWEVER, IS AT LI BERTY TO VERIFY THE VERACITY OF THE FIGURES PROVIDED BY THE APPELLANT WHILE GIVING EFFECT IN VIEW OF THE FINDING GIVEN ABOVE TAKING INTO CONSIDERATION THE BOARDS CIRCULAR DATED 09.10.1984. 5 . AGAINST ABOVE ORDER THE REVENUE AND ASSESSEE IS IN APPEAL BEFO RE US. AT THE OUTSET THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT DECISION IN ASSESSEES OWN CASE IN ITA NO. 432 & 433 / NAG/2014 AND ITA NO.452 & 453 /NAG/2013 . 5 I TA NO. 3 2 & 33 /NAG/ 20 1 5 6 . PER CONTRA THE LD. DR D ID N OT DISPUTE THE ABOVE PROPOSITION , HOWEVER H E RELI ED UPON THE ORDER OF THE AUTHORITIES BELOW. 7 . UPON CA RE FUL CONSIDERATION WE FIND THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE MENTION DECISION S OF THE ITAT IN ASSESSEES OWN CASE VIDE ORDER DATED 31 .0 8 .201 5 , THE TRIBUNAL IN ABOVE CASE S HAS CONCLUDED AS UNDER: - RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE SET ASIDE THE ORDERS PASSED BY THE LEARNED CIT(APPEALS) IN ALL THESE CASES AND HOLD THAT THE ENTIRE ADDITION MADE IN THE PRESENT CASE ON ACCOUNT OF INTEREST ACCRUED ON NPAS IS NOT SUSTAINABLE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8 . IN THE SAID ORDER THE ITAT HAS A LSO REFERRED DECISION OF HONBLE HIGH COURT AS UNDER: - 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE AURANGABAD HIGH COURT, JUDICATURE AT BOMBAY, RENDERED IN A GROUP OF CASES DETAILS OF WHICH ARE AS UNDER: - I) CIT V/S. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD., ITA NO.53 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015; II) CIT V/S. M/S. PEOPLES CO - OPERATIVE BANK LTD., ITA NO. 54 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015; III) CIT V/S. THE N ANDED DISTRICT CENTRAL CO - OPERATIVE BANK LTD ., ITA NO.57 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015; AND IV) CIT V/S. VASANDADA NAGARI SAHAKARI BANK LTD., ITA NO.68 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015. 6. THE FACTS OF THE CASE DEALT WITH BY THE HONBLE AURANGABAD HIGH COURT, JUDICATURE AT BOMBAY, WERE IDENTICAL WITH THE FACTS IN THE PRESENT CASE, WHICH ARE MENTIONED IN PARA - 3 OF THE JUDGMENT RENDERED IN THE ABOVE INCOME TAX APPEALS. THE RELEVANT PORTION OF PARA - 3 IS REPRODUCE BELOW: - 3. THE COMMON ISSUE INVOLVED IN ALL THESE APPEALS RELATING T O THE ASSESSMENT YEAR AS MENTIONED IN THE AFORESAID TABLE ABOUT DELETION OF THE ADDITIONS ON ACCOUNT OF INTEREST ON STICKY ADVANCES. IN ALL THESE CASES, THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, HAS OBSERVED THAT THE PROVISIONS OF SECTION 4 3(D) OF THE INCOME TAX ACT CANNOT BE APPLIED TO THE ASSESSEE AS IT IS NOT A SCHEDULED BANK BUT A CO - OPERATIVE BANK. IN THE OPINION OF THE 6 I TA NO. 3 2 & 33 /NAG/ 20 1 5 ASSESSING OFFICER, CONSIDERING THE PROVISIONS OF SECTION 43 - D OF THE INCOME TAX ACT, NON SCHEDULED CO - OPERATIVE BANKS ARE SPECIFICALLY EXCLUDED FROM THE SPECIAL PROVISIONS OF THE 43 - D OF THE INCOME TAX ACT, REGARDING INTEREST ON STICKY ADVANCES. THE ASSESSING OFFICER HAS ALSO HELD THAT CBDT CIRCULAR NO.F - 201/4/84 ITA - II DATED 09.10.1984 IS APPLICABLE ONLY TO BANKING COMP ANIES AND NOT TO NON - SCHEDULED BANKS AND CO - OPERATIVE BANKS 8. RESPECTFULLY FOLLOWING ABOVE PRECEDENTS, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 9 . IN THE RESULT, APPEAL BY THE REVENUE STANDS DISMISSED AND APP EAL BY THE ASSESSEE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JUNE , 2016 SD/ - SD/ - (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: - NAGPUR DATED: - 16 / 0 6 /2016 COPY FORWARDED TO : 1. THE MALKAP UR URBAN CO - OP BANK LTD. K.N.D. ASSOCIATES, 502 - 503, SATYAM APTS., WAR DHA ROAD, DHANTOLI, NAGPUR - 12 2. DY. COMMISSIONER OF INCOME TAX AKOLA CIRCLE, AKOLA 3. ASST. COMMISSIONER OF INCOME TAX 1 ST FLOOR, AAYAKAR BHAWAN, MURTIZAPUR RD, AKOLA CIRCLE, AKOLA 4. C.I.T. - I, NAGPUR. 5. CIT (APPEALS) - I , NAGPUR. 6. D.R., ITAT, NAGPUR. 7. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR M.B.BODKHE /SR. P.S.