Shri Yashwant Sahakari Bank Ltd., Kolhapur V. Income-tax Officer,

ITA 356/PUN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79746 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: P S SHINGTE
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 143(3); 194C; 201(1); 145; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.356/PN/2014 (ASSESSMENT YEAR : 2006-07) SHRI YASHWANT SAHAKARI BANK LTD., KUDITRE, (KUMBHI- KASARI), TAL- KARVEER, DIST.- KOLHAPUR. PAN : AAAAS9341P . APPELLANT VS. INCOME TAX OFFICER, WARD 1(2), KOLHAPUR. . RESPONDENT ASSESSEE BY : MR. P. S. SHINGTE DEPARTMENT BY : MR. P. L. PATHADE DATE OF HEARING : 22-04-2014 DATE OF PRONOUNCEMENT : 28-04-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR DATED 30.12.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 24.1 2.2008 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, ASSESSEE HAS RAISED FOLLOWING GR OUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LOWER AUTHORITIES HAVE ERRED IN MAKING THE DISA LLOWANCE FOR A SUM OF RS.7,82,267/- BEING INTEREST ACCRUED ON NON PERFORM ING ASSET (NPA). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING THE EXPENDITURE OF RS.72,815/- BEING PIGMI COMMISSION PAID TO PIGMI AGENTS FOR NON -TDS. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO AN ADDITION OF RS.7,82,267/- MADE BY THE ASSESSING OFFICER WITH RESPECT TO THE I NTEREST INCOME RELATING TO NON PERFORMING ASSETS (IN SHORT NPAS). IN BRIEF, THE RELEVANT FACTS ARE THAT ITA NO.356/PN/2014 A.Y. 2006-07 ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDER MA HARASHTRA STATE CO- OPERATIVE SOCIETIES ACT, 1960 AND IS CARRYING ON TH E BANKING BUSINESS IN TERMS OF A LICENSE ISSUED BY THE RESERVE BANK OF INDIA. AS A RESULT, ASSESSEE BEING A CO-OPERATIVE BANK OPERATING UNDER LICENSE FROM RB I, IS GOVERNED BY THE CIRCULARS OF RBI RELATING TO PRUDENTIAL NORMS, INCO ME RECOGNITION, ASSET CLASSIFICATION, PROVISIONING AND OTHER RELATED MATT ERS. IN TERMS OF SUCH PRUDENTIAL NORMS PRESCRIBED BY RBI, ASSESSEE DID NO T ACCOUNT FOR INTEREST INCOME RELATABLE TO NPAS I.E. THOSE ADVANCES TO CUS TOMERS WHICH HAVE BEEN CLASSIFIED AS NPAS IN TERMS OF THE PRUDENTIAL NORMS OF RBI. THE ASSESSING OFFICER WAS OF THE OPINION THAT INTEREST INCOME EVE N IN RELATION TO SUCH NPAS WAS LIABLE TO BE ACCOUNTED FOR THE ON ACCRUAL BASIS BECAUSE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. AS PER THE ASSESSING OFFICER, THE PRUDENTIAL NORMS ISSUED BY THE RESERVE BANK OF INDI A WOULD NOT REGULATE THE ACCRUAL OF SUCH INCOME IN THE HANDS OF THE ASSESSEE . ACCORDINGLY, A SUM OF RS.7,82,267/- WAS ADDED TO THE RETURNED INCOME. TH E CIT(A) HAS ALSO AFFIRMED THE DECISION OF THE ASSESSING OFFICER, AGA INST WHICH ASSESSEE IS FURTHER APPEAL BEFORE US. 4. AT THE TIME OF HEARING, IT WAS A COMMON POINT BE TWEEN THE PARTIES THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE OMERGA JANTA S AHAKARI BANK LTD. ORDER DATED 31.10.2013. IN THE SAID PRECEDENT, THE PUNE BENCH OF THE TRIBUNAL HAS CONSIDERED THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD., 330 ITR 440 (DEL) AS WELL AS THE CONTRARY JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MADRAS) WI TH RESPECT TO THE ISSUE OF ACCRUAL OF INTEREST INCOME ON NPAS ADVANCES. AF TER A DETAILED DISCUSSION AND FOLLOWING THE PROPOSITION THAT IN THE ABSENCE O F ANY JUDGEMENT OF THE JURISDICTIONAL HIGH COURT, THERE BEING TWO CONTRARY JUDGEMENTS OF THE NON- JURISDICTIONAL HIGH COURTS, A DECISION WHICH WAS FA VOURABLE TO THE ASSESSEE ITA NO.356/PN/2014 A.Y. 2006-07 WAS TO BE FOLLOWED IN VIEW OF THE PARITY OF REASONI NG LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD., (1973) 88 ITR 192 (SC), AND ACCORDINGLY, BY FOLLOWING THE RATIO O F THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT THE ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNA L DATED 31.10.2013 (SUPRA) IS REPRODUCED AS UNDER :- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN SO FAR AS THE APPLICABILITY OF SECTION 43D OF THE ACT TO T HE ASSESSEE IS CONCERNED, THERE IS A CONVERGENCE OF OPINION BETWEEN THE ASSES SEE AND THE REVENUE TO THE EFFECT THAT THE SAME IS NOT APPLICABLE TO THE A SSESSEE. OSTENSIBLY, ASSESSEE IS A CO-OPERATIVE BANK CARRYING ON BANKING BUSINESS IN TERMS OF A LICENSE GRANTED BY RBI AND IS NOT A SCHEDULED BANK INCLUDED IN SECOND SCHEDULE OF RBI SO AS TO FALL WITHIN THE SCOPE OF S ECTION 43D OF THE ACT. NOTABLY, SECTION 43D OF THE ACT PRESCRIBES THAT INT EREST INCOME ON SUCH CATEGORIES OF BAD AND DOUBTFUL DEBTS AS PRESCRIBED BY THE RBI GUIDELINES SHALL BE CHARGEABLE TO TAX IN THE YEAR IN WHICH SUCH INTE REST INCOME IS CREDITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT OR IN T HE YEAR OF ACTUAL RECEIPT, WHICHEVER IS EARLIER. SINCE ASSESSEE IS NOT AN ENT ITY COVERED WITHIN THE SCOPE OF SECTION 43D OF THE ACT, THE PRESENT CONTROVERSY CANNOT BE ADJUDICATED IN THE LIGHT OF SECTION 43D OF THE ACT, AND IT IS LIABLE T O BE DECIDED ON GENERAL PRINCIPLES AS TO WHETHER THE IMPUGNED INCOME HAS AC CRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 9. IN THIS CONNECTION, WE FIND THAT THE VISAKHAPATN AM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOPERATIVE U RBAN BANK LTD. (SUPRA) HAS CONSIDERED AN IDENTICAL CONTROVERSY. THE ASSES SEE BEFORE THE VISAKHAPATNAM BENCH WAS A CO-OPERATIVE BANK OPERATI NG UNDER A LICENSE ISSUED BY RBI BUT WAS NOT A SCHEDULED BANK SO AS TO FALL WITHIN THE SCOPE OF SECTION 43D OF THE ACT. THE ISSUE RELATED TO TAXAB ILITY OF INTEREST INCOME RELATING TO NPAS, WHICH AS PER THE REVENUE WAS LIAB LE TO BE TAXED ON ACCRUAL BASIS IN LINE WITH MERCANTILE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE THEREIN. THE ASSESSEE, ON THE OTHER HAND, CONTENDE D THAT HAVING REGARD TO THE GUIDELINES ISSUED BY RBI REGARDING ACCOUNTING O F INTEREST ON NPAS, NO INTEREST INCOME ACCRUED IN RESPECT OF NPAS AND THAT THE SAME WAS TO BE TAXED ONLY ON RECEIPT BASIS. THE TRIBUNAL OBSERVED THAT THE QUESTION OF TAXABILITY OF INTEREST ON NPAS CLASSIFIED BY RBI, W AS CONSIDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VY APAR LTD. (SUPRA) WHEREIN AFTER CONSIDERING THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) IT WAS HELD THAT INTEREST INCOME RELATABLE TO NPAS WAS NOT INCLUDIBLE IN TOTAL INCOME ON ACCRU AL BASIS SINCE THE SAME DID NOT ACCRUE TO THE ASSESSEE. THE FOLLOWING DISCUSSI ON BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOP ERATIVE URBAN BANK LTD. (SUPRA) IS WORTHY OF NOTICE :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. THE QUESTION OF TAXABILITY OF I NTEREST ON NPAS HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD (SUPRA); WHEREIN THE HON'BL E DELHI HIGH COURT TOOK INTO ACCOUNT THE DECISION RENDERED BY TH E HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD (SUP RA). IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD, THE ASSESSEE THEREIN W AS A NON BANKING FINANCIAL COMPANY AND IT WAS ALSO BOUND BY THE PRU DENTIAL NORMS ITA NO.356/PN/2014 A.Y. 2006-07 DIRECTIONS ISSUED BY THE RESERVE BANK OF INDIA FOR INCOME RECOGNITION AND ASSET CLASSIFICATION. THE ASSESSEE DID NOT INCL UDE THE INTEREST INCOME RELATABLE TO NPA ASSETS IN ITS TOTAL INCOME. THE ASSESSING OFFICER, HOWEVER, ADDED THE SAID INTEREST AS THE IN COME OF THE ASSESSEE BY HOLDING THAT IT HAD ACCRUED TO THE AS SESSEE EVEN IT WAS NOT REALIZED AS THE ASSESSEE WAS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING. THE LEARNED CIT (A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE ITAT DELETED THE AFORESAID IN COME. HENCE THE REVENUE PREFERRED APPEAL BEFORE THE HON'BLE DELHI H IGH COURT. 8.1 AFTER HEARING THE RIVAL SUBMISSIONS, THE HON'BL E DELHI HIGH COURT TOOK NOTE OF SEC.45Q OF RESERVE BANK OF INDIA ACT WHICH READS AS UNDER: CHAPTER IIIB TO OVERRIDE OTHER LAWS. 45Q. THE PROVISIONS OF THIS CHAPTER SHALL HAVE EFFE CT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FO RCE OR ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY SUCH LAW. THE HIGH COURT TOOK NOTE OF THE FACT THAT THE PROVI SION OF 45Q OF RESERVE BANK OF INDIA HAS OVERRIDING EFFECT OVER AN Y OTHER LAW. THEN THE HON'BLE HIGH COURT ALSO CONSIDERED ACCOUNTING S TANDARD AS-9 ON REVENUE RECOGNITION AND ALSO EXTRACTED FOLLOWING RELEVANT PORTION FROM THE SAID ACCOUNTING STANDARD: 9. EFFECT OF UNCERTAINTIES ON REVENUE RECOGNITION 9.1 RECOGNITION OF REVENUE REQUIRES THAT REVENUE IS A MEASURABLE AND THAT AT THE TIME OF SALE OR THE REND ERING OF THE SERVICE, IT WOULD NOT BE UNREASONABLE TO EXPECT ULT IMATE COLLECTION. 9.2 WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLEC TION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF RAIS ING ANY CLAIM, E.G., FOR ESCALATION OF PRICE, EXPORT INCENTIVES, I NTEREST ETC., REVENUE RECOGNITION IS POSTPONED TO THE EXTENT OF U NCERTAINTY INVOLVED. IN SUCH CASES, IT MAY BE APPROPRIATE TO R ECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAIN THAT THE ULTIMATE COLLECTION WILL BE MADE. WHERE THERE IS NO UNCERTAI NTY AS TO ULTIMATE COLLECTION, REVENUE IS RECOGNIZED AT THE T IME OF SALE OR RENDERING OF SERVICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALMENTS. 9.3 WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING OF THE SERVICE, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO REFLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REV ENUE ORIGINALLY RECORDED. 9.4 AN ESSENTIAL CRITERION FOR THE RECOGNITION OF R EVENUE IS THAT THE CONSIDERATION RECEIVABLE FOR THE SALE OF G OODS, THE RENDERING OF SERVICES OR FROM THE USE OF OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERMINABLE. WHEN SUCH CONSIDERATION IS NOT DETERMINABLE WITHIN REASONABLE LIMITS, THE RECOGNITION OF REVENUE IS POSTPONED. 9.5 WHEN RECOGNITION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS REVENU E OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNIZED. 8.2 THE DELHI HIGH COURT ALSO CONSIDERED THE DECISI ON RENDERED IN THE FOLLOWING CASES: I) CIT VS. ELGI FINANCE LTD., 293 ITR 357 (MAD) ITA NO.356/PN/2014 A.Y. 2006-07 II) CIT VS. KKM INVESTMENTS (CAL) SLP DISMISSED B Y SUPREME COURT (310 ITR 4) III) CIT VS. MOTOR CREDIT CO (P) LTD., 127 ITR 572 (MAD) IV) UCO BANK VS. CIT 237 ITR 889 (SC) V) CIT VS. SHOORJI VALLABHDAS & CO 46 ITR 144 (SC) VI) GODHRA ELECTRICITY CO. LTD., VS.CIT 225 ITR 746 VII) CIT VS. GOYAL M G GASES (P) LTD., 303 ITR 159 (DEL) VIII) CIT VS. EICHER LTD., ITA NO.431/2009 DATED 15 .7.2009 (DEL) 8.3 AFTER CONSIDERING THE ACCOUNTING STANDARD 9 AND THE VARIOUS CASE LAW LISTED ABOVE, THE HON'BLE DELHI HIGH COURT HELD THAT THE INTEREST ON NPA ADVANCE CANNOT BE TREATED AS ACCRU ED TO THE ASSESSEE. 8.4 BEFORE THE DELHI HIGH COURT, THE REVENUE TOOK S UPPORT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F SOUTHERN TECHNOLOGIES LTD (SUPRA). THE DELHI HIGH COURT CONS IDERED THE SAID DECISION OF HON'BLE APEX COURT AND EXPLAINED THE SA ME AS UNDER: WE HAVE ALREADY HELD THAT EVEN UNDER THE INCOME TA X ACT, INTEREST INCOME HAD NOT ACCRUED. MOREOVER, THIS SUB MISSION OF MR. SABHARWAL IS BASED ENTIRELY ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGY (S UPRA). NO DOUBT, IN FIRST BLUSH, READING OF THE JUDGMENT G IVES AN INDICATION THAT THE COURT HAS HELD THAT RESERVE BAN K OF INDIA ACT DOES NOT OVERRIDE THE PROVISIONS OF THE I NCOME TAX ACT. HOWEVER, WHEN WE EXAMINE THE ISSUE INVOLVED THEREIN MINUTELY AND DEEPLY IN THE CONTEXT IN WHICH THAT HAD ARISEN AND CERTAIN OBSERVATIONS OF THE APEX COURT C ONTAINED IN THAT VERY JUDGMENT, WE FIND THAT THE PROPOSITION AD VANCED BY MR.SABHARWAL MAY NOT BE ENTIRELY CORRECT. IN THE CASE BEFORE THE SUPREME COURT, THE ASSESSEE A NBFC DEBITED RS.81,68,516 AS PROVISION AGAINST NPA IN THE PROFIT AND LOSS ACCOUNT, WHICH WAS CLAIMED AS DEDUCTION IN TER MS OF SECTION 36(1) (VII) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW THE DEDUCTION CLAIMED AS AFORESAID ON THE GRO UND THAT THE PROVISION OF NPA WAS NOT IN THE NATURE OF EXPENDITU RE OR LOSS BUT MORE IN THE NATURE OF A RESERVE, AND THUS NOT D EDUCTIBLE UNDER SECTION 36(I)(VII) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, DID NOT BRING TO TAX RS.20,34,605/- AS INC OME (BEING INCOME ACCRUED UNDER THE MERCANTILE SYSTEM O F ACCOUNTING). THE DISPUTE BEFORE THE APEX COURT CENTERED AROUND DEDUCTIBILITY OF PROVISION FOR NPA. AFTER ANALYZING THE PROVISIONS OF THE RESERVE BANK OF INDIA ACT, THEIR LORDSHIPS OF THE APEX COURT OBSERVED THAT IN SO FAR AS THE PERMISSIBLE DEDUCTIONS OR EXCLUSIONS UNDER THE ACT ARE CONCERNED, THE SAME ARE ADMISSIBLE ONLY IF SUCH DEDUCTIONS/EXCLUSIONS SATISFY THE RELEVANT CONDITIO NS STIPULATED THEREFORE UNDER THE ACT. TO THAT EXTENT, IT WAS OBSERVED THAT THE PRUDENTIAL NORMS DO NOT OVERRIDE THE PROVISIONS OF THE ACT. HOWEVER, THE APEX COURT MADE A DISTINCTION WITH REGARD TO INCOME RECOGNITION AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENT IAL NORMS, EVEN THOUGH THE SAME DEVIATED FROM MERCANTIL E SYSTEM OF ACCOUNTING AND/OR SECTION 45 (SIC. 145) O F THE INCOME TAX ACT. IT CAN BE SAID, THEREFORE, THAT THE APEX COURT APPROVED THE REAL INCOME THEORY WHICH IS ENGRAINE D IN THE PRUDENTIAL NORMS FOR RECOGNITION OF REVENUE BY NBFC . 9. THE HON'BLE SUPREME COURT IN THE CASE OF M/S SOU THERN TECHNOLOGIES LTD (SUPRA) DISSECTED THE MATTER INTO TWO PARTS VIZ., A) INCOME RECOGNITION AND B) PERMISSIBLE DEDUCTION/EXC LUSIONS UNDER THE INCOME TAX ACT. IN SO FAR AS INCOME RECOGNITION IS CONCERNED, THE ITA NO.356/PN/2014 A.Y. 2006-07 HON'BLE SUPREME COURT HELD THAT SECTION 145 OF THE INCOME TAX ACT HAS NO ROLE TO PLAY AND THE ASSESSING OFFICER HAS T O FOLLOW RESERVE BANK OF INDIA DIRECTIONS 1998, SINCE BY VIRTUE OF 4 5Q OF THE RESERVE BANK OF INDIA ACT, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS OF RESERVE BANK OF INDIA VIS--VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIES ACT 1956. IN SO FAR AS COMPUTATION OF INC OME UNDER THE INCOME TAX ACT IS CONCERNED, (WHICH INVOLVES DEDUCT ION OF PERMISSIBLE DEDUCTIONS AND EXCLUSIONS) THE ADMISSIBILITY OF SUC H DEDUCTIONS SHALL BE GOVERNED BY THE PROVISIONS OF THE INCOME TAX ACT . THE RELEVANT OBSERVATIONS OF THE HON'BLE SUPREME COURT ARE EXTRA CTED BELOW: APPLICABILITY OF SECTION 145 40. AT THE OUTSET, WE MAY STATE THAT IN ESSENCE RBI DIRECTIONS 1998 ARE PRUDENTIAL/PROVISIONING NORMS ISSUED BY RB I UNDER CHAPTER IIIB OF THE RBI ACT, 1934. THESE NORMS DEAL ESSENTIALLY WITH INCOME RECOGNITION. THEY FORCE THE NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FINANCIAL ACCOU NTS. THEY FORCE THE NBFCS TO REFLECT TRUE AND CORRECT PROFI TS. BY VIRTUE OF SECTION 45Q, AN OVERRIDING EFFECT IS GIVEN TO TH E DIRECTIONS 1998 VIS--VIS INCOME RECOGNITION PRIN CIPLES IN THE COMPANIES ACT, 1956. THESE DIRECTIONS CONSTITUTE A CODE BY ITSELF. HOWEVER, THESE DIRECTIONS 1998 AND THE IT ACT OPERATE IN DIFFERENT AREAS. THESE DIRECTIONS 1998 H AVE NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME. THESE DIRECTIONS CANNOT OVERRULE THE PERMISSIBLE DEDUCTIONS OR TH EIR EXCLUSION UNDER THE IT ACT. THE INCONSISTENCY BETWEEN THESE DIRECTIONS AND COMPANIES ACT IS ONLY IN THE M ATTER OF INCOME RECOGNITION AND PRESENTATION OF FINANCIAL ST ATEMENTS. THE ACCOUNTING POLICIES ADOPTED BY AN NBFC CANNOT DETERMINE THE TAXABLE INCOME. IT IS WELL SETTLED TH AT THE ACCOUNTING POLICIES FOLLOWED BY A COMPANY CAN BE CH ANGED UNLESS THE AO COMES TO THE CONCLUSION THAT SUCH CHA NGE WOULD RESULT IN UNDERSTATEMENT OF PROFITS. HOWEVER, HERE IS THE CASE WHERE THE AO HAS TO FOLLOW THE RESERVE BANK OF INDI A DIRECTIONS 1998 IN VIEW OF SECTION 45Q OF THE RESER VE BANK OF INDIA ACT. HENCE, AS FAR AS INCOME RECOGNIT ION IS CONCERNED, SECTION 145 OF THE IT ACT HAS NO ROLE TO PLAY IN THE PRESENT DISPUTE. 10. TURNING TO THE FACTS OF THE CASE BEFORE US, THE ASSESSEE HEREIN IS A COOPERATIVE BANK AND IT IS NOT IN DISPUTE THAT IT IS ALSO GOVERNED BY THE RESERVE BANK OF INDIA. HENCE THE DIRECTIONS WIT H REGARD TO THE PRUDENTIAL NORMS ISSUED BY THE RESERVE BANK OF INDI A ARE EQUALLY APPLICABLE TO THE ASSESSEE AS IT IS APPLICABLE TO T HE COMPANIES REGISTERED UNDER THE COMPANIES ACT. THE HON'BLE SUP REME COURT HAS HELD IN THE CASE OF SOUTHERN TECHNOLOGIES LTD (SUPR A), THAT THE PROVISION OF 45Q OF RESERVE BANK OF INDIA ACT HAS A N OVERRIDING EFFECT VIS--VIS INCOME RECOGNITION PRINCIPLE UNDER THE CO MPANIES ACT. HENCE SEC.45 Q OF THE RBI ACT SHALL HAVE OVERRIDING EFFEC T OVER THE INCOME RECOGNITION PRINCIPLE FOLLOWED BY COOPERATIVE BANKS ALSO. HENCE THE ASSESSING OFFICER HAS TO FOLLOW THE RESERVE BANK OF INDIA DIRECTIONS 1998, AS HELD BY THE HON'BLE SUPREME COURT. 10.1 BASED ON THE PRUDENTIAL NORMS, THE ASSESSEE HE REIN DID NOT ADMIT THE INTEREST RELATABLE TO NPA ADVANCES IN ITS TOTAL INCOME. THE HON'BLE DELHI HIGH COURT IN THE CASE OF VASISTH CHA Y VYAPAR LTD (SUPRA) HAS HELD THAT THE INTEREST ON NPA ASSETS CA NNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE. IN THIS REGARD, THE F OLLOWING OBSERVATIONS OF HON'BLE DELHI HIGH COURT IN THE ABO VE CITED CASE ARE RELEVANT: WHAT TO TALK OF INTEREST, EVEN THE PRINCIPLE AMOUN T ITSELF HAD BECOME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME THEREUPON HAS NO T ACCRUED. ITA NO.356/PN/2014 A.Y. 2006-07 THE SAID DECISION OF THE HON'BLE DELHI HIGH COURT I S EQUALLY APPLICABLE TO THE ISSUE IN OUR HANDS. ACCORDINGLY WE DO NOT FI ND ANY INFIRMITY WITH THE DECISION OF THE LEARNED CIT (A) IN HOLDING THAT THE INTEREST INCOME RELATABLE ON NPA ADVANCES DID NOT ACCRUE TO THE ASS ESSEE. ACCORDINGLY WE UPHOLD HIS ORDER. 10. FOLLOWING THE AFORESAID DISCUSSION, WHICH HAS BEEN RENDERED ON AN IDENTICAL ISSUE UNDER SIMILAR CIRCUMSTANCES, WE FIND NO REASONS TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CIT(A ) IN DELETING THE IMPUGNED ADDITION RELATING TO INTEREST INCOME IN RESPECT OF NPAS. 11. SO, HOWEVER, THE LEARNED DEPARTMENTAL REPRESENT ATIVE HAS SUBMITTED THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MADRAS) HA S DIFFERED WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) ON A SIMILAR ISSUE, I.E. RELATI NG TO INTEREST INCOME ON NPAS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER POI NTED OUT THAT THE HONBLE MADRAS HIGH COURT FOLLOWED THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) IN HOLDI NG THAT INTEREST ON NPAS WAS ASSESSABLE TO TAX ON ACCRUAL BASIS. WE HAVE CA REFULLY CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE BASED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN T HE CASE OF SAKTHI FINANCE LTD. (SUPRA). THE CONTROVERSY BEFORE THE HONBLE M ADRAS HIGH COURT RELATED TO NON-RECOGNITION OF INTEREST INCOME ON NPAS BY THE A SSESSEE FOLLOWING THE RBI GUIDELINES. THE HONBLE MADRAS HIGH COURT TOOK THE VIEW THAT THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHER N TECHNOLOGIES LTD. (SUPRA) ALSO APPLIED TO THE INCOME RECOGNITION NORM S PROVIDED BY RBI AND THEREFORE IT HELD THE INTEREST INCOME ON NPAS IS LI ABLE TO BE TAXED ON ACCRUAL BASIS AND NOT IN TERMS OF RBIS GUIDELINES. BUT TH E HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) HA S TAKEN A VIEW THAT SOUTHERN TECHNOLOGIES LTD. (SUPRA) CASE DID NOT APP LY TO THE INCOME RECOGNITION NORMS PRESCRIBED BY RBI. OSTENSIBLY, T HERE IS DIVERGENCE OF OPINION BETWEEN THE HONBLE DELHI HIGH COURT AND TH E HONBLE MADRAS HIGH COURT AS NOTED BY THE HONBLE MADRAS HIGH COURT IN ITS ORDER. 12. IN SO FAR AS, PRESENT CASE IS CONCERNED THERE I S NO JUDGMENT OF THE JURISDICTIONAL HIGH COURT. WE ARE FACED WITH T WO CONTRARY JUDGMENTS OF THE NON-JURISDICTIONAL HIGH COURT. IN SUCH A SITUA TION, WE ARE INCLINED TO PREFER A VIEW WHICH IS FAVOURABLE OF THE ASSESSEE FOLLOWIN G THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETA BLE PRODUCTS LTD. (1973) 88 ITR 192 (SC). 13. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, WE ARE INCLINED TO FOLLOW THE DECISION OF OUR CO-ORDINATE BENCH IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD. (SUPRA) AND ACCORDINGLY THE ORDER OF THE CIT(A) IS LIABLE TO THE AFFIRMED. WE HOLD SO. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 5. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDENTICAL TO THOSE CONSIDERED BY US IN THE CASE OF THE OMERGA JANTA SAHAKARI BANK LTD. (SU PRA), FOLLOWING THE AFORESAID PRECEDENT THE PRESENT CLAIM OF THE ASSESS EE DESERVES TO BE UPHELD. WE HOLD SO. ITA NO.356/PN/2014 A.Y. 2006-07 6. IN THE RESULT, FOLLOWING THE AFORESAID PRECEDENT , THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.7,82,267/-. 7. THE SECOND GROUND OF APPEAL RELATES TO AN ADDITI ON OF RS.72,815/- REPRESENTING EXPENDITURE ON PIGMY COMMISSION, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)( IA) OF THE ACT AS THE ASSESSEE HAD FAILED TO DEDUCT THE REQUISITE TAX AT SOURCE. 8. THE ONLY PLEA RAISED BY THE ASSESSEE IS BASED ON A RECENT DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO, WARD 4(5), PUNE VS. M/S GAURIMAL MAHAJAN & SONS. VIDE ITA NO.1852/PN/2012 D ATED 06.01.2014 PERTAINING TO ASSESSMENT YEAR 2008-09. IT IS CONTE NDED THAT AS PER THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013 NO DISALLOWANCE IS TO BE MADE U/S 40(A)( IA) OF THE ACT IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. IT WAS SUBMITTED THAT T HE APPLICABILITY OF THE AFORESAID PROVISO BE CONSIDERED RETROSPECTIVELY IN THE SAME MANNER AS WAS CONSIDERED IN THE CASE OF THE FIRST PROVISO TO SECT ION 40(A)(IA) OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT, 2010 W.E.F. 01.04. 2010 BUT IT HAS BEEN UNDERSTOOD AS RETROSPECTIVE ON THE REASONING THAT I T IS CLARIFICATORY IN NATURE BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS VIDE ITA NO.302/2011 DATED 23.11.2011. THE PUNE BENCH O F THE TRIBUNAL IN THE CASE OF M/S GAURIMAL MAHAJAN & SONS. (SUPRA) CONSID ERED THE AFORESAID PLEA AND SINCE THE SAME WAS BEING RAISED FOR THE FIRST T IME BY THE ASSESSEE BEFORE THE TRIBUNAL, IT WAS RESTORED BACK TO THE ASSESSING OFFICER TO DECIDE AFRESH FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE T RIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL VS. ACTI VIDE ITA NO.38/COCH/20 13 DATED 29.11.2013 FOR ASSESSMENT YEAR 2008-09. ITA NO.356/PN/2014 A.Y. 2006-07 9. IN THE PRESENT ALSO, THE PLEA HAS NOT BEEN RAISE D BEFORE THE LOWER AUTHORITIES AND IS BEING RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME, THEREFORE, FOLLOWING THE PRECEDENT IN THE CASE OF M/S GAURIMAL MAHAJAN & SONS. (SUPRA), THE ISSUE IS REMANDED BACK TO THE FILE OF THE ASSES SING OFFICER TO BE EXAMINED AFRESH KEEPING IN MIND THE FOLLOWING DISCUSSION MAD E BY THE TRIBUNAL IN THE CASE OF M/S GAURIMAL MAHAJAN & SONS. (SUPRA) :- 8.1 HOWEVER, THE ASSESSEE HAS MADE A NEW LEGAL ARG UMENT THAT THE FINANCE ACT, 2010 HAS AMENDED THE FIRST PROVISO TO SECTION 40(A)(IA) W.E.F. 01-04-2010 AND IT HAS BEEN HELD BY VARIOUS JUDICIAL AUTHORITIES THAT SUCH AMENDMENT IS RETROSPECTIVE IN NATURE. IT IS THE SU BMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SECOND PROVISO TO SECTION 40(A)(IA) WAS INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01-04-2013 WHEREIN IT IS STATED THAT DISALLOWANCE U/S.40(A)(IA) OF THE ACT NEED NOT BE MADE IF THE AS SESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO S ECTION 201(1) OF THE I.T. ACT., THEREFORE, THIS SHOULD ALSO BE HELD AS RETROSPECTIV E SINCE IT HAS BEEN INTRODUCED TO ELIMINATE UNINTENDED CONSEQUENCES WHI CH MAY CAUSE UNDUE HARDSHIP TO THE TAX PAYERS. 8.2 WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) RELIED ON BY LD. COUNSE L FOR THE ASSESSEE, HAD AN OCCASION TO DECIDE AN ISSUE IN THE LIGHT OF THE ABOVE ARGUMENT AND HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH CERTAIN DIRECTIONS. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 7 OF THE ORDER READ AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFU LLY PERUSED THE RECORD. ACCORDING TO THE ASSESSEE, THER E IS NO WRITTEN CONTRACT BETWEEN HIM AND THE PERSONS DOING POLISHIN G WORKS. ACCORDINGLY, THE ASSESSEE HAS CONTENDED BEFORE US T HAT THE PROVISIONS OF SEC. 194C SHALL NOT APPLY TO THE POLISHING CHARG ES. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS GIVEN A CLEAR FINDING THAT ESSENTIAL INGREDIENTS OF A CONTRACT ARE VERY MUCH AVAILABLE I N THE POLISHING WORKS ENTRUSTED BY THE ASSESSEE. FURTHER WE NOTICE THAT T HE CBDT, VIDE CIRCULAR NO.433 DATED 25-09-1985 (1986)(157 ITR ST. 27) HAS CLARIFIED THAT THE PROVISIONS OF SEC. 194C ARE WIDE ENOUGH TO COVER ORAL CONTRACTS ALSO. A CONTRACT IS NORMALLY REDUCED IN W RITING IN ORDER TO MAKE CLEAR THE TERMS AND CONDITIONS, OBLIGATIONS OF THE PARTIES TO THE CONTRACT ETC. IF THE CONDITIONS OF CONTRACT ARE OTH ERWISE UNDERSTOOD BY THE PARTIES, IN VIEW OF THE REPEATED TRANSACTIONS, IN OUR VIEW, THE ABSENCE OF A WRITTEN CONTRACT WOULD NOT MAKE ANY DI FFERENCE. IN THE INSTANT CASE, THE ASSESSEE IS REPEATEDLY GIVEN WORK S TO THE POLISHING PEOPLE AND HENCE THE TERMS AND CONDITIONS OF THE WO RK WOULD BE CLEARLY UNDERSTOOD BY BOTH THE PARTIES. ACCORDINGLY , WE REJECT THIS CONTENTION OF THE ASSESSEE AND HOLD THAT THE PROVIS IONS OF SEC. 194C SHALL APPLY TO THE POLISHING WORKS GIVEN BY THE ASS ESSEE. 7.1 ACCORDING TO LD A.R, THE ASSESSEE HAS ACTED AS A CONDUIT PIPE IN CONNECTION WITH THE POLISHING WORKS BETWEEN THE CUSTOMERS AND THE PERSON DOING POLISHING JOB. ACCOR DINGLY, IT WAS SUBMITTED THAT THERE IS NO PROFIT ELEMENT IN THE SA ID TRANSACTIONS. THE LD A.R FURTHER SUBMITTED THAT THE ASSESSEE HAS INCL UDED THE COST OF POLISHING WORKS IN THE SALE VALUE OF ALUMINIUM EXTR USIONS, WITHOUT ITA NO.356/PN/2014 A.Y. 2006-07 KNOWING TAX IMPLICATIONS. HOWEVER, WE NOTICE THAT T HE ASSESSEE DID NOT FURNISH ANY PROOF TO SUBSTANTIATE THE ABOVE SAI D CLAIMS. THE ASSESSEE, BEING A DEALER IN ALUMINIUM EXTRUSIONS, H AS ONLY SUPPLIED THE PRODUCTS AFTER CARRYING OUT THE POLISHING WORKS ACCORDING TO THE TASTE AND REQUIREMENT OF CUSTOMERS. IT IS ONLY ONE OF THE MANY BUSINESS TECHNIQUES NORMALLY ADOPTED BY A BUSINESS MAN TO IMPROVE HIS SALES, SINCE IT WILL BE VERY DIFFICULT FOR CUST OMERS TO IDENTIFY THE POLISHING PEOPLE AND GET THE WORK DONE BY THEMSELVE S. HENCE, WE ARE OF THE VIEW THAT IT MAY NOT BE CORRECT TO ARGUE THA T THE CONTRACT EXISTED BETWEEN THE CUSTOMERS AND THE POLISHING PEOPLE. IN FACT, THE CUSTOMER MAY NOT HAVE ANY CONTACT WITH THE POLISHING PEOPLE IN THIS TYPE OF TRANSACTIONS. HENCE, IT IS HARD TO BELIEVE THE CLAI M OF THE ASSESSEE THAT HE HAS ACTED AS MERE CONDUIT PIPE BETWEEN THE CUSTO MERS AND POLISHING PEOPLE, ACCORDINGLY, THE CLAIM THAT THE A SSESSEE STANDS IN A FIDUCIARY CAPACITY IS ALSO LIABLE TO BE REJECTED. I N THIS KIND OF FACTUAL SITUATION, IN OUR VIEW, THE EXISTENCE OR ABSENCE OF PROFIT ELEMENT IN THE POLISHING WORKS DOES NOT MAKE ANY DIFFERENCE. 7.2 THE LD COUNSEL, BY PLACING RELIANCE ON THE DEC ISION OF SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING AND TRANSPORTS (SUPRA) CONTENDED THAT THE PROVISIONS OF SEC. 40(A)(IA) SHA LL APPLY ONLY TO AMOUNT PAYABLE AND NOT TO THE AMOUNT PAID. HOWEVER, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDAR KHAN N TUNVAR (357 ITR 312) AND THE HON'BLE CALCUTTA HIGH COURT I N THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013) HAV E HELD THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF MERYLINE SHIPPING & TRANSPORTS IS NOT A GOOD LAW. THE LD A.R , HOWEVER, PLACED RELIANCE ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (357 ITR 642). ON A CAREFU L PERUSAL OF THE DECISION GIVEN BY HON'BLE ALLAHABAD HIGH COURT, WE NOTICE THAT THE HIGH COURT HAS DECIDED THE ISSUE REFERRED TO IT ON A DIFFERENT FOOTING AND HAS MADE A PASSING COMMENT ABOUT THE DECISION R ENDERED BY THE SPECIAL BENCH. THUS, THE RATIO OF THE SAID DECISION IS DIFFERENT FROM THAT RENDERED IN THE CASE OF MERYLINE SHIPPING AND TRANS PORTS BY THE SPECIAL BENCH. HENCE, WE ARE INCLINED TO REJECT THE CONTENTIONS OF THE ASSESSEE ON THIS POINT ALSO. 7.3 THE ASSESSEE PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO -COLA BEVERAGES LTD (SUPRA) IN ORDER TO CONTEND THAT THE REVENUE IS NOT ENTITLED TO RECOVER TAXES, IF THE RECIPIENT HAS DEC LARED THE PAYMENTS IN HIS RETURN OF INCOME. WE NOTICE THAT THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SEC. 2 01(1) AND HENCE, WE ARE OF THE VIEW THAT THE RATIO OF THE SAID DECISION CANNOT BE APPLIED TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT, 7.4 THE LAST CONTENTION OF THE ASSESSEE IS THAT TH E SECOND PROVISO TO SEC, 40(A)(IA) OF THE ACT, INSERTED BY T HE FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 IS CLARIFICATORY IN NATUR E AND HENCE THE BENEFIT OF THE SAME SHOULD BE APPLIED RETROSPECTIVE LY. HOWEVER, THE CORRECTNESS OF THIS CONTENTION HAS NOT BEEN EXAMINE D BY THE TAX AUTHORITIES. HENCE, IN THE INTEREST OF NATURAL JUST ICE, WE ARE OF THE VIEW THAT THIS CONTENTION OF THE ASSESSEE REQUIRES EXAMI NATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD.CIT(A) AND SET ASIDE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ABOVE SAID CONTEN TION OF THE ASSESSEE AND DECIDE THE SAME IN ACCORDANCE WITH LAW , AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. WE MAKE IT C LEAR THAT WE HAVE, IN EFFECT, REJECTED ALL THE CONTENTIONS OF THE ASSE SSEE EXCEPT THE ITA NO.356/PN/2014 A.Y. 2006-07 GROUND RELATING TO APPLICABILITY OF THE SECOND PROV ISO TO SEC.40(A)(IA) OF THE ACT TO THE YEAR UNDER CONSIDERATION. 8.3 SINCE THE ABOVE ARGUMENTS ARE BEING ADVANCED BE FORE THE TRIBUNAL FOR THE FIRST TIME AND THE CORRECTNESS OF THE CONTENTION HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES, THEREFORE, RESPECT FULLY FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL CITED (SUPRA) A ND IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ABOVE CONTENTION OF THE ASSESSEE AND DE CIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE A SSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 10. AS A RESULT OF THE AFORESAID DISCUSSION, THE SE COND GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 28 TH APRIL, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE