The DCIT, Circle-1(2), Baroda V. M/s. The Baroda Central Co. Op. Bank Ltd., Baroda

ITA 365/AHD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4222 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 365/AHD/2017 ( ASSESSMENT YEAR : 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX, CIR-1(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA / VS. M/S. THE BARODA CENTRAL CO OP BANK LTD., STATION ROAD, SAYAJIGUNJ, BARODA - 390005 ./ ./ PAN/GIR NO. : AAAAT1335N ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MUDIT NAGPAL, SR. D.R. / RESPONDENT BY : NONE DATE OF HEARING 16/10/2018 !'# / DATE OF PRONOUNCEMENT 01/11/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-4, VADODARA (CIT(A) IN SHORT), DATED 09 .09.2016 ARISING IN THE ASSESSMENT ORDER DATED 16.02.2016 PASSED BY THE ASSESSING ITA NO.365/AHD/17 [DCIT VS. M/S. THE BARODA CENTRAL CO OP BANK LTD.] A.Y. 2013-14 - 2 - OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- 01. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN ALLOWING THE APPEAL OF T HE ASSESSEE, I.E. ON THE ISSUE OF INTEREST ON NPAS IS NOT TAXABLE ON ACCRUAL BASIS, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS FOLLOWIN G HYBRID METHOD OF ACCOUNTING BY TREATING ALL OTHER INCOME EXCEPT INTE REST ON NPAS ON ACCRUAL BASIS. 02. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN LAW IN ALLOWING THE APPEAL OF T HE ASSESSEE, I.E. ON THE ISSUE OF DISALLOWANCE U/S 14A RWR 8D OF THE RULE, W ITHOUT APPRECIATING THE FACT THAT THE AO HAS RIGHTLY JUSTIFIED IN MAKING SU CH DISALLOWANCE 14A RWR 8D OF THE I.T. ACT. 3. THE FIRST ISSUE CONCERNS ADDITION ON ACCOUNT OF INTEREST ON NON- PERFORMING ASSETS (NPA) ON ACCRUAL BASIS. 4. RULE 6EA R.W.S. 43D PROVIDES FOR APPROVAL OF INT EREST INCOME FOR PUBLIC FINANCIAL INSTITUTIONS, SCHEDULED BANKS, STATE FINANCIAL CORPORATIONS AND STATE INDUSTRIAL CORPORATION FOR T AXATION OF INTEREST INCOME FROM NON-VIABLE OR STICKY LOANS DEFINED UNDE R THE RULE ONLY ON RECEIPT AND NOT ON ACCRUAL BASIS. IT IS THE LAW, W HICH WAS APPLIED IN FAVOUR OF THE ASSESSEE BY THE HONBLE HIGH COURT IN PR.CIT VS. SARANGPUR CO-OPERATIVE BANK LTD. (2018) 406 ITR 302 (GUJ) FOLLOWING PR.CIT VS. SHRI MAHILA SEWA SAHAKARI BANK LTD. [2017] 395 ITR 324 (GUJ). WE ARE CONSCIOUS THAT SPECIAL LEAVE PETITION BY THE DEPARTMENT HAS BEEN GRANTED BY THE HONBLE SUPREME COURT AGAINST THIS JUDGMENT AS REPORTED IN (2018) 401 ITR (ST.) 1 64. HOWEVER, IN ITA NO.365/AHD/17 [DCIT VS. M/S. THE BARODA CENTRAL CO OP BANK LTD.] A.Y. 2013-14 - 3 - THE LIGHT OF POSITION OF LAW ENUNCIATED BY THE HON BLE HIGH COURT HOLDING THE FIELD, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). 5. IN THE RESULT, GROUND NO.1 OF THE REVENUE IS DIS MISSED. 6. GROUND NO.2 CONCERNS DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE UNDER THE ACT. 7. THE QUESTION THAT ARISES FOR DETERMINATION IS WH ETHER SECTION 14A IS APPLICABLE WHEN THE ASSESSEE HAS NOT ACTUALL Y RECEIVED ANY EXEMPT INCOME DURING THE YEAR FROM ASSETS CAPABLE O F YIELDING TAXABLE INCOME. IN THIS REGARD, WE TAKE NOTE OF THE CBDT C IRCULAR NO.5/2014 DATED 11.02.2014 WHICH SEEKS TO EMPHASIZE THAT ALL EXPENSES PERTAINING TO AN EXEMPT INCOME IS REQUIRED TO BE DI SALLOWED NOTWITHSTANDING THE FACT THAT NO CORRESPONDING TAX FREE INCOME HAS BEEN EARNED DURING THE FINANCIAL YEAR. HOWEVER, DE SPITE THE CIRCULAR, VARIOUS COURTS HAVE HELD THAT SECTION 14A DISALLOWA NCE COULD NOT BE KICKED IN WHERE THERE WAS NO EXEMPT INCOME EARNED B Y THE ASSESSEE. HONBLE DELHI HIGH COURT IN PCIT VS IL&FS ENERGY DE VELOPMENT COMPANY LTD. (2017) 84 TAXMAN.COM 186(DELHI) AND TH E HONBLE MADRAS HIGH COURT IN CIT V. CHETTINAD LOGISTICS (P. ) LIMITED (2017) 80 TAXMANN.COM 221(MADRAS) HAVE EXPRESSED A CLEAR D ISAGREEMENT WITH CBDT CIRCULAR AND HELD THAT WHERE THERE IS NO EXEMPT INCOME IN RELEVANT YEAR THERE CANNOT BE A DISALLOWANCE OF EXP ENDITURE UNDER S.14A OF THE ACT. SIMILAR PROPOSITION HAS BEEN LAI D DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY (P.) LTD (2014) 45 TAXMANN.COM. 116 (GUJ) AND PR.CIT VS. IND IA GELATINE AND CHEMICALS LTD. (2016) 66 TAXMANN.COM 356 (GUJ). IN VIEW OF THE JUDICIAL FIAT AVAILABLE IN THIS REGARD, WE DO NOT F IND ANY INFIRMITY IN ITA NO.365/AHD/17 [DCIT VS. M/S. THE BARODA CENTRAL CO OP BANK LTD.] A.Y. 2013-14 - 4 - THE ORDER OF THE CIT(A). THEREFORE, WE CONCUR WITH THE ACTION OF THE CIT(A) AND DECLINE TO INTERFERE. 8. IN THE RESULT, GROUND NO.2 OF THE REVENUES APPE AL IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 01/11/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 01/11/20 18