The Sindhudurg Dist Central Co.op Bank Ltd, Sindhudurg V. Assistant Commissioner of Income-tax, Circle - 2, Kolhapur

ITA 378/PUN/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0906 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VITTHAL BHOSALE
• Keywords: Question of law
• Section: 43D; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO , AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / ITA NO . 378 /PUN/20 1 8 / ASSESSMENT YEAR : 20 13 - 14 THE SINDHUDURG DIST. CENTRAL CO - OP. BANK LTD., S.V. PHADNIS C.A. / SUSHANT S. PHADNIS 613 E WARD, PHADNIS CHAMBERS, SHAHUPURI, 1 ST LANE, KOLHAPUR 416001 PAN: AABAT4262F ....... / APPELLANT / V/S. THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 2, KOLHAPUR. / RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI VITTHAL BHOSALE / DATE OF HEARING : 1 4 - 0 7 - 20 2 1 / DATE OF PRONOUNCEMENT : 14 - 0 7 - 202 1 / ORDER PER BENCH : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT ( A ) - 2 , KOLHAPUR , DATED 1 1 .0 1 .201 8 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE BANK AND FILED ITS RETURN OF INCOME FOR THE YEAR ON 29.09.2013 DECLARING INCOME OF RS.4,69,16,781/ - . THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE WHY THE CONTINGENT PROVISION MADE OF RS.21,59,765/ - SHOULD NOT BE DISALLOWED 2 ITA NO. 378 /PUN/20 1 8 ON THE GROUND THAT IT IS MERELY A PROVISION. THE ASSESSEE SUBMITTED HIS REPLY STATING THAT THE SAID PROVISION WAS MADE AS PER RBI GUIDELINES AND THEREFORE, IT WAS ALLOWABLE. HOWEVER, THE AO HAS DISAGREED WITH THE SUBMISSIONS OF ASSESSEE HOLDING THAT THE CBDT CIRCULAR NO.17/2008 IS AGAINST THE ASSESSEE AND ALSO NOTED THAT IN THE ASSESSEES OWN CASE FOR A.Y. 2007 - 08, THE PUNE BENCH OF TRIBUNAL HAD UPHELD THIS DISALLOWANCE. THE ASSESSEE CHALLENGED THE SAME BEFORE THE LD. CIT(A). THE LD. CIT(A) DISMISSED TH E APPEAL OF ASSESSEE, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, SINCE THE ISSUE BEING COVERED, WE ARE DISPOSING OF THIS APPEAL AFTER HEARING LD. DR. 4. AFTER PERUSING THE MATERIAL ON RECORD, IT IS OBSERVED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. SOLAPUR DISTRICT CENTRAL CO - OP. BANK LTD. , 428 ITR 306. THE HONBLE BOMBAY HIGH COURT RELYING ON THE DECISION IN CASE OF (I) CIT V. SHOORJI VALLABAHDAS & CO. [1962] 46 ITR 144 (SC), (II) PR. CIT V. SHRI MAHILA SEWA SAHAKARI BANK LTD. [2017] 395 ITR 324/[2016] 242 TAXMAN 60/72 TAXMANN.COM 117 (GUJ.), (III) PR. CIT V . SARANGPUR CO - OPERATIVE BANK LTD. [2018] 406 ITR 302/258 TAXMAN 230/97 TAXMANN.COM 304 (GUJ.) AND (IV) PR. CIT V. LUDHIANA CENTRAL CO - OPERATIVE BANK LTD. [2018] 99 TAXMANN.COM 81 (PUNJ. & HAR.) ON THE ISSUE OF TAXABILITY OF INTEREST ON THE NON - PERFORMING ASSETS HELD AS FOLLOWS : - THE ISSUE IS SQUARELY COVERED BY THE JUDGMENTS OF GUJARAT HIGH COURT AND PUNJAB & HARYANA HIGH COURTS. THE GUJARAT HIGH COURT IN CASE OF PR. CIT V. SHRI MAHILA SEWA SAHAKARI BANK LTD. [2017] 395 ITR 324/[2016] 242 TAXMAN 60/72 TAX MANN.COM 117 HAD UNDERTAKEN THE DETAILED EXERCISES TO EXAMINE AN IDENTICAL SITUATION. THE COURT 3 ITA NO. 378 /PUN/20 1 8 HELD THAT THE COOPERATIVE BANKS WERE ACTING UNDER THE DIRECTIVES OF THE RESERVE BANK OF INDIA WITH REGARD TO THE PRUDENTIAL NORMS SET OUT. THE COURT WAS OF THE OPINION THAT TAXING INTEREST ON NPA CANNOT BE JUSTIFIED ON THE REAL INCOME THEORY. THE DECISION OF THE GUJARAT HIGH COURT IN SHRI MAHILA SEWA SAHAKARI BANK LTD., (SUPRA) WAS CARRIED IN APPEAL BY THE REVENUE TO THE SUPREME COURT AND SUCH APPEAL WAS DISMISSE D. [PARA 5]. THE COURT CONCLUDED IN CASE OF PR. CIT V. LUDHINA CENTRAL CO - OPERATIVE BANK LTD. [2018] 99 TAXMANN.COM 81 CONCLUDED THAT THE TRIBUNAL WHILE RELYING UPON THE VARIOUS PRONOUNCEMENTS HAD CORRECTLY DECIDED THE ISSUE REGARDING TAXABILITY OF INTERES T ON NPA IN FAVOUR OF THE ASSESSEE AS BEING TAXABLE IN THE YEAR OF RECEIPT; THE TRIBUNAL HAD UPHELD THE DELETION MADE BY THE CIT(A) ON ACCOUNT OF ADDITION OF RS.3,02,82,000 REGARDING INTEREST ACCRUED ON NPA AND THAT THERE WAS NO ILLEGALITY OR PERVERSITY IN THE AFORESAID FINDINGS RECORDED BY THE TRIBUNAL. [PARA 6]. THE ISSUE IS THUS, COVERED BY THE DECISIONS OF TWO HIGH COURTS. AGAINST THE JUDGMENT OF THE GUJARAT HIGH COURT, THE APPEALS HAVE BEEN DISMISSED BY THE SUPREME COURT. THUS, THE SUPREME COURT CAN BE SEEN TO HAVE APPROVED THE DECISION OF THE GUJARAT HIGH COURT. THEREFORE, THERE IS NO REASON TO ENTERTAIN THESE APPEALS, SINCE NO QUESTION OF LAW CAN BE STATED TO HAVE ARISEN. [PARA 7]. FOR THE REFERENCE, IT MAY ALSO BE NOTICED THAT SUBSEQUENTLY, LEGISLATU RE HAS AMENDED SECTION 43D. SECTION 43D ESSENTIALLY PROVIDES FOR CHARGING OF INTEREST ON ACTUAL BASIS IN CASE OF CERTAIN SPECIAL CIRCUMSTANCES, IN THE HANDS OF THE PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANIES ETC. EXPLANATION TO SECTION 43D DEFINES CERT AIN TERMS FOR THE PURPOSE OF SAID SECTION. CLAUSE (G) WAS INSERTED IN THE SAID EXPLANATION BY FINANCE ACT, 2016 WHICH PROVIDES THAT FOR THE PURPOSE OF SUCH SECTION, COOPERATIVE BANKS, PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY AGRICULTURAL AND RURAL D EVELOPMENT BANK SHALL HAVE MEANINGS RESPECTIVELY ASSIGNED IN EXPLANATION TO SUB - SECTION 4 OF SECTION 80B. BY VIRTUE OF SUCH INSERTION, THE COOPERATIVE BANKS WOULD GET THE BENEFIT OF SECTION 43D. ONE WAY OF LOOKING AT THIS AMENDMENT, CAN BE THAT, THE SAME I S CURATIVE IN NATURE AND WOULD, THEREFORE, APPLY TO PENDING PROCEEDINGS, NOTWITHSTANDING THE FACT THAT, THE LEGISLATURE HAS NOT MADE THE PROVISION RETROSPECTIVE. [PARA 7]. AS PER THE MEMORANDUM EXPLAINING THE PROVISION, THE INSERTION OF CLAUSE (G) TO THE EXPLANATION WAS TO PROVIDE FOR A LEVEL PLAYING FIELD TO THE COOPERATIVE BANKS. THIS MAY BE ONE MORE INDICATION TO HOLD A BELIEF THAT, THE LEGISLATURE IN ORDER TO ADDRESS A PIQUENT SITUATION AND TO OBVIATE UNINTENDED HARDSHIP TO THE ASSESSEE, HAS INTRODUCED THE AMENDMENT. HOWEVER, IN THE PRESENT CASE, THERE IS NO NEED TO CONCLUDE THIS ISSUE AND LEAVE IT TO BE JUDGED IN APPROPRIATE PROCEEDINGS. [PARA 8] 5 . THE RATIO OF ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLAPUR DISTRICT CENTRAL C O - OP. BANK LTD. (SUPRA) IS SUBSEQUENTLY FOLLOWED BY THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF BHIND DISTRICT CO - OPERATIVE CENTRAL BANK LTD. V S. INCOME - TAX DEPARTMENT , 429 4 ITA NO. 378 /PUN/20 1 8 ITR 121 AND THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V S . TIRUCHIRA PALLI DISTRICT CENTRAL CO - OPERATIVE BANK LTD. , 429 ITR 127 AND ALSO THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V S . DAVANGERE DISTRICT CENTRAL CO - OPERATIVE BANK LTD., 430 ITR 29. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE OF TAXABILITY OF INTEREST ON THE NON - PERFORMING ASSETS. THEREFORE, THE RATIO LAID DOWN IN THE ABOVE DECISIONS CLEARLY APPLICABLE TO THE FACTS OF PRESEN T CASE. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE. THUS, THE GROUND S RAISED BY THE ASSESSEE ARE ALLOWED . 6 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 4 T H JU LY , 20 2 1 . SD/ - SD/ - ( INTURI RAMA RAO ) ( PARTHA SARATHI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 1 4 T H JULY , 20 2 1 GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT 3. THE CIT (APPEALS) - 2 , KOLHAPUR . 4. THE PR. CIT - 2 , KOLHAPUR . 5. DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / SR. PRIVATE SECRETARY , / ITAT, PUNE