DCIT, AKOLA CIRCLE, Akola V. THE MALKAPUR URBAN CO-OP. BANK LTD., MALKAPUR

ITA 388/NAG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3103 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3); 145

Judgement Text

1 ITA NO. 388/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 388/NAG/2014 ASSESSMENT YEAR : 2010 - 11. DY. COMMISSIONER OF INCOME - TAX, THE MALKAPUR URBAN CO - OP. AKOLA CIRCLE, AKOLA. VS. BANK LTD., MALKAPUR. PAN AAALT 0274F (APPELLANT) (RESPONDENT) APPELLANT BY : S MT. ANITA RUPAVATARAM. RESPONDENT : NONE. DATE OF HEARING : 02 - 12 - 2015. DATE OF PRONOUNCEMENT : 26 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 18 - 06 - 2014 . REVENUE HAS RAISED THE FOLLOWING G ROUNDS : 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT IN VIEW OF THE CBOT CIRCULAR DATED 09.10.1984, THE INTEREST ON NPAS WHICH WERE OUTSTANDING FOR MORE THAN 3 YEARS WAS NOT TAXABLE AND CONSEQUENTLY THE LD . CIT(A) ERRED IN ALLOWING THE RELIEF TO THE EXTENT OF RS.178.36 LACS SUBJECT TO THE FURTHER VERIFICATION BY THE A O ; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE BENEFIT OF THE CBOT CIRCULAR DATED 09.10.1984 WAS AVAILABLE TO THE NON - SCHEDULED BANKS CARRYING ON THE BUSINESS UNDER THE LICENSE ISSUED BY THE RBI; 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT APPRECIATING THE CHANGED POSITION OF THE LAW THAT T HE SAID CB D T CIRCULAR HAD BECOME REDUNDANT IN VIEW OF THE SPECIFIC AMENDED PROVISION SEC . 43 D ABOUT TAXABILITY OF THE ACCRUED INTEREST ON NPA'S EITHER ON RECEIPT OR CREDIT BASIS AND AMENDED PROVISIONS OF SEC . 14S(1) PRESCRIBING EITHER MERCANTILE OR CASH SYSTEM OF ACCOUNTING STATUTORILY TO BE FOLLOWED BY THE HYBRID SYSTEM OF ACCOUNTING WAS NO MORE AVAILABLE TO THE ASSESSEE; 2 ITA NO. 388/NAG/2014 4. THE LD. CIT (A) OUGHT TO HAVE APPRECIATED THE AMENDED POSITION OF LAW THAT THE SPECIFIC PROVISIONS WERE INTRODUCED IN SEC . 36(1) OF THE LT. 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 HON'BLE LUCKNOW ITAT BENCH DECISION IN THE CASE OF MLS HAMIRPUR DISTRICT CO - OPER ATIVE BANK LTD. VS. DCIT(25 TAXMAN 306) WHEREIN ON SIMILAR FACTS. THE HON'BLE ITAT HAS HELD THAT THE ACCRUED INTEREST ON NPAS WAS BASED UPON THE HON'BLE SC JUDGMENT IN THE CASE OF MLS SOUTHERN TECHNOLOGIES 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 NPA'S W.EJ. A.Y.2008 - 09 ONWARD FOR THE ONLY REASON THAT SUCH INTEREST INCOME HAD BECOME TAXABLE DUE TO WITHDRAWAL OF THE DEDUCTION UL S 80P TO THE CO - OPERATIVE BANK W.EJ. A.Y.2007 - 08 ONWARDS. HENCE THE CHANGES OF SYSTEM OF ACCOUNTING WAS NOT BONAFIDE; 2. AS PER THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) DATED 20 TH MARCH, 2013 FOR THE ASSESSMENT YEAR 2010 - 11 IT WAS NOTICED BY THE AO THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND ENGAGED IN BANKING ACTIVITIES. ON PERUSAL OF THE TAX AUDIT REPORT, THE AO HAD MADE AN OBSERVATION THAT THE ASSESSEE HAD NOT CREDITED INTERE ST ACCRUED ON NPA. A SHOW CAUSE NOTICE WAS ISSUED TO EXPLAIN AS TO WHY THE INTEREST ACCRUED ON NPA WAS NOT TAXABLE FOR THE YEAR UNDER CONSIDERATION. FURTHER THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAD MAINTAINED THE ACCOUNTS AS PER MERCANTILE SYS TEM OF ACCOUNTING. AFTER A DETAILED DISCUSSION AND IN THE LIGHT OF THE ACCOUNTS OF THE ASSESSEE IT WAS FOUND THAT DURING THE YEAR THE ASSESSEE HAD CREDITED A NET AMOUNT OF RS.4,48,35,364/ - TO THE OVER DUE INTEREST RESERVE ACCOUNT WHICH WAS NOT CREDITED T O THE P&L ACCOUNT. THE SAID AMOUNT WAS DIRECTLY TRANSFERRED TO INTEREST OVERDUE RESERVE AND REFLECTED IN THE BALANCE SHEET. THE AO HAS THEREUPON MADE A CONCLUSION THAT THE INTEREST HAD ACCRUED DURING THE YEAR UNDER CONSIDERATION, THEREFORE, REQUIRED TO B E TAXED IN THE HANDS OF THE ASSESSEE. ACCORDINGLY THE SAID AMOUNT WAS TAXED AS ACCRUED INTEREST ON NPA. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAD MADE AN OBSERVATION IN RESPECT OF THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IN THE LIGHT OF THE CBDT CIRCULAR NO. 201 DATED 09 - 10 - 3 ITA NO. 388/NAG/2014 1984 AS WELL AS THE ACCOUNTING NORMS ISSUED BY R.B.I. LEARNED CIT(APPEALS) HAS ALSO REFER RED THE DECISION OF M/S SOUTHERN TECHNOLOGIES LTD. 320 ITR 577 (SC). FINALLY IT WAS HELD AS UNDER : 9.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. AS POINTED OUT BY THE APPELLANT IT IS OBSERVED THAT ON IDENTICAL FACTS, MY LEARNED PREDECESSORS HAVE DECIDED THE ISSUES VIDE ORDER NO. CIT(A) - I/013/09/10 DATED 05 - 07 - 2010 FOR AY 2007 - 08 AN D VIDE ORDER NO. CIT(A) - 1/339/2011 - 12 DATED 15.11.2012 IN AKOLA DISTRICT CO - OPERATIVE BANK FOR A.Y. 2009 - 10 HOLDING THAT THE ADDITION ON INTEREST ON NPA IS REQUIRED TO BE MADE IN ACCORDANCE WITH BOARDS CIRCULAR DATED 09.10.1984. 9.2 IN VIEW OF THE BOARDS CIRCULAR DATED 09.10.1984, THE APPELLANT WAS REQUIRED TO FILE THE CLASSIFICATION/DETAILS OF SUCH DEBTS/NPAS, IN TERMS OF THE AGE OF DEBTS, TO ASCERTAIN THE QUANTUM OF INTEREST ATTRIBUTABLE TO SUCH NPAS WHICH HAVE BECOME IRRECOVERABLE OR NO RECOVERY FOR TH REE CONSECUTIVE ACCOUNTING YEARS COULD BE MADE BY THE APPELLANT WITH A VIEW TO BRING THE INTEREST ACCRUED ON SUCH NPAS WITHIN THE AMBIT OF TAXABILITY, AS ENVISAGED IN THE BOARDS CIRCULAR. 9.3 CONSIDERING THE FACTS OF THE PRESENT CASE, IT WOULD BE NECESSAR Y TO COMPUTE THE INCOME THAT IS TO BE BROUGHT TO TAX BEING INTEREST ON CERTAIN AMOUNT CLASSIFIED AS NPA IN VIEW OF THE BOARDS ABOVE REFERRED CIRCULAR DATED 09.10.1984. THE AR OF THE APPELLANT ON 21.05.2014 HAS PROVIDED THE BIFURCATION OF THE INTEREST ACCR UED 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 : SUMMARY 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 8,64,26,734/ - 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 TO BE TAXED AS INTEREST CHARGED BUT NOT RECEIVED ON SUC H NPAS WHICH FALLS WITHIN THE 4 ITA NO. 388/NAG/2014 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 LIBERTY TO VERIFY THE VERACITY OF THE FIGURES PROVIDED B Y THE APPELLANT WHILE GIVING EFFECT IN VIEW OF THE FINDING GIVEN ABOVE TAKING INTO CONSIDERATION THE BOARDS CIRCULAR DATED 09.10.1984. THIS GROUND IS PARTLY ALLOWED. 4. IN THE LIGHT OF THE ABOVE BACKGROUND WE HAVE PERUSED THE RECORDS . AT THE OUTSET WE HAVE FOUND THAT ON IDENTICAL FACTS AND CIRCUMSTANCES, THIS VERY TRIBUNAL HAS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE FOLLOWING VARIOUS JUDICIAL PRONOUNCEMENTS ALREADY MADE ON THIS ISSUE. IN ONE OF SUCH ORDER OF THE TRIBUNAL, NAMELY , DCIT VS. WASHIM URBAN COOPERATIVE BANK, ITA NO. 233/NAG/2013 ASSESSMENT YEAR 2009 - 10, ORDER DATED 5 TH JUNE, 2015 WHEREIN A VIEW WAS EXPRESSED AS UNDER : 6. IN THE LIGHT OF THE ABOVE FACTUAL AND LEGAL ARGUMENTS RAISED BEFORE US, WE HAVE TO ADDRESS THE CONTROVERSY THAT WHETHER THE ASSESSEE IS ELIGIBLE FOR THE EXCEPTION AS PRESCRIBED UNDER SECTION 43D OF I.T. ACT. AT THE OUTSET, WE MAY LIKE TO REFER THE DECISIO N OF KARNAVATI CO - OP BANK LTD. 114 ITR (TRIB.) 175 (AHM) WHEREIN THE ISSUE WAS IDENTICAL THAT WHETHER INTEREST ON ACCRUAL BASIS IN RESPECT OF NON PERFORMING ASSETS (NPA) OF A COOPERATIVE BANK ARE TO BE TAXED OR NOT. IT WAS HELD THAT IN A SITUATION WHEN THE ASSESSEE IS A COOPERATIVE BANK, HOWEVER, GOVERNED BY RBI GUIDE LINES THEN THE PROVISIONS OF SECTION 43D IS TO BE APPLIED. EVEN THE ITAT, PUNE BENCH IN THE CASE OF OMERGA JANTA SAHAKARI BANK LTD. 166 TTJ 375 HAS HELD THAT THE ASSESSEE, A COOPERATIVE BANK, OPERATING UNDER THE LICENSE FROM RBI AND GOVERNED BY THE CIRCULARS OF RESERVE BANK OF INDIA IS ENTITLED FOR RELIEF. ON THE BASIS OF THOSE CIRCULARS, THE SAID COOPERATIVE BANK HAD NOT ACCOUNTED FOR THE INTEREST INCOME OF NPA. IT WAS HELD THAT INTEREST INCO ME RELATABLE TO NPA WAS NOT INCLUDIBLE ON ACCRUAL BASIS SINCE THE INTEREST INCOME HAD NOT ACCRUED TO THE ASSESSEE IN THAT PERIOD. BOTH THE TRIBUNALS HAVE ALSO DISCUSSED A DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF SOUTHERN TECHNOLOGIES LTD . 320 ITR 577 (SC). THE HONBLE COURT HAS EXPRESSED THAT IN ESSENCE RBI DIRECTIONS WERE PRUDENTIAL NORMS ISSUED WHICH DEALS ESSENTIALLY IN RESPECT OF RECOGNITION OF INCOME. THE GUIDELINES WERE IN RESPECT OF NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FI NANCIAL ACCOUNTS. BY VIRTUE OF SECTION 45Q AN OVERRIDING EFFECT IS GIVEN TO SAID DIRECTIONS VIS - A - VIS PRINCIPLES OF INCOME RECOGNITION. THE HONBLE COURT HAS OBSERVED THAT 5 ITA NO. 388/NAG/2014 THE ACCOUNTING POLICIES ADOPTED BY NBFC CANNOT DETERMINE THE TAXABILITY OF INCOME. IT WAS HELD THAT THE ASSESSING OFFICER HAS TO CONSIDER THE DIRECTIONS OF RESERVE BANK OF INDIA AS PER SECTION 45Q OF RESERVE BANK OF INDIA ACT AND EXAMINE THE ISSUE AS PER THE PRUDENTIAL NORMS ISSUED BY RBI IN CONNECTION WITH THE INCOME RECOGNITION OF A BANK. THE COURT HAS ALSO COMMENTED THAT IN SUCH A SITUATION THE PROVISIONS OF SECTION 145 HAD NO ROLE TO PLAY. 7. THEREFORE, WE HEREBY CONCLUDE THAT IN A SITUATION WHEN THE BENCHES OF THE TRIBUNAL HAVE FOLLOWED THE DECISIONS OF HONBLE HIGH COURTS AND HON BLE SUPREME COURT, THEREFORE, THE DECISION OF ITAT, LUCKNOW BENCH BEING ON DIFFERENT FACTS IS NOT APPLICABLE ON THE FACTS OF THIS CASE, SPECIALLY WHEN THE RESPECTED COORDINATE BENCH LUCKNOW (HAMIRPUR DIST. COOPERATIVE BANK 148 ITR 233) HAS ALSO ENDORSED THE VIEW OF SOUTHERN TECHNOLOGIES (SUPRA), AS PER THE FOLLOWING OBSERVATIONS: ACCRUAL (OR OTHERWISE) OF AN INCOME (OR EXPENDITURE) IS MATTER OF FACT, TO BE DECIDED SEPARATELY FOR EACH CASE, ON THE BASIS OF THE ASSESSMENT OF THE OBTAINING FACTS AND CIRCUM STANCES. THE SAME CANNOT BE STATED AS AN ACCOUNTING POLICY WHICH BY ITS VERY NATURE IS TO BE APPLIED UNIFORMLY, EXCEPT WHERE IT IS STATED IN BROAD TERMS, BEARING THE NECESSARY INGREDIENTS OF THE QUALIFYING CRITERION, I.E. EXISTENCE OF A REASONABLE CERTA INTY AS TO ULTIMATE REALIZATION AT THE TIME OF RAISING THE CLAIM OR EVEN AS AT THE END OF THE ACCOUNTING PERIOD. CLEARLY, THE SAME WOULD REQUIRE AN ASSESSMENT OF THE RELEVANT FACTS, AND INCOME TO THAT EXTENT SHALL NOT BE RECOGNIZED UNLESS THERE IS REASONA BLE CERTAINTY OF REALIZATION. THE SAME WOULD NECESSARILY REQUIRE EXAMINATION OF THE FACTS AND CIRCUMSTANCES OF EACH CASE, AND TAKING A DECISION HAVING REGARD THERETO. THIS STANDS ENDORSED BY THE HONBLE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD . (SUPRA). THE ADOPTED ACCOUNTING POLICY, I.E., RECOGNIZING INCOME ON NPA ACCOUNTS ONLY SUBJECT TO REALIZATION, DOES NOT SERVEAS A VALID QUALIFYING CATEGORY AS THERE COULD BE OTHER MITIGATING FACTORS, MAKING IT REASONABLE TO EXPECT REALIZATION DESPITE THE ACCOUNT BEING A NPA. FURTHER, ON FACTS, IT IS FOUND THAT THERE HAS BEEN IN FACT RECOGNITION OF INCOME, AND THE ASSESSEES CLAIM IS ONLY QUA PROVISION FOR BAD AND DOUBTFUL DEBTS WITH REFERENCE TO TOTAL ASSETS, INCLUDING THE INTEREST INCOME BOOKED AND DEBITED TO THE ACCOUNT OF RESPECTIVE BORROWER, AND QUA WHICH THE ASSESSEE IS ENTITLED TO AND HAS CLAIMED DEDUCTION U/S 36(1)(VIIA) 8. AN ORDER OF ITAT, AHMEDABAD BENCH HAS ALSO BEEN CITED BEFORE US PRONOUNCED IN THE CASE OF KARNAVATI COOPERATIVE BANK 144 TTJ 769 (AHD) 6 ITA NO. 388/NAG/2014 WHEREIN THE IDENTICAL ISSUE HAS BEEN DEALT WITH AT LENGTH AND THE CBDT INSTRUCTIONS HAVE ALSO BEEN CONSIDERED. IT IS ALSO WORTH TO MENTION THAT IN THIS DECISION AS WELL THE CASE OF SOUTHERN TECHNOLOGIES 320 ITR 577 (SC) HAS BEEN DISCUSSED AN D FOLLOWED. WE HAVE ALSO NOTED THAT THE DECISION OF U.CO. BANK 237 ITR 889 (SC) WAS ALSO DISCUSSED FOR THE LEGAL PROPOSITION THAT A BENEFICIAL CIRCULAR IS NOT TO BE TREATED AS INCONSISTENT WITH THE PROVISIONS OF STATUTE AND BINDING ON THE AUTHORITIES. ACCO RDING TO THE HONBLE COURT, THE INTEREST IN RESPECT OF STICKY ADVANCES ARE TO BE TAXED ONLY WHEN ACTUALLY RECEIVED AS PRESCRIBED BY CBDT CIRCULAR. 8.1 THERE IS ONE MORE DECISION OF ITAT, BENGALORE BENCH - B, BENGALORE BEARING ITA NO.1528/BANG/1013 ASSTT. Y EAR 2009 - 10 ORDER DATED 13 TH OF FEB., 2015 PRONOUNCED IN THE CASE OF ACIT V/S. BAGALKOT DISTRICT CENTRAL COOPERATIVE BANK WHEREIN IT WAS HELD THAT THE COOPERATIVE BANK BEING GOVERNED BY RBI GUIDELINES, THE PROVISIONS OF SECTION 43D OF THE ACT ARE ALSO APPL ICABLE TO SUCH COOPERATIVE BANKS AND THERE IS NOTHING IN THE SECTION WHICH MAKES THE INTEREST INCOME OF COOPERATIVE BANK FROM NPAS TAXABLE ON ACCRUAL BASIS. 9. WE, THEREFORE, HOLD THAT THE DECISIONS AS CITED BEFORE US SQUARELY COVER THE ISSUE IN FAVOUR OF THE ASSESSEE. WE HEREBY CONFIRM THE FINDING OF LEARNED CIT(APPEALS) AND DISMISS THIS GROUND OF THE REVENUE. 4.1 LIKEWISE IN THE CASE OF KARNAVATI COOPERATIVE BANK LTD. 144 TTJ 769 (ADH.) THE SAME ISSUE WAS CONSIDERED AND HELD AS UNDER : SEC . 430 IS IN CONTRAST WITH THE FUNDAMENTAL PRINCIPLE OF 1 ACCOUNTANCY. THE CARDINAL PRINCIPLE OF MERCANTILE SYSTEM OF ACCOUNTANCY IS THAT AN INCOME IS TO BE SHOWN IN THE BOOKS OF ACCOUNT ON ACCRUAL BASIS. THE PRINCIPLE IS THAT IT IS IMMATERIAL WHETHER IT W AS ACTUALLY RECEIVED OR NOT, BUT IF AN INCOME IS EXPECTED TO BE RECEIVED, THEN IT SHOULD BE BROUGHT TO BOOKS OF ACCOUNT AS AN INCOME ACCRUED TO THE ASSESSEE. CONTRARY TO THIS RECOGNIZED PRINCIPLE, THIS SECTION HAS PRESCRIBED THAT AN INCOME BY WAY OF IN TEREST SHALL BE CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHICH IT IS CREDITED. THE OTHER DEVIATION FROM THE SAID ACCEPTED PRINCIPLE OF ACCOUNTANCY IS THAT AN INCOME BY WAY OF INTEREST SHALL BE CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHICH IT IS ACTU ALLY RECEIVED. THE ACT SAYS THAT THE INCIDENCE OF 'CREDIT' OR 'ACTUALLY RECEIVED', WHICHEVER IS EARLIER IS TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF CHARGEABILITY OF INCOME BY WAY OF 7 ITA NO. 388/NAG/2014 INTEREST . SIMULTANEOUSLY, IT IS NOTEWORTHY THAT THIS SECTION IS AN OVER RIDING SECTION BECAUSE THE OPENING WORDS ARE 'NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT'.THEREFORE, IN SPITE OF ANYTHING CONTAINED IN THE ACT, THE PROVISIONS OF THIS SECTION SHALL OVERRIDE THOSE PROVISIONS. ONC E THE STATUTE HAS CATEGORICALLY MADE A LAW IN RESPECT OF PUBLIC FINANCIAL INSTITUTIONS THAT INTEREST IS CHARGEABLE TO TAX EITHER IN THE YEAR IN WHICH CREDITED OR ACTUALLY RECEIVED, WHICHEVER IS EARLIER, THEN IT IS COMPULSORY TO ABIDE BY THE SAID RULE. NO SCOPE IS LEFT WITH THE REVENUE AUTHORITIES TO IGNORE THESE PROVISIONS DUE TO UNAMBIGUOUS USE OF LANGUAGE IN THE SECTION . AS FAR AS THE STATUS OF THE ASSESSEE IS CONCERNED, THE AO HAS STATED THAT THE ASSESSEE - BANK IS A CO - OPERATIVE BANK. UNDISPUTEDLY, THE ASSESSEE IS ALSO GOVERNED BY THE RBI GUIDELINES. VIDE AN EXPLN. (D) R/V S. 36(1)(VIIA) ANNEXED TO S. 430 THE DEFINITION OF THE ENTITIES INCORPORATED BY THE SECTION HAVE BEEN DEFINED AND IN THE ABSENCE OF ANY CONTRARY MATERIAL, IT IS HEREBY HELD THAT THE ASSESSEE IS COVERED BY ONE OF THE ENTITIES, HENCE THE PROVISIONS OF S. 430 ARE TO BE APPLIED. NEXT ISSUE IS THAT WHETHER A CIRCULAR HAVING EFFECT OF RELAXING RIGOUR OF LAW CAN BE TREATED AS INCONSISTENT W ITH THE PROVISIONS OF A STATUTE. IN ORDER TO AID PROPER DETERMINATION OF THE INCOME OF MONEYLENDERS AND BANKS, THE CBDT HAS ISSUED A CIRCULAR DT . 6 TH OCT . , 1952, PROVIDING THAT WHERE INTEREST ACCRUING ON DOUBTFUL DEBTS IS CREDITED TO A SUSPENSE ACCOUNT, IT NEED NOT BE INCLUDED IN ASSESSEE'S TAXABLE INCOME, PROVIDED THE ITO IS SATISFIED THAT RECOVERY IS PRACTICALLY IMPROBABLE. THE CBOT UNDER S. 119 HAS POWER TO ISSUE CIRCULARS IN EXERCISE OF ITS STATUTORY POWERS. IF THE BOARD CONSIDERS IT NECESSARY TO LAY DO WN CERTAIN RULES AND THEN DIRECT THE SUB - ORDINATE AUTHORITIES, SUCH DIRECTIONS ARE REQUIRED TO BE FOLLOWED AND SUCH CIRCULAR WOULD BE BINDING ON THE DEPARTMENT UNLESS AND UNTIL HELD AS ULTRA VIRES BY A COURT OF LAW. THE BOARD HAS POWERS TO RELAX THE SEVERITY OR THE STRICTNESS OF LAW AND THE AUTHORITIES ARE REQUIRED TO FOLLOW THOSE INSTRUCTIONS. AS OF NOW THE LAW AS LAID DOWN IS THAT IN TERMS OF CBOT CIRCULAR THE INTEREST IS TO BE ADDED AS INCOME ONLY WHEN ACTUALLY RECEIVED OR CREDITED IN RESPECT OF TH E 'STICKYADVANCES' WHILE MAKING ASSESSMENT FOR A FINANCIAL INSTITUTION. IT CAN SAFELY BE CONCLUDED THAT BY THE INSERTION OF A SPECIAL PROVISION TO TAX INTEREST I NCOME I N THE CASE OF PUBLIC FINANCIAL INSTITUTION, ETC . S. 430 HAS TO BE APPLIED IN ITS LETTER AND SPIRIT . - UN I TED COMMERCIAL BANK VS. CIT (1999 ) 154 CTR (SC ) 88 : (1999) 237ITR 889 (SC), CIT VS. ELGI FINANCE LTD. (2007) 293 ITR 357 (MAD ) AND IT: CIT VS. INDIA EQUIPMENT LEASING LTD . (2007) 293 ITR 350 (MAD ) RELIED ON; 8 ITA NO. 388/NAG/2014 SOUTHERN TECHNOLOGIES LTD. VS . JT . CIT (2010) 228 CTR (SC) 440 : (2010) 34 DTR ( SC) 11 : ( 2010 ) 320 ITR 577 (SC) AND JT . CIT VS . IND I A EQU I PMENT LEAS I NG LTD . (2007 ) 111 TT] ( CHEN N A I) 250 DISTINGUISHED. 4.2 THERE IS ONE MORE DECISION OF ITAT, PUNE BENCH PRONOUNCED IN THE CASE OF ACIT VS. THE OMERGA JANTA SAHAKARI BANK LTD. REPORTED AS 110 DTR 255, ORDER DATED 31 ST OCT., 2015 WHEREIN IT WAS HELD THAT THE ASSESSEE HAD NO LIABILITY TO PAY TAX U/S 43D AS INTEREST INCOME RELATABLE TO NPAS IS NOT INCLUDIBLE IN TOTAL INCOME ON MERCANTILE BASIS TO ASSESSEE. 5. BEFORE WE PART WITH , IT IS WORTH TO MENTION THAT ON THE ISSUE O F DOUBTFUL DEBTS AND THE QUESTION OF ACCRUAL OF INTEREST, A JUDGMENT HAS BEEN PRONOUNCED BY THE HONBLE SUPREME COURT IN THE CASE OF UCO BANK VS. CIT 251 ITR 889 AND IN THAT JUDGMENT AN OLD CBDT CIRCULAR DATED 9 TH OCT., 1984 HAS BEEN DISCUSSED. THE LEGAL PROPOSITION LAID DOWN IN THIS ORDER OF THE HONBLE SUPREME COURT ALSO SUPPORTS THE ABOVE VIEW. 6. THUS CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS RESPECTFULLY FOLLOWING THE PRECEDENTS AS CITED ABOVE, WE HEREBY CONFIRM TH E FINDING OF LEARNED CIT(APPEALS). GROUNDS RAISED BY THE REVENUE ARE HEREBY DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPU R, DATED: 26 TH FEBRUARY, 2016. 9 ITA NO. 388/NAG/2014 COPY FORWARDED TO : 1. THE MALKAPUR URBAN CO - OPERATIVE BANK LTD., DHANSHREE, BULDHANA ROAD, MALKAPUR. 2. D.C.I.T., AKOLA CIRCLE, AKOLA. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR .