Deputy Commissioner of Income-tax, V. The Pune People Co-op. Bank Ltd., Pune

ITA 418/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1651 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 418 /PN/201 6 / ASSESSMENT YEAR : 20 11 - 12 THE JT. COMMISSIONER OF INCOME TAX, RANGE - 4, PUNE . / APPELLANT VS. THE PUNE PEOPLE CO - OP. BANK LTD., 606, SADHASHIV PETH, LAXMI ROAD, PUNE - 411030 . / RESPONDENT PAN: AAAAP6104H / APPELLANT BY : SHRI ANIL CHAWARE / RESPONDENT BY : SHRI SUHAS P. BORA / / / DATE OF HEARING : 04 .0 7 . 201 6 / DATE OF PRONOUNCEMENT: 04 . 0 7 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) , PUNE - 5 , PUNE DATED 2 3 . 12 .20 1 5 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF INTEREST ON NPAS. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ACCRUED INTEREST ON NP A SHOULD BE WORKED AS PER THE PROVISIONS OF SECTION 43D R.W. R . 6EA. THE HONBLE ITAT, PUNE IN ITS ORDER DATED 23.01.2014 OF COSMOS BANK IN ITA NOS.460/461 OF 2012 HAS UPHELD THE STAND OF THE DEPARTMENT THAT THE ACCRUED ITA NO. 418 /PN/20 1 6 THE PUNE PEOPLE CO.OP BANK LTD. 2 INTEREST SHOULD BE WORKED OUT AS PER SECTION 43D R.W.R. 6EA AND ACCORDINGLY BROUGHT TO TAX ON ACCRUAL BASIS. 2. THE ORDER OF THE LD. CIT(A) BE VACATED ON THIS ISSUE AND THAT OF AO BE RESTORED. 3 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSU E RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS ORDERS OF TRIBUNAL. 4. THE ISSUE RAISED IN THE PRESENT APPEAL BY THE REVENUE IS IN RELATION TO THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF ACCRUE D INTEREST ON NON - PERFORMING ASSETS (NPAS). 5 . BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING AND FINANCE . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD NOT CREDITED THE INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (REFERRED TO AS NPAS) TO ITS PROFIT & LOSS ACCOUNT FOR THE CAPTIONED ASSESSMENT YEAR. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT IN VIEW OF RBI GUIDELINES, THE SA ID INTEREST INCOME ON NPAS WAS TO BE RECOGNIZED, BUT NOT TO BE OFFERED TO TAX. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST ACCRUED ON NPAS IS TO BE ADDED IN THE HANDS O F ASSESSEE AND ADDITION TO THAT EXTENT WAS MADE IN THE HANDS OF ASSESSEE. 6 . THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, AGAINST WHICH THE REVENUE IS IN APPEAL. ITA NO. 418 /PN/20 1 6 THE PUNE PEOPLE CO.OP BANK LTD. 3 7 . WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN ITO VS. SHANKARRAO MO HITE PATIL SAHAKARI BANK LTD. IN ITA NO.934/PN/2015 AND IN ITO VS. SAMARTH SAHAKARI BANK LTD . IN ITA NO.615/PN/2015 , RELATING TO ASSESSMENT YEAR 2011 - 12, ORDER DATED 10.02.2016 AND KOLHAPUR MAHILA SAHAKARI BANK LTD. VS. ITO IN ITA NO.01/PN/2013, RELATING T O ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 29.01.2014. THE TRIBUNAL IN TURN FOLLOWING THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, ORDER DATED 31.08.2012, HELD AS UNDER: - 2. THE ASSESSEE IS A CO - OPERATIVE BANK ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIVING LOANS TO MEMBERS. IT HAS FILED ITS RETURN OF INCOME ON 11.09.2009 FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT 14,57,840/ - . IN THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT CREDIT ED INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (HEREINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2008 - 09. THE ASSESSING OFFICER AFTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUID ELINES ARE NOT INTENDED TO REGULATE THE INCOME TAX LAW AND THE ASSESSEE WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BENEFITS EXTENDED TO SCHEDULE BANK, PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANIES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO - OPERATIVE BANK AND (II) THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASSESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/ - ADVANCE THE ASSESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/ - ADVANCE CLAIMED TO BE NPA ACCOUNT. T HE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN, FOLLOWING THE OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVE NUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT IN OSMANABAD JANTA SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 7. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS DIRECTLY TAKEN THE INTEREST TO THE BALANCE SHEET AND IT IS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ISSUE OF THE TAXABILITY OF THE INTEREST ON THE STICKY LOSSES/ADVANCES, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE COORDINATE BENCHES IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD., VIJAYAWADA (SUPRA) AND KARNAVATI COOPERATIVE BANK LTD. (SUPRA). WE FIND NO REASON TO INTERFERE WITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY THE SAME IS CONFIRME D. IN THE RESULT, THE REVENUES GROUND IS DISMISSED. THE ABOVE DECISION HAS BEEN FOLLOWED IN (I) ACIT, CIRCLE - 3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BANK LTD. ITA NO.793/PN/2011, (II) ACIT, CIRCLE - 3 V/S SIDHESHWAR SAHAKARI BANK LTD. ITA NO.794/PN/2011 , (III) ACIT (CENTRAL) V/S LATUR URBAN CO - OPERATIVE BANK LTD. ITA NO.792/PN/2011 AND (IV) ASST. CIT, CIRCLE - 1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011. ITA NO. 418 /PN/20 1 6 THE PUNE PEOPLE CO.OP BANK LTD. 4 8 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK L TD. IN INCOME TAX APPEAL NO.53 OF 2014 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON NPAS IS NOT TAXABLE IN THE HANDS OF ASSESSEE, IN VIEW OF THE GUIDELINES ISSUED BY THE RBI. 9 . FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT N O ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST ACCRUED ON NPAS. THE GROUND S OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JULY , 201 6 . SD/ - SD/ - ( R.K. PANDA ) (SUSHMA CHOWLA) ( R.K. PANDA ) (SUSHMA CHOWLA) / AC COUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 4 TH JULY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A), PUNE - 5, PUNE ; 4. / THE PR. CIT , PUNE - 4, PUNE ; 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE