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

ITA 483/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6286 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIRMIT ME H TA
• Section: 145; 56

Judgement Text

, * ** *CH CHCH CH* ** * IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER I.T.A. NO.483/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) THE DCIT, CIRCLE-1(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. VS. M/S. THE BARODA CENTRAL CO. OPERATIVE BANK LTD. STATION ROAD, SAYAJIGUNJ, BARODA-390 005. ! PAN/GIR NO. : AAAAT 1335 N ( ' / APPELLANT ) .. ( #' RESPONDENT ) '$ APPELLANT BY : SHRI MUDIT NAGPAL, SR. D.R. #'%$ / RESPONDENT BY : SHRI NIRMIT MEHTA, A.R. & ' (%) * / DATE OF HEARING 22/01/2018 +,-. %) * / DATE OF PRONOUNCEMENT 23/01/2018 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE RELATING TO ASSESSMEN T YEAR 2012-13 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, VADODARA DATED 16.11.2015 WHICH IS ARI SING OUT OF ORDER U/S.143(3) OF THE INCOME TAX ACT, 1961 DATED 24.03. 2015 FRAMED BY DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BARODA, VIDE APPEAL NO.CAB/5-892/2014-15. 2. DEPARTMENT HAS TAKEN FOLLOWING GROUNDS OF APPEAL : ITA NO.483/AHD/ 2016 THE DCIT VS. M/S. THE BARODA CENTRAL CO-OPERATIVE B ANK LTD. ASST.YEAR 2012-13 - 2 - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST INCOME ON NPAS AND IGNORED THE FACT ON REC ORD THAT THE ASSESSEE IS A NON-SCHEDULED CO-OPERATIVE BANK AND T HE PROVISIONS OF SECTION 43D ARE NOT APPLICABLE TO THE ASSESSEE. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE AO THAT ASSESSEE HAD FAILED TO OFFER INTERES T INCOME TO TAX ON ALL THE LOANS AND ADVANCES OUTSTANDING AS ON 31.03.2012 . WHEN ASKED TO EXPLAIN, THE ASSESSEE EXPLAINED THAT THE INTEREST O F RS.98,17,814/- ON NPAS WAS NOT CREDITED TO PROFIT AND LOSS ACCOUNT DU RING THE YEAR. THE ASSESSEE SUBMITTED THAT IT WAS MAINTAINING ACCOUNTS ON MERCANTILE SYSTEM AND AS PER AS-1 ISSUED BY ICAI, ONLY IF IT IS REASO NABLE CERTAIN THAT COLLECTION CAN BE MADE, THE REVENUE IS TO BE REALIZ ED. THE ASSESSEE SUBMITTED THAT SINCE THERE WAS NO CERTAINTY OF RECO VERY OF PRINCIPLE AMOUNT OF LOAN AS WELL AS INTEREST ON NPA, THEREFO RE, THE INTEREST INCOME IS NOT RECOGNIZED DURING THE YEAR. WHEN THE REVENUE IS REALIZED IN A PARTICULAR YEAR, THE SAME IS OFFERED TO TAX. HOWEVE R, THE ASSESSING OFFICER REJECTED ASSESSEES EXPLANATION AND MADE AN ADDITION OF RS.98,17,814/-. 4. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LD. AR CITED AN ORDER OF JURISDICTIONAL HIGH COURT IN THE MATTER OF PR. ITA NO.483/AHD/ 2016 THE DCIT VS. M/S. THE BARODA CENTRAL CO-OPERATIVE B ANK LTD. ASST.YEAR 2012-13 - 3 - COMMISSIONER OF INCOME TAX VS. SHRI MAHILA SEWA SAH AKARI BANK LTD. [2016] 72 TAXMANN.COM 117 (GUJARAT). IN THIS MATTER , HONBLE HIGH COURT DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. RELEVANT PARA OF THE SAME IS REPRODUCED AS UNDER: SECTION 5, READ WITH SECTION 145, OF THE INCOME-TA X ACT, 1961, READ WITH SECTION 45Q, OF THE RESERVE BANK OF INDIA ACT, 1934 AND SECTION 5, READ WITH SECTION 56 OF THE BANKING REGULATION ACT, 1949 - INCOME - ACCRUAL OF (INTEREST) - ASSESSMENT YEAR 2010-11 - A SSESSEE, A CO- OPERATIVE BANK FILED ITS RETURN OF INCOME FOR RELEV ANT YEAR BUT DID NOT SHOW INTEREST INCOME ON NON-PERFORMING ASSETS (NPAS ) AS ACCORDING TO ASSESSEE IT WAS NOT REALISABLE -ASSESSING OFFICER, HOWEVER, ADDED INTEREST AS INCOME OF ASSESSEE HOLDING THAT IT HAD ACCRUED TO ASSESSEE EVEN IF IT WAS NOT ACTUALLY REALISED AS IT WAS FOLL OWING MERCANTILE SYSTEM OF ACCOUNTING - WHETHER EXPRESSION 'BANKING COMPANY ' HAS BEEN DEFINED UNDER SECTION 5(C) OF BANKING REGULATION ACT, 1949 TO MEAN ANY COMPANY WHICH TRANSACTS BUSINESS OF BANKING IN INDI A - HELD, YES - WHETHER IN VIEW OF CLAUSE (A) OF SECTION 56 OF 1949 ACT, EXPRESSION 'BANKING COMPANY' WOULD TAKE WITHIN ITS SWEEP A CO- OPERATIVE BANK - HELD, YES - WHETHER THEREFORE, ASSESSING OFFICER WA S NOT JUSTIFIED IN HOLDING THAT CBDT'S CIRCULAR F .NO. 201/21/84-ITA-L L. DATED 9-10-1984 (REGARDING NON-TAXABILITY OF INTEREST NOT RECEIVED FOR THREE YEARS) APPLIES ONLY TO BANKING COMPANIES AND NOT TO CO-OPE RATIVE BANKS - HELD, YES -WHETHER TWIN FACTORS COME INTO PLAY WHIL E DETERMINING TAX LIABILITY, NAMELY, INCOME RECOGNITION AND COMPUTATI ON AND INSOFAR AS INCOME RECOGNITION IS CONCERNED, IT WOULD BE RBI DI RECTIONS WHICH WOULD PREVAIL IN VIEW OF PROVISIONS OF SECTION 45Q OF RBI ACT AND SECTION 145 WOULD HAVE NO ROLE TO PLAY - HELD, YES -WHETHER IN VIEW OF MANDATE OF RBI GUIDELINES, ASSESSEE COULD NOT HAVE RECOGNISED INCOME FROM NON-PERFORMING ASSETS ON ACCRUAL BASIS BUT COU LD HAVE BOOKED SUCH INCOME ONLY WHEN IT WAS ACTUALLY RECEIVED - HE LD, YES - WHETHER THEREFORE, INTEREST ON NPAS WOULD NOT BE TAXABLE ON ACCRUAL BASIS IN ASSESSEE'S HANDS - HELD, YES [PARAS 20, 23, 30 & 31 ] [IN FAVOUR OF ASSESSEE] 6. RESPECTFULLY FOLLOWING THE ABOVE SAID JUDGMENT, WE DISMISS THE APPEAL OF THE DEPARTMENT AS CO-OPERATIVE BANK IS AL SO A BANKING ITA NO.483/AHD/ 2016 THE DCIT VS. M/S. THE BARODA CENTRAL CO-OPERATIVE B ANK LTD. ASST.YEAR 2012-13 - 4 - COMPANY; NOT LIABLE TO PAY TAX ON NPA INTEREST ON A CCRUAL BASIS IN VIEW OF RBI NORMS RELATING TO INCOME RECOGNITION AND ASS ETS CLASSIFICATION. 7. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/01/2018 SD/- SD/- IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRAMOD KUMAR) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/01/2018 PRITI YADAV, SR.PS !'# $#! COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) 45 / THE CIT(A)-5, VADODARA. 5. 67 8)'12 *12. 0 / DR, ITAT, AHMEDABAD 6. 8 9: ( GUARD FILE. % & / BY ORDER, # 6)) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 22/01/2018. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 23/01/2018 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE F 6. AIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER