Saraspur Nagrik Co.Op.Bank Ltd., Ahmedabad V. The ACIT.,(OSD)Circle-10, Ahmedabad

ITA 508/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6072 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Question of law
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO. 508/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) SARASPUR NAGRIK CO-OP BANK LTD. 1, DARSHAN SOCIETY, STADIUM CIRCLE, NR. COMMERCE SIX ROADS, NAVRANGPURA, AHMEDABAD. # VS. OFFICE OF THE ACIT(OSD) CIRCLE-10, 1 ST FLOOR, NARAYAN CHAMBERS, NEHRU BRIDGE, ASHRAM ROAD. AHMEDABAD . $ # % & # PAN/GIR NO. : AANFS 1529 H ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI S.N. DIVATIA, A.R. ($'*) / RESPONDENT BY : SHRI ASHISH POPHARE, SR.D.R. + ,*-. / DATE OF HEARING 23/02/2017 /012*-. / DATE OF PRONOUNCEMENT 28/04/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XVI, AHMEDA BAD, DATED 12/12/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11. ITA NO.508/AHD/ 2014 SARASPUR NAGRIK CO-OP BANK LTD. VS. ACIT ASST.YEAR 2010-11 - 2 - 2. ASSESSEE HAS BEEN TAKEN FOLLOWING GROUNDS OF APP EALS: (I). THE LEARNED COMMISSION (APPEALS) ERRED IN LAW & IN FACTS WHILE APPROVING THE ADDITION MADE BY THE LEARNED ASSESSIN G OFFICER ON ACCOUNT OF ACCRUED INTEREST ON NON PERFORMING ASSET S ADVANCES OF THE APPELLANT WITHOUT APPRECIATING THE FACTS OF THE CASE, REPRESENTATIONS MADE BY THE APPELLANT AND VARIOUS PRONOUNCEMENTS MADE BY THE VARIOUS JUDICIAL AUTHORI TIES FROM TIME TO TIME ON THE SIMILAR FACTS, GROUNDS AND MATT ER OF THE CASE IN OTHER MATTERS. (II). THE LEARNED COMMISSIONER (APPEALS) OUGHT TO H AVE APPRECIATED THAT A) THE INTEREST ON NPA ADVANCES IS NOT REQUIRED TO BE ACCOUNTED FOR BY THE BANKS AS THE SAME ARE NOT IN PURSUANT WI TH THE DIRECTIVES OF THE RESERVE BANK OF INDIA. B) INTEREST ON NPA IS NOT REAL INCOME OF THE BANK, AND IT IS REQUIRED TO BE BOOKED AS AND WHEN IT IS ACTUALLY RE COVERED FROM THE BORROWER. AS THE ADVANCE ITSELF IS CATEGOR IZED AS DOUBTFUL, HOW THE INTEREST THEREON CAN BE CONSIDERE D AS INCOME IS THE QUESTION REQUIRED TO BE CONSIDERED. C) THE APPELLANT'S CASE IS FULLY COVERED WITH THE JUDG MENT OF AHMEDABAD ITAT IN THE MATTER OF ITA NO.2939 /AHD/20 10, IN THE MATTER OF THE KARNAVATI CO-OP. BANK LTD. VS. DC IT - ASST. YEAR -2007-08 AND ON THE SIMILAR FACTS OF THE CASE, THE DISALLOWANCE MADE WAS DELETED. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- A PERUSAL OF THE ORDER U/S. 143(3) DATED 28/02/2013 INDICATES THAT THE ASSESSING OFFICER HAS DETERMINED TOTAL INCOME OF RS .3,51,22,401/- AS ITA NO.508/AHD/ 2014 SARASPUR NAGRIK CO-OP BANK LTD. VS. ACIT ASST.YEAR 2010-11 - 3 - AGAINST RETURNED INCOME OF RS. 3,17,54,390/- AFTER MAKING ADDITION OF RS.33,68,011/- ON ACCOUNT OF ACCRUED INTEREST ON NP A. 4. IT IS THE CASE OF THE APPELLANT APPLYING THE THE ORY OF REAL INCOME NO ADDITION WAS REQUIRED TO BE MADE SINCE HONBLE APEX COURT IN THE CASE GODHRA ELECTRICITY COMPANY 225 ITR 746 HAS HELD THA T MERELY AN ENTRY MADE BY A HYPOTHETICAL INCOME FOLLOWING BOOK KEEPIN G METHODS CANNOT BE TAXED. THUS, THE APPELLANT ARGUED THAT PRESUMING THAT IT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN IN VIEW OF THE ABOVE APEX COURT DECISION NO INTEREST WAS CHARGEABLE TO TAX. IN SUPP ORT OF ITS CONTENTIONS THE APPELLANT HAS ALSO RELIED UPON THE CATENA OF DECISIONS DELIVERED BY HONBLE HIGH COURT AND TRIBUNALS INCLUDING DECISION OF HONBLE JURISDICTIONAL TRIBUNAL, INTER ALIA, IN THE CASE OF KARNAVATI CO-OP BANK ITA NO.2939/AHD/2010, HONBLE PUNE TRIBUNAL IN THE CASE OF USMANABAD JANTA SAHKARI BANK LTD. ITA NO.795/PN/201 1 DATED 30/08/2012. WHERE AN ADDITION MADE ON IDENTICAL FAC TS WAS DELETED BY THE HONBLE TRIBUNAL FOLLOWING THE DECISIONS OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS URJIT INVESTMENTS, HONBLE APEX COURT IN THE CASE OF GODHRA ELECTRICITY. THE APPELLANT SU BMITTED THAT NO INTEREST WAS SHOWN AS ACCRUED ON THE NPAS AS THE APPELLANT H AS BEEN FOLLOWING RBI GUIDELINES. 5. THE LEARNED CIT(A) BY CONTRADICTING ALL THE DECI SIONS OF THE TRIBUNAL COURT IN ITA NOS. 2939/AHD/2010 & 795/PN/2 011, HE ITA NO.508/AHD/ 2014 SARASPUR NAGRIK CO-OP BANK LTD. VS. ACIT ASST.YEAR 2010-11 - 4 - DISMISSED THE APPEALS OF THE ASSESSEE. NOW THE APPE LLANT IN APPEAL IS BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE IMPUGNED ORDER, LEARNED AR CITED A JUDGMENT [2016] 72 TAXMANN.COM 117 (GUJARAT): IN THE MATTER FOLLOWING SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN HOLDING THAT INTEREST ON NON-PERFORMING ASSETS IS NOT TAXABLE ON ACCRUAL BASIS LOOKING TO THE GUIDELINES OF THE RESERVE BANK OF IN DIA? IN THIS CASE, A CO-OPERATIVE BANK, FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION WHEREI N IT DID NOT SHOW INTEREST INCOME ON NON-PERFORMING ASSETS (NPA) ON T HE GROUND THAT SUCH INTEREST WAS NOT REALISABLE. DURING THE SCRUTINY PROCEEDINGS THE ASSESSEE FURNIS HED DETAILS OF INTEREST ACCRUED ON NON-PERFORMING ASSETS AND STATE D THAT SUCH INTEREST WAS NOT CHARGED ON MANDATORILY STIPULATED UNDER INC OME RECOGNITION AND ASSETS CLASSIFICATION NORMS OF THE RESERVE BANK OF INDIA (RBI). THE ASSESSEE PLACED STRONG RELIANCE ON RBI MASTER C IRCULAR ON INCOME RECOGNITION, ASSETS CLASSIFICATION, PROVISIONING AN D STATED THAT IN COMPLIANCE OF THE CIRCULAR, NO INTEREST HAD BEEN CH ARGED BY IT ON NPA. IT WAS FURTHER STATED THAT INTEREST IF CHARGED ON N PA WOULD FURTHER ENHANCE THE NPAS AS RECOVERY OF THE NPA AMOUNT WAS ITSELF NOT CERTAIN. ASSESSEE ALSO RELIED ON CBDT CIRCULAR, DAT ED OCTOBER 9, 1984 AND STATED THAT EVEN UNDER THE INCOME TAX ACT, 1961 SUCH AMOUNT COULD NOT BE TAXED SINCE NO INTEREST HAD EVER ACCRUED NOR HAD BEEN CHARGED. ITA NO.508/AHD/ 2014 SARASPUR NAGRIK CO-OP BANK LTD. VS. ACIT ASST.YEAR 2010-11 - 5 - 7. RESPECTFULLY FOLLOWING THE ABOVE SAID JUDGMENT O F THE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDER O F THE LEARNED CIT AND ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PU RPOSE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 28 / 04 /201 7 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/04/2017 PRITI YADAV, SR. PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-XVI, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY