DCIT, Kollam V. The Quilon Co-op Urban Bank Ltd, Kollam

ITA 554/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58343 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R SIVAKUMAR
• Assessee Lawyers: K GOPI

Judgement Text

1 ITA NO.554/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 554/COCH/2010 (ASSESSMENT YEAR 2007-08) DY.CIT, CIR.1 VS THE QUILON COOPERATIVE URBAN KOLLAM BANK LTD, YMCA ROAD, KOLLAM PAN : AAAAT1144K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. SIVAKUMAR RESPONDENT BY : SHRI K GOPI DATE OF HEARING : 08-03-2012 DATE OF PRONOUNCEMENT : 23-03-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A), TRIVANDRUM DATED 05-07 -2010. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ASSES SMENT OF ACCRUED INTEREST ON THE INVESTMENT AS ON 31-03-2007. 3. SHRI R SIVAKUMAR, THE LD.DR SUBMITTED THAT THE AS SESSEE IS A CO-OPERATIVE BANK FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. ACC ORDING TO THE LD.DR, AS PER THE MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST A CCRUED AS ON 31-03-2007 IS LIABLE FOR TAXATION. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) ALLOWED THE 2 ITA NO.554/COCH/2010 CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ACCRUE D INTEREST IS NOT RECEIVABLE. ACCORDING TO THE LD.REPRESENTATIVE, ONCE THE INTERE ST IS ACCRUED TO THE ASSESSEE ON THE BASIS OF THE METHOD OF ACCOUNTING CONSISTENT LY FOLLOWED BY THE ASSESSEE, WHETHER IT IS RECEIVABLE OR NOT, HAS TO BE INCLUDED IN THE TAXABLE INCOME. 4. ON THE CONTRARY, SHRI K GOPI, THE LD.REPRESENTATI VE FOR THE ASSESSEE SUBMITTED THAT THE DEPOSIT MADE BY THE ASSESSEE DID NOT ATTAIN MATURITY DURING THE YEAR UNDER CONSIDERATION. THEREFORE, EVEN THOU GH THE INTEREST WAS ACCRUED ON SUCH DEPOSIT IT IS NOT RECEIVABLE BY THE ASSESSE E. ACCORDING TO THE LD.REPRESENTATIVE, THE INTEREST IS RECEIVABLE ONLY AT THE TIME OF MATURITY OF THE DEPOSIT. THEREFORE, MERELY BECAUSE THE ACCRUED INT EREST IS SHOWN IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE IT CANNOT BE INCLUDED IN THE TAXABLE INCOME. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGME NT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS FEDERAL BANK LTD (200 8) 301 ITR 188 (KER). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY OBJECTI ON OF THE LD.DR IS THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. NO DOUBT, THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE KERA LA HIGH COURT IN THE CASE OF FEDERAL BANK LTD (SUPRA) EXAMINED THIS ISSUE AND FOU ND THAT THE INCOME ACCRUED OBVIOUSLY MEANS INCOME THAT HAS BECOME DUE OR RECEI VABLE BY THE ASSESSEE. THE KERALA HIGH COURT FURTHER FOUND THAT SINCE THE SECUR ITIES HAD NOT BEEN MATURED FOR PAYMENT, THE ASSESSEE, OBVIOUSLY, IS NOT ENTITL ED TO INTEREST AND THE INTEREST WAS NOT REALLY DUE TO THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. SO MERELY BEC AUSE THE INTEREST WAS SHOWN IN THE PROFIT & LOSS ACCOUNT, THIS IS NOT A GROUND FOR TAXING THE AMOUNT SHOWN BY THE ASSESSEE. IN VIEW OF THE JUDGMENT OF THE JURIS DICTIONAL HIGH COURT WHICH IS 3 ITA NO.554/COCH/2010 BINDING ON THIS TRIBUNAL WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME- TAX(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 23 RD MARCH, 2012 PK/- COPY TO: 1. DY.C.I.T., CIR.1, KOLLAM 2. THE QUILON COOPERATIVE URBAN BANK LTD, YMCA ROAD, KOL LAM 3. THE COMMISSIONER OF INCOME-TAX(A), TRIVANDRUM 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH