Asst. Commissioner of Income tax Cir. 1, Belgaum V. The Bassveshear Co-Op. Bank Ltd., Belgaum

ITA 64/PAN/2014

• Counselvise Citation: 6424114 RSA 2014
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR LD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 64/PNJ/2014 (ASSESSMENT YEAR - 2009 - 10) THE ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE - 1, BELGAUM. (APPELLANT) VS. SHRI BASAVESHWAR CO - OP. BANK LTD., RAVIWAR PETH, BELGAUM PAN:AAAAB3041M (RESPONDENT) APPELLANT BY : SHRI , B. BARTHAKUR, LD. DR RESPONDENT BY : NONE (WRITTEN SUBMISSION) DATE OF HEARING : 12/06 /2014 DATE OF PRONOUNCEMEN T : 15 /07 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) - BELGAUM, DATED 10.12 . 2013 FOR THE ASSESSMENT YEAR 20 0 9 - 10 . 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL AS UNDER: - 1. THE CIT(A) ERRED IN LAW AND ON FACTS, IN DELETING THE ADDITION OF RS.13,01,24 ION ACCOUNT OF ACCRUED INTEREST ON LOANS WHICH ARE CLASSIFIED AS NON - PERFORMING AS SETS RELYING ON THE KARNATAKA HIGH COURT DECISION IN CANFIN HOMES LTD (2011) 5 TAX CORP (DT) 49593, IGNORING THE PROVISIONS OF SECTION 43D OF THE I.T. ACT,1961? (2) ON THE FACTS AND IN LAW THE CIT(A) ERRED IN HOLDING THAT INCOME ACCRUED TO THE ASSESSEE CA NNOT BE TAKEN AS INCOME IN THE YEAR IGNORING THE AMENDED PROVISIONS OF SECTION 43D OF THE I.T. ACT, 1961, WHICH PROVIDES CERTAIN BENEFIT TO THE CERTAIN CLASS OF ASSESSEES BUT DO NOT PROVIDE SUCH BENEFIT TO THE ASSESSEE BANK AND AS SUCH, THE PROVISIONS OF SECTION 43D AMENDED W.E.F. 1.4.200 0 OVERRULED THE COURT DECISIONS / CIRCULARS? (3) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RE STORED. 2 . ITA NO. 64/PNJ/2014(A.Y.2009 - 10 ) ACIT VS. M/S. SHRI BASAVESHWAR CO - OP. BANK. 2 . THE ASSESSEE IS A CO - OPERATIVE BANK ENGAGED IN BUSINESS OF BANKING , DOING BUSINESS COVERED UNDER BANKING REGULATIONS ACT, 1949. IT IS REGULATED BY RBI AND THE KARNATAKA STATE CO - OPERATIVE ACT, 1956. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE A.Y. 2009 - 10, ON 29 TH SEPTEMBER, 200 9. THE ASSESSING OFFICER OBSERVED THAT THE INTEREST RECEIVABLE ON NPAS ON A CCRUAL BASIS TO THE TUNE OF RS. 13,01,241/ - BUT THE ASSESSEE DID NOT CREATED THE INTEREST RECEIVABLE TO PROFIT AND LOSS ACCOUNT. THE ASSES SING OFFICER WAS OF THE VIEW THAT INTEREST RECEIVABLE HAS TO BE TAXED ON ACCRUAL BASIS. 2 . 1. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 2.2. THE LEARNED D R SUBMITTED THAT AS PER SECTION 145(1) OF THE I.T. ACT, T HE ASSESSEE BANK IS REQUIRED TO FOL LOW THE METHOD WHICH HE IS FOLLOWING AND IF ANY METHOD FOLLOWED BY THE ASSESSEE BANK WOULD AMOUNT TO CONTRAVENING THE PROVISION S LAID DOWN BY THE RESERVE BANK OF INDIA IS AGAINST THE SPIRIT OF LAW. THEREFORE, THE ASSESSEE CO - OPERATIVE BANK HAS TO ACCOUNT FOR THE INTEREST INCOME O N LOANS ON CASH BASIS. THE ASSESSEE IS NOT AN EXCEPTION, THEREFORE, HYBRID OF ACCOUNTING SYSTEM CANNOT BE ACCEPTED. 2.3. THE LEARNED AR RELIED UPON THE ORDER OF THE COMMISSIONER OF INCOME TAX. 3 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT WHETHER THE ASSESSEE HAS TO ACCOUNT THE INTEREST I NCOME ON NON - PERF ORMING ASSETS EVEN THOUGH IT DOES NOT YIELD ANY INCOME AS THE ASSESSEE HAS ADOPTED THE MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE HAS TO BE TAXED ON THE REVENUE WHICH HAS ACCRUED NOTIONALLY OR NOT, THAT HAS BEEN DECIDED BY JURISDICTIONAL HIGH COURT IN THE CASE OF JCIT VS. M/S. CONFINE HOMES LTD. (2011) 5 TAX CORP (DT) 49593. FOLLOWING TH E DECISION OF UCO BANK VS. CIT, 237 ITR 889, WHEREIN IT HAS HELD THAT INTEREST ACCRUED ON STICKY ADVANCES WHICH WAS NOT BROUGHT INTO PROFIT AND LOSS ACCOUNT BUT TAKEN TO SEPARATE SUSPENSE ACCOUNT SHOULD BE ADDED AS INCOME ONLY WHEN ACTUALLY RECEIVED. WE FI ND THAT 3 . ITA NO. 64/PNJ/2014(A.Y.2009 - 10 ) ACIT VS. M/S. SHRI BASAVESHWAR CO - OP. BANK. CIT(A) HAS FOLLOWED THE DECISION OF HONB LE SUPREME COURT, THEREFORE, OUR INTERFERENCE IS NOT REQUIRED. THUS, THE DEPARTMENT S APPEAL IS DI S MISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER P RONOUNCED IN THE OPE N COURT ON 15 .07 .2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 15 .7 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) G UARD FILE TRUE COPY, BY ORDER