The Beed District Central Co-op. Bank Ltd., V. Assistant Commissioner of Income-tax,

ITA 643/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1124 (ITAT-PUNE)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 643 /PN/20 1 6 / ASSESSMENT YEAR : 20 11 - 1 2 THE BEED DISTRICT CENTRAL CO - OP. BANK LTD., RAJURI VES, BEED 431122 . / APPELLANT PAN: A AAAT5256C VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2, AURANGABAD . / RESPONDENT / APPELLANT BY : SMT. DEEPA KHARE / RESPONDENT BY : S HRI ANIL KUMAR CHAWARE / DATE OF HEARING : 11 . 0 8 .201 6 / DATE OF PRONOUNCEMENT: 12 . 0 8 .201 6 / ORDER / PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF C I T (A) - 2 , AURANGABAD , DATED 02 . 02 .20 1 6 RELATING TO ASSESSMENT YEAR 20 11 - 1 2 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 19 61 (IN SHO RT THE ACT) . ITA NO . 643 /PN/20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 2 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.35,03,62,656/ - U/S 36(1)(VIIA) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.1,84,10,000/ - U/S 36(1)(VIIA) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT ON THE GROUND THAT PROVISION ON STANDARD ASSET IS NOT AGAINST ANY DEBT WHICH H AVE BECOME DOUBTFUL. 3. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.9,92,700/ - U/S 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT TO AUDITORS WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT ON THE G ROUND THAT THE APPELLANT HAS NOT BEEN ABLE TO COMPLY WITH THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. THE PROVISO TO SECTION 201A OF THE ACT. 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.6,70,200/ - U/S 40(A)(IA) OF THE AC T IN RESPECT OF PAYMENT OF RENT WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT ON THE GROUND THAT THE APPELLANT HAS NOT BEEN ABLE TO COMPLY WITH THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. THE PROVISO TO SECTION 201A OF THE ACT. 3. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL WHICH READ AS 3. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL WHICH READ AS UNDER: - 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE A.O.S ACTION OF MAKING ADDITION AMOUNTING TO RS.2,67,75,208/ - WITHOUT APPRECIATING THAT THE SAID AMOUNT DID NOT CONSTITUTE INCOME IN THIS YEAR. 2] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE AMOUNT OF RS.2,67,75,208/ - IS INTEREST ON NPA, WHICH IS TO BE TAXED ON REALIZATION OF THE SAME AND THE CLAIM OF THE APPELLANT IS SUPPORTED BY THE RATIO OF CBDT CIRCULAR NO.F 201/81/84 ITA II DATED 09.10.1984 AS WELL AS THE DECISIONS OF THE HONBLE APEX COURT AS WELL JURISDICTIONAL HIGH COURT. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ORIGINAL GROUNDS OF APPEAL NO.1 TO 4 RAISED BY THE ASSESSEE ARE NOT PRESSED. HOWEVER, THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEING LEGAL IN NATURE FOR WHICH NO REFERENCE IS TO BE MADE ON ANY FACTUAL ASPECTS SHOULD BE ADMITTED. IN VIEW OF THE ADMISSION OF THE ASSESSEE THE ORIGINAL GROUNDS OF APPEAL NO.1 TO 4, ARE DISMISSED AS NOT ITA NO . 643 /PN/20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 3 PRESSED. THE ISSUE RAISED BY WAY OF ADDITIONAL GROUNDS OF APPEAL IS AGAINST THE ADDITION MADE ON ACCOUNT OF INTEREST ACCRUING ON NPAS WHICH IS A PURELY LEGAL ISSUE AND THE SAME ARE ADMITTED FOR ADJUDICATION. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN BANKING ACTIVITY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED INTEREST ACCRUED ON NPA OF RS.2,67,75,208/ - WAS NOT TO BE INCLUDED INCOME IN THE PROFIT & LOSS ACCOUNT. HOWEVER, T HE CONTENTION OF THE ASSESSEE WAS SIMPLY DISMISSED BY THE ASSESSING OFFICER, IN VIEW OF THE ASSESSEE WAS A NON - SCHEDULED BANK AND CO - OPERATIVE BANK. FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN SOUTHERN TECHNOLOGIES LTD. VS. JCIT REPORTED IN 320 ITR 577 (SC) . 6. BEFORE THE CIT(A), THE ASSESSEE FURNISHED THE WRITTEN SUBMISSIONS, IN WHICH IT CLAIMED THE DEDUCTION ON ACCOUNT OF INTEREST DUE ON NPA NOT ACCOUNTED FOR IN THE PROFIT & LOSS ACCOUNT. HOWEVER, THE PLEA OF THE ASSESSEE WAS DISMISSED BY THE CIT(A) AS THE ASSESSEE HAD FAILED TO RAISE ANY GROUND OF APPEAL IN THIS REGARD. 7. THE ASSESSEE IS IN APPEAL BEFORE US AND HAS RAISED THE ISSUE BY WAY OF ADDITIONAL GROUNDS OF APPEAL. 8. WE HAVE HEARD THE RIVAL CONTENTION S AND PERUSED THE RECORD. THE ASSESSEE HAS MOVED THE ISSUE BY WAY OF ADDITIONAL GROUNDS OF APPEAL. THE ISSUE BEING LEGAL IS ADMITTED FOR ADJUDICATION. AGAINST THE ORDER OF ASSESSING OFFICER, THE ASSESSEE HAD MOVED APPEAL BEFORE CIT(A) AND BY AN ERROR TH E ITA NO . 643 /PN/20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 4 GROUND AGAINST INTEREST ON NPAS WAS NOT MOVED , T HOUGH IN THE WRITTEN SUBMISSIONS FILED BEFORE CIT(A), THIS ISSUE WAS ADDRESSED. NOW, WE PROCEED TO DECIDE THE PRESENT ISSUE RAISED BY ASSESSEE. 9 . THE CLAIM OF THE ASSESSEE BEFORE US IS THAT THE SAID ISSU E IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2009 - 10. ON PERUSAL OF ORDER OF TRIBUNAL IN ITA NO. 1109/PN/2011, RELATING TO ASSESSMENT YEAR 2008 - 09 I.E. THE APPEAL FILED BY THE ASSESSEE, AN ID ENTICAL ISSUE OF RECOGNITION OF INTEREST ACCRUED ON NPAS, AROSE BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 31.12.2015 WITH LEAD ORDER IN ITA NO.1108 & 1109/PN/2011, RELATING TO ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 OBSERVED AS UNDER: - 38. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A COOPERATIVE BANK AND HAD DERIVED INCOME FROM BANKING BUSINESS AND HAD MAINTAINED BOOKS OF ACCOUNT ON MERCANTILE BASIS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NO TED THAT THE ASSESSEE HAD NOT CREDITED COURSE OF ASSESSMENT PROCEEDINGS NO TED 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 GUIDE LINES, THE SAID 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 I N THE HANDS OF ASSESSEE AND ADDITION TO THE EXTENT OF RS.19,10,80,000/ - WAS MADE IN THE HANDS OF ASSESSEE. 39. THE CIT(A) HAS UPHELD THE ORDER OF ASSESSING OFFICER. 40. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 41. WE FIND THAT SIMILAR ISSU E AS BEFORE US AROSE IN ITO VS. KOLHAPUR MAHILA SAHAKARI BANK LTD. IN ITA NO.01/PN/2013, RELATING TO 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. OSMANAB AD 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 O N 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 CREDITED INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (HEREINAFTER REFERRE D TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR ITA NO . 643 /PN/20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 5 FINANCIAL YEAR 2008 - 09. THE ASSESSING OFFICER AFTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED TO REGULATE THE INCOME TAX LAW AND THE ASSESSEE WAS LIA BLE 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 FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASSESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/ - ADVANCE CLAIMED TO BE NPA ACCOUNT. THE 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 REVENUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE F IND 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 ROUTE D 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 DECISION 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 CONFIRMED. IN THE RESULT, THE REVENUES GROUND IS SAME IS CONFIRMED. IN THE RESULT, THE REVENUES GROUND IS DISMISSED. THE ABOVE DECISION HAS BE EN 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. 42. THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. 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. 43. THE ISSUE IN GROUND OF APPEAL NO.2 ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. D EOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) AND TRIBUNAL IN ITO VS. KOLHAPUR MAHILA SAHAKARI BANK LTD. (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS. ACCORDINGLY, WE DIRECT TH E ASSESSING OFFICER TO DELETE THE ADDITION OF RS.19,10,80,000/ - . THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 10 . THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NA GARI SAHAKARI BANK LTD. IN ITA NO . 643 /PN/20 1 6 THE BEED DIST. CENTRAL CO - OP. BANK LTD. 6 INCOME TAX APPEAL NO.53 OF 2014 & ORS., WHICH PRINCIPLE WAS APPLIED IN ASSESSEES OWN CASE AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2,67,75,208/ - . THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 12 TH D AY OF AUGU ST , 201 6 . SD/ - SD/ - ( R.K. PANDA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 12 TH AUGUST , 201 6 . GCVSR GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPE LLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - 2 , AURANGABAD ; 4. / THE PR. C I T - 2 , AURANGABAD ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY OR DER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE