ACIT, New Delhi V. M/s. Jain Corporative Bank Ltd., New Delhi

ITA 6795/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5344 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 6795/DEL/2015 ASSESSMENT YEAR: 2012-13 ACIT, VS M/S JAIN COOPERATIVE BANK LTD. , CIRCLE 52(1), 80, DARYA GANJ, NEW DELHI. DELHI-110002 (PAN: AAAAJ0060A) (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SRIDHAR DORA, SR. DR ASSESSEE BY: NONE PRESENT DATE OF HEARING: 20.11.2018 DATE OF PRONOUNCEMENT: 28.01.2019 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE LD. CIT (APPEALS)-18, NEW DELHI VIDE O RDER DATED 5.10.2015 PERTAINING TO ASSESSMENT YEAR 2012-13 AND THE SOLE ISSUE UNDER CHALLENGE BEFORE US IS THE ACTION OF TH E LD. COMMISSIONER OF INCOME TAX (A) IN DELETING THE ADDI TION OF RS. 3,61,74,735/- MADE ON ACCOUNT OF INTEREST ACCRUED O N NON- PERFORMING ASSETS (NPAS). 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COOPERATIVE SOCIETY AND IS CARRYING ON BANKING BUSINESS UNDER L ICENSE FROM ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 2 RESERVE BANK OF INDIA. THE RETURN OF INCOME WAS FI LED DECLARING INCOME OF RS. 83,22,4967/-. THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY UNDER CASS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT AS PER AUDIT REPORT IN FORM 3CD SUBMITTED BY THE ASSES SEE, THE ASSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING. IT WAS FURTHER OBSERVED THAT ON PERUSAL OF THE BALANCE SHE ET AND OTHER DETAILS, THE ASSESSEE HAD NOT RECOGNISED INTEREST O N NPAS AS INCOME. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE INTEREST ACCRUED ON NPAS SHOULD NOT BE CONSIDERED A S INCOME OF THE ASSESSEE AND ADDED TO THE TOTAL INCOME. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT AS PER THE GUIDEL INES OF THE RBI IN CASE OF LOANS DISBURSED TO ITS MEMBERS, THE BANK HAS TO MAKE PROVISION FOR BAD AND DOUBTFUL LOANS I.E. NPAS AND THAT AT THE END OF THE YEAR, INTEREST DEBITED ON SUCH LOANS DUR ING THE YEAR HAS TO BE REVERSED. IT WAS SUBMITTED THAT AN AMOUN T OF RS. 3,61,74,735/- HAD BEEN REVERSED BY THE BANK BEING I NTEREST ON NPAS AND, THEREFORE, THIS INCOME HAD NOT BEEN RECOG NISED IN THE BOOKS OF ACCOUNTS. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE GUIDELINES OF THE RBI DO NOT OVERRIDE THE EXPRESS PROVISIONS OF THE INCOME TAX ACT AND, THEREFORE, IN VIEW OF THE ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 3 ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, INTEREST SHOULD HAVE BEEN RECOGNISED AS INCOME. THE ASSESSI NG OFFICER PROCEEDED TO ADD THIS AMOUNT TO THE INCOME OF THE A SSESSEE. SOME OTHER ADDITIONS WERE ALSO MADE AND THE ASSESSM ENT WAS FINALISED AT AN INCOME OF RS.4,45,11,470/-. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. COMM ISSIONER OF INCOME TAX (A) WHO HELD IN FAVOUR OF THE ASSESSE E AND ALLOWED THE ASSESSEES APPEAL. NOW, THE DEPARTMENT IS BEFO RE THE ITAT AND HAS CHALLENGED THE ACTION OF THE LD. COMMISSION ER OF INCOME TAX (A) IN DELETING THE AFORESAID ADDITION. 3.0 NONE WAS PRESENT ON BEHALF OF THE ASSESSEE/RESP ONDENT WHEN THE APPEAL WASCALLED OUT FOR HEARING NOR ANY A PPLICATION FOR ADJOURNMENT WAS RECEIVED. HOWEVER, LOOKING INTO TH E FACTS OF THE CASE, WE ARE PROCEEDING TO ADJUDICATE THE ISSUE AT HAND EX PARTE QUA THE ASSESSEE/RESPONDENT. 4.0 THE LD. SR. DR VEHEMENTLY ARGUED THAT THE RBI N ORMS CANNOT OVERRIDE THE PROVISIONS OF THE INCOME TAX AC T AND INTEREST ON NPAS ALSO ACCRUES TO THE ASSESSEE IF MERCANTILE SYSTEM OF ACCOUNTING IS FOLLOWED. THE LD. SR. DR ALSO SUBMIT TED THAT VARIOUS HONBLE COURTS HAVE HELD THAT IN NUMEROUS C ASES THAT ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 4 THE RBI NORMS CANNOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. IT WAS PRAYED THAT THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (A) BE REVERSED AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 5.0 WE HAVE HEARD THE SUBMISSIONS OF THE LD. SR DR AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT I S SEEN THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS DISCUSSED TH E ISSUE AT GREAT LENGTH IN THE IMPUGNED ORDER AND HAS ALSO REF ERRED TO VARIOUS JUDICIAL PRECEDENTS OF THE VARIOUS HONBLE COURTS WHILE ALLOWING THE ASSESSEES APPEAL. IT IS ALSO SEEN THA T HE HAS TAKEN A FAVOURABLE VIEW OF THE FACT THAT IN ASSESSEES OWN CASE ON IDENTICAL ISSUE FOR EARLIER ASSESSMENT YEARS, THE D ELETIONS MADE BY THE LD. COMMISSIONER OF INCOME TAX (A) WERE UPHE LD BY THE ITAT DELHI BENCH AND THE MATTER WAS SETTLED IN FAVO UR OF THE ASSESSEE. ITAT DELHI BENCH IN ASSESSEES OWN CASE FOR AY 09-10 IN ITA NO. 20/DEL/2013 HELD AS UNDER: 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR A Y 2008-09 ORDER DATED 11.7.2014 (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REV ENUE WITH FOLLOWING OBSERVATIONS AND CONCLUSION:- '4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. THE APPEAL WAS EARLIER HEARD ON 10.07.2012 BUT IT WAS RELEASED ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 5 ON 19.07.2012 FOR RE-HEARING IN VIEW OF THE RETIREMENT OF ONE OF THE MEMBERS. THE REVENUE HAS TAKEN A SPECIFIC GROUND VIDE GROUND NO.L BY WHICH I T HAS CHALLENGED THAT LD. CIT(A) HAS WRONGLY FOLLOWED THE JUDGEMENT OF CIT VS SHOORJI VALLABHDAS & CO. 46 ITR 144 (S.C.), WHICH WAS DISTINGUISHED BY THE JUDGEMENT IN THE CASE OF MORVI INDUSTRIES LTD. VS C IT 82 ITR 835. HOWEVER, WE FIND THAT LD. CIT(A) HAD FOLLOWED THE FORMER CASE LAW BY APPLYING THE RATIO WHICH LAYS DOWN THAT REAL INCOME HAS TO BE CONSIDERED WITH REFERENCE TO COMMERCIAL & BUSINESS REALITIES OF THE SITUATION NOT WITH REFERENCE TO HI S SYSTEM OF ACCOUNTING. THE FACTS IN THE CASE LAW OF MORVI INDUSTRIES LTD. (SUPRA) ARE QUITE DIFFERENT. THEREFORE, GROUND NO.L RAISED BY REVENUE DESERVES TO BE DISMISSED. 4.1 THE REVENUE HAS FURTHER TAKEN GROUND NO.2 BY WHICH IT HAS CHALLENGED THAT LD. CIT(A) HAS NOT FOLLOWED THE RATIO OF CASE LAW OF STATE BANK OF TRAVENCORE VS CIT 158 ITR 102 (S.C.). 4.2 WE HAVE GONE THROUGH THE CASE LAW AND WE FIND THAT IN THAT CASE, ACCOUNTS OF BORROWERS WERE DEBIT ED AND INTEREST INCOME WAS CREDITED TO INTEREST SUSPEN SE ACCOUNT WHEREAS IN THE PRESENT CASE, THE INTEREST O N BAD LOANS HAS NOT BEEN PROVIDED AS PER RBI GUIDELINES AND AS PER ACCOUNTING STANDARD 9 ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. 4.3 WE FIND THAT THE ISSUE RAISED BY REVENUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN TH E CASE OF VAISH COOPERATIVE BANK LTD. IN I.T.A.NO. 54 49 WHEREIN THE TRIBUNAL HAS DELETED THE ADDITION UNDER SIMILAR CIRCUMSTANCES VIDE PARA 7 AND THE RELEVANT PORTION IS REPRODUCED BELOW: '7. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT THE INTEREST IN T HIS CASE WAS DUE ON NON-PERFORMING ASSETS (NPA). AS PER THE RBI GUIDELINE IN THIS REGARD, INTEREST ON NPAS IS NOT TO BE RECOGNIZED. ACCOUNTING STANDARD 9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA A LSO ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 6 PROVIDES THAT INCOME IS TO BE RECOGNIZED ONLY WHEN THERE IS SOME REASONABLE CERTAINTY ABOUT THE RECEIP T OF THE INCOME. WE, FURTHER, FIND THAT THIS VIEW IS ALSO SUPPORTED BY THE DECISIONS, AS MENTIONED ABOVE. WE FIND THAT IN THE CASE OF CIT VS ELGI FINANCE LTD., 293 ITR 357, HON'BLE MADRAS HIGH COURT HAS HELD THAT INTEREST ON NON-PERFORMING ASSET IS NOT TO BE RECOGNIZED IN LIGHT OF THE RBI NOTIFICATION AND ACCOUNTING STANDARD 9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA.' 5. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE ARE SIMILAR, THEREFORE, RESPECTFULLY F OLLOWING THE SAME, WE DISMISS THE APPEAL OF THE REVENUE.' 6. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED OPI NION THAT THE INTEREST ON NON-PERFORMING ASSETS IS NOT T O BE RECOGNISED IN THE LIGHT OF RBI NOTIFICATION AND ACC OUNTING STANDARD 9 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA. WE FURTHER RESPECTFULLY NOTE T HAT THE BENEFIT OF THE RATIO OF THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF CIT VS SHOOJI VALLABHDAS & CO. (SUPRA) ITA NO.20/DEL/2013 AND STATE BANK OF TRAVANCORE VS CIT (SUPRA) IS NOT AVAILABLE FOR THE REVENUE. UNDER THESE FACTS AND CIRCUMSTANCES, WE AR E INCLINED TO HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CAS E FOR AY 2008-09 (SUPRA). THEREFORE, GROUND NO. 1, 2 AND 3 OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. 5.1 THEREFORE, IN VIEW OF THE BINDING JUDICIAL PREC EDENT IN ASSESSEES OWN CASE AS LAID DOWN BY THE ORDER OF TH E COORDINATE BENCH IN ASSESSEES OWN CASE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND WE DISMISS THE GROUNDS RAISED BY THE DEPA RTMENT. ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 7 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY, 2019. SD/- SD/- (N.K. SAINI) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED: 28 TH JANUARY, 2019 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR ITA NO. 6795.DEL/2015 ASSESSMENT YEAR 2012-13 8 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER