THE WASHIM URBAN COOP. BANK LTD., WASHIM V. The DY. CIT- AKOLA CIRCLE, Akola

ITA 71/NAG/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9655 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 02-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K B LOHIYA; SHAILESH AGRAWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SH. G.D.AGRAWAL, HONBLE PRESIDENT AND SH. MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.71 & 72/NAG/2015 (ASSESSMENT YEAR: 2007-08 & 2010-11) THE WASIM URBAN COOP. BANK LTD., WASHIM, LATE R.G.RATHI MARG, RAVIVAR BAZAR, WASHIM, DISTT. WASHIM. VS DCIT, AKOLA CIRCLE, AYAKAR BHAVAN, ALSI PLOT SQUARE, AKOLA (APPELLANT) (RESPONDENT) APPELLANT BY SH. K.B.LOHIYA, ADV. & SH. SHAILESH AGRAWAL, CA RESPONDENT BY SH. GITESH KUMAR, SR.DR DATE OF HEARING 06.03.2018 DATE OF PRONOUNCEMENT 06.03.2018 O R D E R PER BENCH THESE TWO APPEALS BY ASSESSEE ARE ARISING OUT OF TH E ORDER OF LD.CIT(A)-1, NAGPUR VIDE ORDER NO.CIT(A)-1/174/2013-14 AND CIT(A )-1/176/2013-14 DATED 05.11.2014 FOR A.Y 2007-08 AND 2010-11 RESPEC TIVELY. 2. THE FIRST COMMON ISSUES IN THESE TWO APPEALS OF THE ASSESSEE IS AS REGARDS TO THE ADDITION MADE BY THE AO AND CONFIRME D BY THE LD.CIT(A) BEING ACCRUED INTEREST OF NON PERFORMING ASSET (IN SHORT NPA) ACCOUNTS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG EXCEPT THAT INTEREST ON NPA WHICH WAS ACCOUNTED FOR ON CASH BASIS. ACCORDI NG TO THE AO, THE PROVISIONS OF SECTION 145(1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) ARE APPLICABLE AND THE ASSESSEE FOLLOWING MERCANTILE SY STEM OF ACCOUNTING SO AS TO ITA NO.71 & 72/NAG/2015 PAGE | 2 INCLUDE THE INTEREST ACCRUED ON NPA AS INCOME. AGG RIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A), WHO ALSO CONFIRM ED THE ACTION OF THE AO BY OBSERVING IN PARA 9, 9.1, 9.2 AND 9.3 AS UNDER:- 9.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. AS POINTED OUT BY THE APPELLANT IT IS OBSERVED THAT ON IDENTICAL FACT S, MY LEARNED PREDECESSORS HAVE DECIDED THE ISSUES VIDE ORDER NO. CIT(A)-I/013/09-10 DATED 05-07-2010 FOR AY 2007-08 AND VIDE DATED NO.C IT(A)- 1/339/2011-12 ORDER 15.11.2012 IN APPELLANT'S OWN C ASE FOR A.Y. 2009-10 HOLDING THAT THE ADDITION ON INTEREST ON NP A IS REQUIRED TO BE MADE IN. ACCORDANCE WITH THE BOARD'S CIRCULAR DATED 09.10.1984. 9.2 IN VIEW OF THE BOARD'S CIRCULAR DATED 09.10.198 4, THE APPELLANT WAS REQUIRED TO FILE THE CLASSIFICATION/DETAILS OF SUCH DEBTS/NPAS, IN TERMS OF THE AGE OF DEBTS, TO ASCERTAIN THE QUANTUM OF INTER EST ATTRIBUTABLE TO SUCH NPAS WHICH HAVE BECOME IRRECOVERABLE OR NO REC OVERY FOR THREE CONSECUTIVE ACCOUNTING YEARS COULD BE MADE BY THE A PPELLANT WITH A VIEW TO BRING THE INTEREST ACCRUED ON SUCH NPAS WIT HIN TAXABILITY, AS THE AMBIT OF ENVISAGED IN THE BOARD'S CIRCULAR. 9.3.CONSIDERING THE FACTS OF THE PRESENT CASE, IT W OULD BE NECESSARY TO COMPUTE THE INCOME THAT IS TO BE BROUGHT TO TAX BEI NG INTEREST ON CERTAIN AMOUNTS CLASSIFIED AS NPAS IN VIEW OF THE BOARD'S A BOVE REFERRED CIRCULAR DATED 09.10.1984. THE AR OF THE APPELLANT VIDE HIS LETTER HAS PROVIDED THE BIFURCATION OF THE INTEREST ACCRUED ON NPAS AND THE FIGURES OF INTEREST ATTRIBUTABLE TO SUCH NPAS, WHICH ARE OU TSTANDING FOR LESS THAN 3 YEARS AND ABOVE 3 YEARS AS UNDER: SR. NO. PARTICULARS AS ON 31.03.2007 PRINCIPAL OD INTEREST 1. SUBSTANDARD (>3M<12M) 29920141.17 2546954.96 2. DOUBTFULA (>12M<24M) 27784194.73 10995346.34 3. DOUBTFULB(>24M<36M) 14968522.62 7735312.65 ITA NO.71 & 72/NAG/2015 PAGE | 3 4. DOUBTFUL B (>36M<48M) 44086039.14 35921325.21 5. DOUBTFULC(>48M) 38668119.92 43008511.78 TOTAL 155427017.58 100207450.94 ACCORDINGLY, AS PER THE DETAILS SUBMITTED BY THE AP PELLANT, IT IS SEEN THAT OUT OF THE TOTAL ACCRUED INTEREST ON NPAS OF R S.10,02,07,451/- AN AMOUNT OF RS. 2,12,77 ,614/ - ONLY IS LIABLE TO BE TAXED AS INTEREST CHARGED BUT NOT RECEIVED ON SUCH NPAS WHICH FALLS W ITHIN THE PERIOD OF LESS THAN 3 YEARS. ACCORDINGLY, THE AO IS DIRECTED TO TAX RS.2,12,77,614/-AS INTEREST ACCRUED ON NPAS AS AGAI NST RS.10,02,07,451/-.THE FIGURES PROVIDED BY THE AR OF THE APPELLANT AS MENTIONED ABOVE, ARE THOUGH DULY CERTIFIED BY THE B ANK MANAGEMENT. THIS GROUND IS PARTLY ALLOWED. AGGRIEVED THE ASSESSEE CAME IN APPEAL BEFORE THE TR IBUNAL. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE STATE D THAT THE ISSUES ARE REGARDING ACCRUED INTEREST ON NPA AMOUNTING TO RS.3 3,47,052/-, DEDUCTION OF EXCESS NPA INTEREST DISALLOWED AMOUNTING TO RS.82, 53,506/-, OVERDUE INTEREST DIFFERENCE OF RS.47,69,440/- ON NPA THE ISSUE IS TH E SAME. WE FIND THAT THE ISSUE AS REGARDS TO OVERDUE INTEREST ON NPA ACCOUNT AND WE HAVE ALREADY ADJUDICATED THIS ISSUE IN THE CASE OF ITA NO.127, 1 28 & 135/NAG/2015 IN THE CASE OF THE BULDHANA DISTRICT CENTRAL COOP. BANK LT D. VS DCIT WHEREIN WE HAVE HELD AS UNDER:- 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT REVERSAL OF DOUBTFUL CLAIM MADE WITH THE GOVERNMENT FOR SUBVENTION OF INTEREST S, THE ASSESSEE HAS CREDITED A SUM OF RS.17,16,80,205/- IN THE P&L A/C ON ESTIMATE BASIS. THE ASSESSEE ENCLOSED THE DETAILS OF THE SA ME IN ITS PAPER ITA NO.71 & 72/NAG/2015 PAGE | 4 BOOK AT PAGE 26, WHICH ARE EXTRACTED HEREUNDER FOR READY REFERENCE:- SR. PARTICULARS AMOUNT RS. 1. KHARIF SEASON 2009-10 INTEREST @1.75% SUBVENTION RECEIVABLE UPTO 31.03.2010 14592900/- 2. KHARIF SEASON 2009-10 INTEREST @ 3% SUBVENTION RECEIVABLE UPTO 31.03.2010 25016401/- 3. KHARIF SEASON 2009-10 - 4% PUNJABRAO DESHMUKH SCHEME & INTEREST SUBVENTION UP TO 31.03.2010 ON RS.60.00 CRORES 24000000/- 4. CENTRAL GOVERNMENT AGRICULTURAL LOAN WAIVER & LO AN REPAYMENT RELIEF SCHEME 2008, AMOUNT RECEIVABLE FRO M CENTRAL GOVERNMENT RS.5849.08 LACS AND INTEREST RECEIVABLE FOR THE PERIOD 01.11.2008 TO 31.03.2010 FOR 17 MONTHS @12% 98070904/- 5. RECEIVABLE FROM GOVERNMENT OF MAHARASHT.7ESPECT OF KHARIF SEASON 2009-10 INTEREST SUBVENTION @1% ON TH E LOAN 10000000/- TOTAL 171680205/- 5. THESE CLAIMS ARE ON ACCOUNT OF SUBVENTION OF INT ERESTS FOR KHARIF SEASON FOR THE YEAR 2009-10 AND PROBABLY WAIVER OF LOAN AND PAYMENT SCHEME, 2008. BEFORE US, IT WAS EXPLAINED BY THE ASSESSEE THAT OUT OF THE TOTAL CREDIT OF RS.17,16,80,205/-, THE ASSESSEE CLAIMED DEDUCTION OF RS.10,15,60,904/- BECAUSE THE SAID AM OUNT HAS BEEN INCLUDED IN THE INCOME WRONGLY BY THE ASSESSEE AND THIS CAME TO HIS KNOWLEDGE WHEN THIS WAS POINTED OUT BY THE STATUTOR Y AUDITOR IN HIS AUDIT REPORT AND, THEREFORE, THE SAME WAS CLAIMED I N THE COMPUTATION OF INCOME SUBMITTED ALONGWITH THE RETURN OF INCOME. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 34 OF THE A SSESSEES PAPER BOOK WHEREIN AUDITORS REPORT DATED 06.09.2010, THE ESTIMATE IS GIVEN AS UNDER:- ITA NO.71 & 72/NAG/2015 PAGE | 5 1. CONTINGENT BOOKING OF INTEREST RECEIVABLE ON EST IMATED BASIS: IN THE CASE OF INTEREST EARNED ON ADVANCES AND DIS COUNT THE BANK HAS INCLUDED RS. 1716.80 LAKH INTEREST UNDER THE HEAD ' GOVT AGRO RURAL DEBT RELIEF'. THIS AMOUNT INCLUDES INTEREST SUBVENT ION DUE FROM STATE ALSO. AS PER BANK, IT HAS RECEIVED AMOUNT OF RS. 44 3.81 LAKH BEFORE 31/03/2011 AND NOW BALANCE AMOUNT OF RS. 1411.66 LA KHS PERTAINS TO THE AMOUNT OF INTEREST, WHICH HAS BEEN BOOKED BY THEM ON ESTIMATED BASIS TOWARDS AMOUNT OF AGRI DEBT RELIEF AND INTERE ST SUBVENTION RECEIVED BY THEM LATE FROM CENTRAL AND STATE GOVERN MENT, THE AMOUNT OF 1015.61 IS REVERSED AND DEBITED TO PROFIT AND LO SS ACCOUNT OF THE AUDIT PERIOD. OUT OF TOTAL OUTSTANDING OF RS 1716.80 LAKHS AND BA LANCE AMOUNT OF RS 257.38 LAKHS STILL RECEIVABLE FROM STATE AND CENTRA L GOVERNMENT, OUT OF RS WHICH RS 14.87 LAKHS IS RECEIVED IN THE MONTH OF JUNE -2011. 6. IT WAS EXPLAINED THAT THE CREDIT WAS MADE ON TH E BASIS THAT THE ASSESSEE MAY RECEIVE THE SAME FROM STATE GOVERNMENT AND CENTRAL GOVERNMENT AS PER THE SCHEME OF 2008 BUT ACTUALLY A S AGAINST DEMAND OF RS.9,80,70,904/-, THE ASSESSEE RECEIVED O NLY A SUM OF RS.2,05,10,000/- FROM THE CENTRAL GOVERNMENT AND BA LANCE DEMAND OF RS.7,75,60,904/- WAS REJECTED. SIMILARLY, A DEMAND OF 4% IN RESPECT OF PUNJABRAO DESHMUKH INTEREST WAIVER SUBVENTION SC HEME WAS ALSO REJECTED FOR AN AMOUNT OF RS.2.40 CRORES. THEREFORE , THE TOTAL COMES TO RS.10,15,60,904/- AND THIS AMOUNT WAS REVERSED AND DEBITED TO THE P&L A/C FOR THE RELEVANT A.Y. 2011-12 AND IN THE CO MPUTATION OF INCOME, SAME HAS BEEN ADDED BECAUSE THE CLAIM HAS A LREADY BEEN MADE IN THE RETURN OF INCOME FOR A.Y. 2010-11. IT W AS EXPLAINED THAT THIS CLAIM WAS MADE IN A.Y. 2010-11 BECAUSE IT WAS SUBSEQUENTLY POINTED OUT BY THE STATUTORY AUDITOR IN HIS AUDIT R EPORT. IT WAS ITA NO.71 & 72/NAG/2015 PAGE | 6 EXPLAINED THAT THERE IS NO CLAIM OF DOUBLE DEDUCTIO N FOR THIS, HE SUBMITTED THE FOLLOWING DETAILS AS UNDER:- 1. KHARIF SEASON 2009-10-4% PUNJABRAO DESHMUKH SCHEME & INTEREST SUBVENTION UP TO 31.03.2010 ON RS.60.00 CR ORES THIS AMOUNT IS RECEIVABLE BY THE TALUKA SOCIETIES & THEREFORE REVERSED. 24000000 2. CENTRAL GOVERNMENT AGRICULTURAL LOAN WAIVER & LO AN REPAYMENT RELIEF SCHEME 2008, AMOUNT RECEIVABLE FRO M CENTRAL GOVERNMENT RS.5849.08 LACS FOR THE PERIOD 01.11.2008 TO 31.03.2010 FOR 17 MONTHS @12%. THIS I NTEREST IS RECEIVABLE AT THE TREASURY RATE AT RS.20510000/- (98070904 - 20510000) 77560904 TOTAL 101560904 ASSESSEE IS SUBMITTING HEREWITH DETAILS OF INTEREST OF RS.171680205/- FOR THE F.Y.2010-11. PARTICULARS AMOUNT RS. TOTAL AMOUNT OF INTEREST SHOWN AS RECEIVABLE 17,16, 80,205 AMOUNT RECEIVED ON 30.04.2010 1,00,00,000 AMOUNT RECEIVED ON 04.08.2010 39,90,000 AMOUNT RECEIVED ON 13.08.2010 1,65,20,000 22.11.2010 AMOUNT REVERSED AS ABOVE 10,15,60,904 AMOUNT RECEIVED ON 31.03.2011 1,38,70,338 BALANCE 2,57,38,963 7. IN VIEW OF THE ABOVE DETAILS, WE ARE CONVINCED T HAT THE ASSESSEES CLAIM IS A BONAFIDE AND THE AMOUNT WHICH HAS BEEN R EVERSED AND DEBITED TO THE P&L A/C FOR A.Y. 211-12 HAS ALREADY BEEN ADDED IN THE COMPUTATION OF INCOME BECAUSE THE ASSESSEE HAS ALRE ADY CLAIMED THE SAME IN THE COMPUTATION OF INCOME FOR A.Y. 2010-11 I.E. YEAR UNDER CONSIDERATION. IN VIEW OF THESE FACTS, WE ALLOW TH E CLAIM OF THE ASSESSEE AND THIS ISSUE OF ASSESSEES APPEAL IS ALL OWED. ITA NO.71 & 72/NAG/2015 PAGE | 7 4. AS WE HAVE PRINCIPALLY DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE IN THE CASE OF THE BULDHANA DISTRICT CENTRAL COOP. BANK LT D. VS DCIT (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO RE-COMPUTE THE OVERDUE INTEREST AND ACCRUED INTEREST ON NPAS ACCOR DING. 5. ONE MORE ISSUE IN ITA NO.72/NAG/2015 IS AS REGAR DS TO THE ORDER OF LD.CIT(A) IN CONFIRMING THE DISALLOWANCE OF DEDUCTI ON U/S 40(A)(IA) OF THE ACT FOR SHORT DEDUCTION OF TDS AMOUNTING TO RS.3,66,660 /-. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN REJECTING THE CLAIM IN RESPECT OF SHORT DEDUCTION O F TDS FOR RS.3,66,660/- U/S 40(1)(IA). 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS S.K.TEKRIWAL IN ITA NO.183 OF 2012 VIDE ORDER DATED 0312.2012 WHEREIN IT IS H ELD THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE WHEREVER SHORT DEDUCTION OF TDS IS MADE. AS NO DISALLOWANCE CAN BE MADE FOR SHORT DEDUCTION OF TDS, WE DIRECT THE AO TO VERIFY THAT THE ASSESSEE HAS DEDUCTED TDS BUT MA Y BE SHORT. SHORT DEDUCTION DOES NOT GIVEN ANY RIGHT TO AO TO DISALLO W THE EXPENSES FOR SHORT DEDUCTION. THIS ISSUE OF THE ASSSESSEES APPEAL IS ALLOWED BUT SUBJECT TO VERIFICATION. ITA NO.71 & 72/NAG/2015 PAGE | 8 7. IN THE RESULT, BOTH APPEALS FILED BY THE ASSESSE E ARE ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH MARCH, 2018. (G.D.AGRAWAL) (MAHAVIR SINGH) HONBLE PRESIDENT JUDICIAL MEMBER DATED:06 TH MARCH, 2018 *AMIT KUMAR* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), NAGPUR 4. THE CIT, NAGPUR 5. THE DR, BENCH, ITAT, NAGPUR BY ORD ER ASSISTANT REGISTRAR ITAT, NAGPUR BENCH, NAGPUR