The Bellad Bagewadi Urben Souhard Sahakari Niyamit, Belgaum V. Dy. CIT, Circle 2, Belgaum

ITA 72/PAN/2013

• Counselvise Citation: 7224114 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Assessee Lawyers: SURESH G SHOLAPURMATH
• Keywords: Bad and doubtful debts

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. 72/PNJ/2013 : (ASST. YEAR : 2009 - 10) THE BELLAD BAGEWADI URBAN SOUHARD SHAKARI NIYAMIT, BELLAD BAGEWADI 591 305. TAL. HUKKERI PAN : AAAAT4231F (APPELLANT) VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 2, BELGAUM (RESPONDENT) ASSESSEE BY : SURESH G. SHOLAPURMATH, CA REVENUE BY : NISHANT K., LD. DR DATE OF HEARING : 16/07/2014 DATE OF PRONOUNCEMENT : 08 /08/2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DT. 28.2.2013. ORIGINALLY THE ASSESSEE HAD TAKEN AS MANY AS 12 GROUNDS OF APPEAL BUT SUBSEQUENTLY, AT THE TIME OF HEARING THE LD. AR FILED REVISED GROUNDS OF APPEAL WHICH RELATE TO THE ONLY ISSUE OF ADDITION ON ACCOUNT OF INTEREST ACCRUED ON NPA AMOUNTING TO RS.13,71,008/ - IN THE INCOM E OF THE ASSESSEE. THE SAME ISSUE HAS BEEN TAKEN BY THE ASSESSEE IN THE PRAYER SUBMITTED BELOW THE GROUNDS OF APPEAL ORIGINALLY FILED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN URBAN SOUHARD SAHAKARI BANK ENGAGED IN CARRYING ON BUSINESS OF BANKING. THE AO WHILE FRAMING THE ASSESSMENT MADE AN ADDITION OF RS.13,71,008/ - ON ACCOUNT OF INTEREST ACCRUED AS THE AO NOTED FROM THE PROFIT & LOSS ACCOUNT THAT THE ASSESSEE HAD NOT OFFERED TO TAX THE AMOUNT OF I NTEREST ON ACCRUED BASIS IN RESPECT OF THE NPA. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). BEFORE 2 ITA NO. 72/PNJ/2013 (ASST. YEAR : 2009 - 10) THE CIT(A), THE ASSESSEE SUBMITTED THAT AS PER THE NORMS PRESCRIBED BY THE RESERVE BANK OF INDIA, INTEREST ON NPA SHALL NOT BE TAKEN TO REVENUE UNLESS R EALISED. THE LD. AR ALSO RELIED ON THE PROVISIONS OF SEC. 43D WHICH WAS INSERTED W.E.F. A.Y 2007 - 08. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT THE PROVISIONS OF SEC. 43D IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 3. WE HEARD THE RIV AL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSEE HAS SIMPLY PASSED AN ENTRY UNDER MEMORANDUM ACCOUNTS BY WHICH INTEREST RECEIVABLE IS DEBITED WITH AN AMOUNT OF RS.13,71,008/ - WITH EQUAL AMOUNT OF PROVISION APPEARING IN THE LIAB ILITIES SIDE . THE ULTIMATE EFFECT OF THE ENTRY IS THAT THE INTEREST ON THE NPA DOES NOT REMAIN CREDITED IN THE PROFIT & LOSS ACCOUNT. WE HAVE GONE THROUGH THE PROVISIONS OF SEC. 43D OF THE INCOME TAX ACT. THIS PROVISION, IN OUR OPINION, IS APPLICABLE TO THE CASE OF THE ASSESSEE. UNDER THIS SECTION IT HAS BEEN PROVIDED THAT IN THE CASE OF A PUBLIC FINANCIAL INSTITUTION OR A SCHEDULED BANK OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, THE INCOME BY WAY OF INTEREST IN RELAT ION TO SUCH CATEGORIES OF BAD OR DOUBTFUL DEBTS AS MAY BE PRESCRIBED HAVING REGARD TO THE GUIDELINES ISSU ED BY THE RESERVE BANK OF INDIA SHALL BE CHARGEABLE TO TAX IN THE PREVIOUS YEAR IN WHICH IT IS CREDITED TO ITS PROFIT AND LOSS ACCOUNT FOR THAT YEAR OR , AS THE CASE MAY BE, IN WHICH IT IS ACTUALLY RECEIVED BY THAT INSTITUTION OR BANK OR CORPORATION OR COMPANY, WHICHEVER IS EARLIER . SCHEDULED BANK DEFINED UNDER CLAUSE (D) OF EXPLANATION TO SEC. 43D STATES THAT SCHEDULED BANK SHALL HAVE THE MEANING A SSIGNED TO IT IN CLAUSE (II) OF THE EXPLANATION TO CLAUSE (VIIA) OF SUB - SECTION (1) OF SECTION 36 . SEC. 36(VIIA) AS INSERTED W.E.F. 1.4.2007 INCLUDES CO - OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULT URAL AND RURAL DEVELOPMENT BANK WITHIN ITS AMBIT. THUS, THE PROVISIONS OF SEC. 43D, IN OUR OPINION, ARE APPLICABLE IN THE CASE OF THE ASSESSEE SINCE THERE IS A SPECIFIC 3 ITA NO. 72/PNJ/2013 (ASST. YEAR : 2009 - 10) PROVISION IN SEC. 43D AND THE EFFECT OF THE ENTRY PASSED BY THE ASSESSEE IS THAT THE ASSESS EE HAS NOT CREDITED THE INTEREST ACCRUED ON NPA ACCOUNT DURING THE YEAR. THEREFORE, THE INTEREST ON NPA ACCOUNT, IN OUR OPINION, CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. WE ALSO NOTED THAT THE HON'BLE DELHI HIGH COURT IN DIT VS. BRAHAMPUTRA CAPITAL FINANCIAL SERVICES LTD. , 335 ITR 182 HAS CATEGORICALLY HELD THAT AS PER THE NORMS ISSUED BY RBI, THE INCOME ON NPA IS TO BE BOOKED ONLY WHEN IT IS ACTUALLY RECEIVED. THEREFORE, THE INTEREST IN RESPECT OF NPAS CANNOT BE TAKEN TO BE THE INCOME UNTIL IT IS RECEIVED. A SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE BENCH OF THE ITAT IN THE CASE OF SAMARTH URBAN CO - OPERATIVE BANK VS. DIT IN ITA NO. 1558/PN/2011 VIDE ORDER DT. 7.3.2013. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 /08/2014. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACC OUNTANT MEMBER PLACE : PANAJI DATED : 0 8 /08/ 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER