The Assistant Commissioner of Income Tax Circle-1 , Vijayapur V. Iikal Co-op Bank Ltd , IIKal

ITA 822/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7325 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: RAMASUBRAMANIAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B, BANGALORE BEFORE SHRI GEORGE GEORGE K, JM & SHRI JASON P.BOAZ , AM ITA NO.822/BANG/2017 : ASST.YEAR 2012-2013 ASST.COMMISSIONER OF INCOME-TAX, CIRCLE 1 VIJAYAPUR. M/S.ILKAL CO-OP BANK LTD. NEAR BASAVAN GUDI MARKET, ILKAL DIST : BAGALKOT PAN : AAAAP0212P. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SMT.PADMAMEENAKSHI, JCIT RESPONDENT BY : SHRI RAMASUBRAMANIAN, CA DATE OF HEARING : 26.10.2017 DATE OF PRONOUNCEMENT : 03.11.2017 O R D E R PER GEORGE GEORGE K, JM THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRE CTED AGAINST CIT(A)S ORDER DATED 25.01.2017. THE RELEVA NT ASSESSMENT YEAR IS 2012-2013. 2. THE CORRECTED GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS: 1. WHETHER THE LD.CIT(A), IS RIGHT IN LAW AND ON F ACTS IN DELETING THE ADDITIONS ON ACCOUNT OF ACCRUED INTERE ST ON LOANS WHICH ARE CLASSIFIED AS NON-PERFORMING ASSETS RELYING ON THE KARNATAKA HIGH COURT DECISION IN CAN FIN HOMES LTD. (2011) 5 TAX CROP (DT) 49593, IGNORING T HE PROVISIONS OF SECTION 43D OF THE I.T.ACT, 1961? 2. ON THE FACTS AND IN LAW WHETHER THE LD.CIT(A) IS RIGHT IN HOLDING THAT INCOME ACCRUED TO THE ASSESSEE CANN OT BE TAKEN AS INCOME IN THE YEAR IGNORING THE AMENDED PROVISIONS OF SECTION 43D OF THE I.T.ACT, 1961, WHIC H ITA NO.822/BANG/2017. M/S.ILKAL CO-OP BANK LIMITED. 2 PROVIDES CERTAIN BENEFIT TO THE CERTAIN CLASS OF AS SESSEE BUT DOES NOT PROVIDE SUCH BENEFIT TO THE ASSESSEE B ANK. 3. THE LD.CIT(A) DID NOT APPRECIATE THE FACT THAT T HE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF THE BILAGI PATTAN SAHAKARI BANK NIYAMIT, BILAGI IN ITA NO.100090 OF 2015 AND CANFIN HOMES HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLP HAS BEEN FILED BEFORE THE HONBLE SUPREME COURT, WHICH IS PENDING. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLL OW:- 3.1 THE ASSESSEE IS A CO-OPERATIVE BANK, ENGAGED IN THE BUSINESS OF BANKING. FOR THE ASSESSMENT YEAR 2012-2 013, THE RETURN OF INCOME WAS FILED ON 29.09.2012 DECLARING AN INCOME OF RS.2,63,83,610. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, BY ORDER DATED 16.03.2015. IN THE ASSES SMENT COMPLETED FOR ASSESSMENT YEAR 2012-2013, THE ASSESS ING OFFICER HAD MADE AN ADDITION OF RS.33,30,234 BEING INTEREST ACCRUED ON NON-PERFORMING ASSETS (NPA). THE ASSESSE E HAD NOT ACCOUNTED THE SAME SINCE THE INTEREST ACCRUED W AS ON A NON-PERFORMING ASSET AND BASED ON THE RESERVE BANK OF INDIA GUIDELINES, SAME WAS NOT CREDITED TO THE PROFIT & L OSS ACCOUNT. THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST WHICH HAD ACCRUED ON NON-PERFORMING ASSETS ALSO NEE DS TO BE TAKEN AS INCOME FOR THE RELEVANT ASSESSMENT YEAR. I T WAS FURTHER HELD BY THE ASSESSING OFFICER THAT SECTION 43D OF THE INCOME-TAX ACT IS NOT APPLICABLE TO THE ASSESSEE SI NCE THE ASSESSEE IS NOT AN ENTITY MENTIONED IN THE SAID SEC TION. ITA NO.822/BANG/2017. M/S.ILKAL CO-OP BANK LIMITED. 3 3.2 AGGRIEVED BY THE ADDITION OF RS.33,30,234, BEIN G INTEREST ON NON-PERFORMING ASSETS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3.3 THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CANFIN HOMES LTD. [(2012) 347 ITR 282 (KAR.)] AND THE BILAGI PTTAN SAHAKARI BANK NIYAMIT [ITA NO.100090 OF 2015] , DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 3.4 THE REVENUE BEING AGGRIEVED BY THE ORDER OF CIT (A), HAS PREFERRED THIS PRESENT APPEAL BEFORE THE TRIBUNAL. 3.5 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ASSESSMENT ORDER. 3.6 THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CANFIN HOMES LTD. (SUPRA). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A NON-SCHEDULE COOPERATIVE BANK, CARRYING ON THE BUSINESS OF BANKI NG. THE ASSESSEE, FOLLOWING THE PRUDENTIAL NORMS OF RESERVE BANK OF INDIA, DID NOT ACCOUNT FOR INTEREST WHICH HAD ACCRU ED ON NON- PERFORMING ASSETS (NPA). THE ASSESSING OFFICER WAS OF THE OPINION THAT EVEN SUCH INTEREST IN RELATION TO THE CONCERNED ASSESSMENT YEAR IS TO BE DISCLOSED IN THE PROFIT & LOSS ITA NO.822/BANG/2017. M/S.ILKAL CO-OP BANK LIMITED. 4 ACCOUNT SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE PROVISIONS OF SECTION 43D OF THE ACT DOES HAVE ANY APPLICATION TO THE ASSESSEE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CANFIN HOMES LTD. (SUPRA) HAD HELD THAT ONCE THE ASSETS HAS BEEN CLASSIFIED AS NON-PERFORMING ASSETS AND ANY INTEREST THAT IS ACCR UING ON THE SAME, CANNOT BE DEEMED TO BE INCOME. THE RELEVA NT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT RE ADS AS FOLLOW:- THEREFORE. NON-PERFORMING ASSET IS AN ASSET IN RESPECT OF WHICH INTEREST HAS REMAINED UNPAID AND H AS BECOME PAST DUE. ONCE A PARTICULAR ASSET IS SHOWN T O BE A NON-PERFORMING ASSET THEN THE ASSUMPTION IS IT IS NOT YIELDING ANY REVENUE. WHEN IT IS NOT YIELDING ANY R EVENUE, THE QUESTION OF SHOWING THAT REVENUE AND PAYING TAX WOULD NOT ARISE. AS IS CLEAR FROM THE POLICY GUIDEL INES ISSUED BY THE NATIONAL HOUSING BANK, THE INCOME FRO M NON-PERFORMING ASSET SHOULD BE RECOGNIZED ONLY WHEN IT IS ACTUALLY RECEIVED. THAT IS WHAT THE TRIBUNAL HELD I N THE INSTANT CASE. THEREFORE, THE CONTENTION OF THE REVE NUE THAT IN RESPECT OF NON-PERFORMING ASSETS EVEN THOUGH IT DOES NOT YIELD ANY INCOME AS THE ASSESSEE HAS ADOPTED A MERCANTILE SYSTEM OF ACCOUNTING, HE HAS TO PAY TAX ON THE REVENUE WHICH HAS ACCRUED NOTIONALLY IS WITHOUT ANY BASIS. IN THAT VIEW OF THE MATTER, . THE SUBSTANT IAL QUESTION FRAMED IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 5. SINCE THE FACTS CONSIDERED BY THE HONBLE JURISD ICTIONAL HIGH COURT AND THE FACTS OF THE INSTANT CASE ARE ID ENTICAL, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL FILED BY THE REVENUE. ITA NO.822/BANG/2017. M/S.ILKAL CO-OP BANK LIMITED. 5 6. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 03 RD DAY OF NOVEMBER , 2017. SD/- SD/- (JASON P.BOAZ) (GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE ; DATED : 03 RD NOVEMBER, 2017. DEVDAS* COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER, (ASSTT. REGISTRAR) ITAT, BANGALORE 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT, BELAGAVI. 4. CIT(A), BELAGAVI 5. DR, ITAT, BANGALORE 6. GUARD FILE.