Kolhapur Mahila Sah. Bank Ltd., Kolhapur V. Income-tax Officer,

ITA 854/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0753 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: PRANJAL S PHADNIS
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 854 /PN/201 4 / ASSESSMENT YEAR : 20 1 0 - 1 1 KOLHAPUR MAHILA SAH AKARI BANK LTD., 1082 KH, B WARD, TUTUCHI BAG, OPP. KHASBAG, DIST. KOLHAPUR . / APPELLANT PAN: AAAAK0367R VS. THE INCOME TAX OFFICER, WARD - 1(1 ), KOLHAPUR . / RESPONDENT / APPELLANT BY : S HRI PRANJAL S. PHADNIS / RESPONDENT BY : SHRI MAZHAR AKRAM / DATE OF HEARING : 29 . 1 2 .2015 / DATE OF PRONOUNCEME NT: 31 .1 2 .2015 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , KOLHAPUR , DATED 19 . 1 2 .20 1 3 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 ( IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON MERIT IN CONFIRMING THE ADDITIONS ON ACCOUNT OF ACCRUED INTEREST ON NPA OF RS. 94,99,366/ - WHEN THE ISSUE WAS ITA NO. 854 /PN/20 1 4 KOLHAPUR MAHILA SAH. BANK LTD. 2 SQUARELY COVERED IN THE APPELLANTS FAVOUR BY THE DECISION OF PUNE TRIBUNAL IN CASE OF OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011. 2) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRE D IN LAW AND ON MERIT IN CONFIRMING THE PROVISIONS MADE BY THE ASSESSEE BANK FOR S T ANDARD ASSETS AT RS.1,00,000/ - WHEN THE PROVISION WAS MADE IN ACCORDANCE WITH THE RBI GUIDELINES. 3) THE ASSESSEE CRAVES FOR LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE GROUNDS OF APPEAL WITH THE PERMISSION OF THE HONBLE TRIBUNAL. 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT BOTH THE ISSUES RAISED IN THE PRESENT APPEAL ARE COVERED AND HENCE, THE ISSUES MAY BE DECIDED AS PER T HE PRECEDENTS. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 5. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS IN RELATION TO THE ADDITION MADE ON ACCOUNT OF ACCRUED INTEREST ON NPAS OF RS.94,99,366/ - . TO THE ADDITION MADE ON ACCOUNT OF ACCRUED INTEREST ON NPAS OF RS.94,99,366/ - . 6. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED 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 GUIDELINES, THE SAID INTEREST INCOME ON NPAS WA S TO BE RECOGNIZED, BUT NOT TO BE OFFER ED 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 IN THE HANDS OF ASSESSEE AND ADDITION TO TH E EXTENT OF RS. 94,99,366/ - WAS MADE IN THE HANDS OF ASSESSEE. ITA NO. 854 /PN/20 1 4 KOLHAPUR MAHILA SAH. BANK LTD. 3 7. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 9. WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN ASSESSEES OWN CASE IN ITA NO . 0 1 /PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 29.01.2014 . T HE TRIBUNAL IN TURN FOLLOWING THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011 , ORDER DATED 31.08.2012 , H ELD 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 ON 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 REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR 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 LIABLE TO BE ASSESSED ON ACCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BEN EFITS 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 OF SECTION 43D WERE NOT EXTENDED TO A CO - OPERATIVE BANK AND (II) THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY TH E 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 D ECIDED 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 FIND THAT IN OSMANABAD JANTA SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS DEC IDED 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 ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ISSUE OF THE TAXABILIT Y 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 N O 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 DISMISSED. THE ABOVE DECISION HAS BEEN FOLLOWED IN (I) ACIT, CIRCLE - 3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BA NK 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.8 17 & 1114/PN/2011. ITA NO. 854 /PN/20 1 4 KOLHAPUR MAHILA SAH. BANK LTD. 4 10. 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 VI EW OF THE GUIDELINES ISSUED BY THE RBI. 11 . THE ISSUE IN GROUND OF APPEAL NO.1 ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) AND TRIBUNAL 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.94,99,366/ - . THE GROUND OF APPEAL NO.1 RAISED BY THE ASSE SSEE IS THUS, ALLOWED. 12. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF PROVISION MADE AGAINST STANDARD ASSETS AT RS.1,00,000/ - . DISALLOWANCE OF PROVISION MADE AGAINST STANDARD ASSETS AT RS.1,00,000/ - . 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THA T THE ISSUE RAI SED IN GROUND OF APPEAL NO.2 WAS DECIDED AGAINST THE ASSESSEE BY PUNE BENCH OF TRIBUNAL IN THE SINDHUDURG DIST. CENTRAL CO - OP. BANK LTD. VS. ITO IN ITA NO.617/PN/2011, RELATING TO ASSESSMENT YEAR 2007 - 08 , WHEREIN IT WAS HELD THAT THE CLAIM OF EXPENDITURE ON ACCOUNT OF PROVISION FOR STANDARD ASSETS AT RS.1,00,000/ - WAS NOT TO BE ALLOWED AS DEDUCTION. 14. WE FIND THAT THE TRIBUNAL VIDE ORDER DATED 02.03.2012 HAD HELD THAT THE DECISION OF HONBLE SUPREME COURT IN SOUTHERN TECHNOLOGIES LTD. VS. JCIT REPORTED IN 320 ITR 577 (SC) WAS ATTRACTED AND THE PROVISION MADE ON ACCOUNT OF STANDARD ASSETS IS NOT TO BE ALLOWED AS DEDUCTION IN THE HANDS OF ASSESSEE. FOLLOWING THE SAME PARITY OF REASONING AND IN VIEW OF THE CONCESSION OF THE ITA NO. 854 /PN/20 1 4 KOLHAPUR MAHILA SAH. BANK LTD. 5 LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. 1 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF DECEM BER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST DECEM BER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE A PPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I / II, KOLHAPUR / CIT 4. / THE CIT - I / II, KOLHAPUR / CIT (CENTRAL), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE