The Asstt. Commissioner of Income Tax, Central Circle-2(3), Ahmedabad V. The Bhuj Mercantile Co.Op. Bank Limited, Ahmedabad

ITSSA 145/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5538 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 23-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N R SONI
• Keywords: Question of law
• Section: 143(3); 153A; 145; 56; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.(SS)A. NOS.142, 143, 144 & 145/AHD/2017 (ASSESSMENT YEARS : 2011-12, 2012-13, 2013-14 & 201 4-15) ACIT, CENTRAL CIRCLE 2(3), AHMEDABAD. VS. THE BHUJ MERCANTILE CO- OP BANK LTD., MITHAKHALI SIX ROAD, MITHAKHALI, NAVRANGPURA, AHMEDABAD. [PAN NO. AAABT 0110 C] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI N. R. SONI, CIT-DR RESPONDENT BY : --NONE-- DATE OF HEARING 24.01.2019 DATE OF PRONOUNCEMENT 30.01.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE BUNCH OF APPEALS FILED BY THE REVENUE ARE AGAIN ST THE COMMON ORDERS DATED 22.12.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-12, AHMEDABAD ARISING OUT OF THE ORDER DATED 28.01.2016 FOR THE A SSESSMENT YEARS 2011-12, 2012-13, 2013-14 & 2014-15 WHEREBY AND WHEREUNDER THE ORDER OF ADDITION MADE UNDER SECTION 143(3) R.W.S. 153A(1)(B) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) HAS BEEN DELETED. SINCE THE ISSUES INVOLVED IN THESE CASES ARE IDENTI CAL THE SAME ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON ORDER. IT(SS) A NO.142/AHD/2017 IS TAKEN AS THE LEAD CASE, WITH THE FOLLOWING GROUNDS: - 2 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN DELETING THE ADDITI ON MADE ON ACCOUNT OF ACCRUED INTEREST ON NPAS OF RS.41,72,017/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE EXTENT. 2. THE BRIEF FACTS LEADING TO THIS CASE IS THIS THA T THE ASSESSEE BEING A CO-OPERATIVE SOCIETY ENGAGED IN BANKING ACTIVITIES PERMITTED TO CO-OPERATIVE BANKS. A SEARCH OPERATION U/S 132 OF THE ACT WAS CARRIED OUT ON 30. 07.2013. SUBSEQUENTLY, A NOTICE U/S 153A WAS ISSUED ON 17.06.2014 AND SERVED UPON THE A SSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE FILED ITS RETURN OF INCOME ON 13.07.20 15 DECLARING TOTAL INCOME AT RS.1,80,22,496/-. THE ASSESSMENT PROCEEDING WAS COM PLETED U/S 143(3) R.W.S. 153A(1)(B) OF THE ACT ON 28.01.2016 AT RS.2,21,94,513/- CULMIN ATING INTO AN ADDITION OF RS.41,72,017/- ON ACCOUNT OF INTEREST INCOME ON NON -PERFORMING ASSETS (NPAS), AGAINST WHICH THE ASSESSEE PREFERRED AN APPEAL BEFORE THE L EARNED CIT(A) WHO IN TERM DELETED SUCH ADDITION. HENCE, THE INSTANT APPEAL BEFORE US BY THE REVENUE. 3. AT THE TIME OF HEARING OF THE MATTER, THE LEARNE D COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS COVE RED BY NUMBER OF JUDGMENTS INCLUDING THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COUR T IN THE CASE OF MAHILAVIKAS CO- OPERATIVE BANK PASSED IN ITA NO.531/2015 DATED 05.08.2016 . 4. ON THE CONTRARY, THE LEARNED DR RELIED UPON THE ORDER PASSED BY THE LEARNED AO. 5. DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE W AS ASKED TO EXPLAIN AS TO WHY ACCRUED INTEREST ON NPAS SHOULD NOT BE BROUGHT TO T AX PRIMARILY FOR THE TWIN REASONS THAT THE APPELLANT MAINTAINS ACCOUNTS ON MERCANTILE BASI S, AND, THAT INTEREST HAS ACCRUED. AGAINST THIS THE ASSESSEE CONTENDED THAT AS PER RBI CIRCULAR NO.9/09.14.000/2006-07 - 3 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 DATED 08.08.2006, THE APPELLANT IS OBLIGED NOT TO D EBIT SUCH INTEREST ON NPAS NOT REALIZED TO BORROWER PARTY ACCOUNTS OR TO CREDIT S UCH INTEREST ON NPAS TO P&L ACCOUNT. SIMILARLY, THE APPELLANT IS ALSO REQUIRED TO DEBIT INTEREST RECEIVABLE ACCOUNT AND CREDIT OVERDUE INTEREST RESERVE ACCOUNT WITH RESPECTIVE AMOUNTS OF INTEREST ON NPAS DUE/ACCRUED BUT NOT REALIZED. AS AND WHEN ANY PART OF SUCH OVER-DUE INTEREST AMOUNTS IS RECEIVED, THE SAME IS OFFERED AS INCOME AS ALSO SUBMITTED BY THE ASSESSEE. IN THAT VIEW OF THE MATTER, IT WAS SUBMITTED THAT INTEREST ON NP AS, THOUGH ACCRUED, IS NOT CREDITED TO P&L ACCOUNT FOLLOWING MANDATORY GUIDELINES ISSUED B Y RBI AND THEREFORE NO QUESTION OF MAKING THE ADDITION WOULD ARISE. HOWEVER, SUCH P LEA WAS NOT ACCEDED TO BY THE LEARNED AO RELYING UPON THE JUDGMENT PASSED IN THE MATTER OF STATE BANK OF TRVANCORE [1986] 158 ITR 102 (SC) . IT APPEARS THAT THE LEARNED AO HELD THAT DESPITE RB I CIRCULAR, IN VIEW OF THE FACT THAT THE APPELLANT HAS NOT BEEN ABLE TO SHOW THAT S UCH CIRCULAR SHALL PREVAIL OVER INCOME- TAX PROVISIONS, THE INCOME ACCRUED NEEDS TO BE BR OUGHT TO TAX. ACCORDINGLY, THE ADDITIONS WERE MADE IN THE MANNER AS FOLLOWS: A.Y. ADDITION MADE RS. 2011-12 41,72,017 2012-13 48,46,363 2013 - 14 53,02,154 2014 - 15 49,73,052 6. IN APPEAL, THE ASSESSEE THOUGH FAIRLY SUBMITTED THAT FOR A.Y. 2009-10, THE LEARNED CIT(A) PASSED AN ORDER AGAINST THE ASSESSEE, HOWEVE R, THE ASSESSEE IS COVERED BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF MAHILAVIKAS CO-OPERATIVE BANK . ON THE BASIS OF SUCH SUBMISSION AND UPON PERUSAL OF THE RECORD O F THE CASE, THE LEARNED CIT(A) PASSED THE ORDER IN FAVOUR OF THE ASSESSEE BY DELET ING THE ADDITION MADE BY THE LEARNED AO WITH THE FOLLOWING OBSERVATION: 5. I HAVE NOTED THAT THERE IS NO DISPUTE THAT THE AMOUNTS ADDED BACK BY THE AO ARE INDEED NOT CREDITED BY THE APPELLANT TO P & L A /C AS MANDATED UNDER RBI - 4 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 GUIDELINES (SUPRA). THE WORKING OF TREATMENT OF INT EREST ON NPAS, AFTER CONSIDERING THE RECEIPT AND OFFER AS TAXABLE INCOME OUT OF THESE AMOUNTS IN SUBSEQUENT PERIODS, GIVEN BY THE APPELLANT TO THE A O, IS AS UNDER: PARTICULARS ACCRUED INTEREST AS PER I.T. NOTICE (B) ACCRUED INTEREST AS PER BANKS REVISED WORKING (1) ACCRUED INTEREST ALREADY CONSIDER ED AS INCOME IN THE F.Y. 2011-12 (RECEIPT BASIS) (2) ACCRUED INTEREST ALREADY CONSIDERED AS INCOME IN THE F.Y. 2012-13 (RECEIPT BASIS) (3) ACCRUED INTEREST ALREADY CONSIDERE D AS INCOME IN THE F.Y. 2013-14 (RECEIPT BASIS) (4) ACCRUED INTEREST ALREADY CONSIDERED AS INCOME IN THE F.Y. 2014-15 (RECEIPT BASIS) (5) NET INTEREST NPA 6=[1- (2+3+4+5)] FOR THE YEAR ENDED 31.03.2011 57,60,797 41,72,017 4,85,032 2,37,836 95,953 0 33,5 3,196 FOR THE YEAR ENDED 31.03.2012 67,40,620 53,31,395 0 4,69,850 1,69,359 0 46,92,186 FOR THE YEAR ENDED 31.03.2013 69,14,909 65,29,801 0 0 5,18,795 5,19,961 54,91,045 FOR THE YEAR ENDED 31.03.2014 3,43,35,765 65,15,205 0 0 0 7,58,046 57,57,159 TOTAL 5,37,52,091 2,25,48,418 4,85,032 7,07,686 7,8 4,107 12,78,007 1,92,93,586 5.1 1 WOULD FIRSTLY NOTE THAT THE AO HIMSELF H AS RELIED EXCLUSIVELY ON THE APPELLANT'S WORKING AS PER TABLE ABOVE FOR ARRIVING AT THE 'ACCRUED INTEREST ON NPAS TO BE BROUGHT TO TAX. STILL, IT IS NOT CLEAR HOW THE AO'S FIGURES OF ADDITION MADE BY HIM ARE MATCHING NEITHER WITH COLUMN B, NOR WITH COLUMN 1 NOR ALSO WITH COLUMN 6 IN THE ABOVE TABLE, THOUGH TH E TOTAL ADDITION OVER FOUR YEARS (1,92,93,586/-) MATCHES WITH TOTAL OF COLUMN 6 ABOV E. MOREOVER, IT TRANSPIRED DURING THE COURSE OF HEARING THAT THE FIGURES IN TA BLE ABOVE WERE PROVIDED BY THE APPELLANT BY MANUALLY CALCULATING THE I NTEREST DUE ON NPAS BUT NOT CALCULATED/DEBITED IN BOOKS ACCURATELY FOR THE REAS ON THAT THE APPELLANT-BANK WAS UNDER THE MANAGEMENT OF ADMINISTRATOR DURI NG THE INTERVENING PERIOD. MY VERIFICATION, HOWEVER, HAS ALSO REVEALED THAT TH E APPELLANT HAS ALSO SHOWN THE INTEREST RECOVERED FROM NPAS AS INCOME WHEN ACTUALL Y RECEIVED, WHICH HAS BEEN SO ACCEPTED BY THE AO AND THIS PARTICULAR ASPECT HA S NOT BEEN DISPUTED OR CHALLENGED BY THE AO. THE AR ALSO INFORMED ME BY WA Y OF FILING THE BALANCE-SHEET AS ON 31/3/2016 THAT THE INTEREST ON NPAS HAS INCRE ASED TO RS. 6,47,74,047/- AS AT 31/3/2016 AND THAT CORRESPONDING AMOUNTS ARE SHOWN AS RESERVE/RECEIVABLE IN THE BALANCE-SHEET AS PER RBI GUIDELINES. THE TOTAL AMOU NT OF ADDITION MADE BY THE AO - 5 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 ON ACCOUNT OF 'ACCRUED INTEREST ON NPAS' OVER THE F OUR ASSESSMENT YEARS UNDER REFERENCE IS ONLY RS. 1,92,93,586/-, WHICH IS LES S THAN THE AMOUNT OF 'INTEREST RECEIVABLE ON NPAS' AS AT 31/3/2016 AS SHOWN I N THE BALANCE-SHEET AS ON 31/3/2016. BE THAT AS IT MAY, THE INDISPUTABLE FACT WHICH EMERGES IS THAT THE ADDITION MADE BY THE AO IS ON ACCOUNT OF INTEREST ACCRUED ON NPAS BUT NOT RECEIVED, AS PER THE WORKING PROVIDED BY THE APPELLANT, WHICH OBVIOUSLY, WAS ALSO NOT CREDITED TO P & L ACCOUNT. POSSIBLY FOR PART OF SUCH 'ACCRUED INTEREST', NEITHER BORROWER PARTY ACCOUNTS NOR INTEREST RECEIV ABLE ACCOUNT WAS DEBITED BY THE APPELLANT FOR SOME INTERVENING PERIOD (F.YS. 20 11-12, 2012-13, 2013-14), AS THE BALANCE-SHEET AS ON 31 ST MARCH OF 2012, 2013 AND 2014 DO NOT SHOW RESERVES/RECEIVABLES OF CORRESPONDING AMOUNTS ADDED BY THE AO. NEVERTHELESS, THE AR IS ABSOLUTELY RIGHT THAT THE AMOUNTS ADDITIONALL Y BROUGHT TO TAX BY THE AO AS 'ACCRUED INTEREST REPRESENT INTEREST ON NPAS NOT CREDITED TO P & L ACCOUNT, WHICH IS THUS, FULLY IN SYNC WITH RBI GUIDELINES, THOUGH, ACCOUNTING ENTRIES IN KEEPING WITH THE RBI GUIDELINES WERE POSSIBLY NOT PASSED. I N MY CONSIDERED OPINION, ONCE THE AMOUNTS OF ACCRUED INTEREST ON NPAS ARE NEITHER DEBITED TO PARTY ACCOUNTS AND NOR CREDITED TO P & L ACCOUNT, THE SPIRIT OF PRUDEN TIAL NORM PRESCRIBED BY THE RBI (OF NOT TAKING SUCH 'DOUBTFUL INTEREST' TO P & L ACCOUNT) IS COMPLIED WITH BY THE APPELLANT, AND THEREFORE, WHETHER OR N OT THE CREDIT/DEBIT TO OVERDUE INTEREST RESERVE ACCOUNT/INTEREST REC EIVABLE ACCOUNT IS MADE, IS NOT MUCH OR CRITICALLY RELEVANT. FAILURE OR DISCREPANCY MERELY IN PASSING SUCH ACCOUNTING ENTRIES WOULD NOT MAKE THE AMOUNTS TAXABLE. THUS AND THEREF ORE, IT IS CRYSTAL CLEAR THAT THE .FACTS OF THE APPELLANT'S CA SE ARE SQUARELY COVERED BY THE DECISION OF JURISDICTIONAL HC (SUPRA). ACCORDINGLY, AND THEREFORE, IT NEEDS TO BE HELD THAT INTEREST ON NPAS NOT DEBITED TO PARTY ACC OUNTS AND NOT CREDITED TO P & L A/C BY THE APPELLANT IS RIGHTLY NOT OFFERED BY TH E APPELLANT AS INCOME FOR THE YEARS UNDER REFERENCE, AND, THAT THE AO HAS ERRED I N LAW IN BRINGING THESE AMOUNTS TO TAX. IN VIEW OF THE ABOVE, I HAVE NO HESITATION IN HOLDING THAT THERE IS NO MERIT IN THE ACTION OF THE AO IN BRINGING THE AM OUNTS OF 'ACCRUED INTEREST ON NPAS' TO TAX FOR THE RESPECTIVE ASSESSMENT YEARS. THUS, GROUND NO. 2 IS ALLOWED FOR ALL THE FOUR APPEALS AND THE FOLLOWING ADDITION S ARE DELETED: A.Y ADDITION DELETED RS. 2011 - 12 41,72,017 2012 - 13 48,46,363 2013-14 53,02,154 2014-15 49,73,052 - 6 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 7. WE HAVE HEARD THE LEARNED REPRESENTATIVE APPEARING FOR THE RESPECTIVE PARTIES, WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RE CORD. IT APPEARS THAT THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT DEALS THE S IMILAR ISSUE. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: SHRI MAHILA SEWA SAHAKARI BANK LTD ITA NO 531/2015 DTD 5/8/2O16: QUESTION OF LAW: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN HOLDING THAT INTEREST ON NON- PERFORMING ASSETS IS NOT TAXABLE ON ACCRUAL BASIS L OOKING TO THE GUIDELINES OF THE RESERVE BANK, OF INDIA?' EXTRACT FROM OPERATIVE PORTION OF DECISION: '28...... IN THE LIGHT OF THE VIEW ADOPTED BY THE C OURT, IT IS NOT NECESSARY TO ENTER INTO ANY DETAILED DISCUSSION AS REGARDS THE APPLICA BILITY OR OTHERWISE OF THE CBDT CIRCULAR TO THE FACTS OF THE PRESENT CASE. THE SUPR EME COURT IN UCO BANK, CALCUTTA V. CIT (SUPRA) HAS HELD THAT SUCH CIRCULAR S ARE NOT MEANT FOR CONTRADICTING OR NULLIFYING ANY PROVISION OF THE ST ATUTE. THEY ARE MEANT FOR PROPER ADMINISTRATION OF THE STATUTE, THEY ARE DESIGNED TO MITIGATE THE RIGOURS OF THE APPLICATION OF A PARTICULAR PROVISION OF THE STATUT E IN CERTAIN SITUATIONS BY APPLYING A BENEFICIAL INTERPRETATION TO THE PROVISI ON IN QUESTION SO AS TO BENEFIT THE ASSESSEE AND MAKE THE APPLICATION OF THE FISCAL PRO VISION, IN THAT CASE, IN CONCORDANCE WITH THE CONCEPT OF INCOME AND IN PARTI CULAR, NOTIONAL INCOME AS TREATMENT OF SUCH NOTIONAL INCOME UNDER THE ACCOUNT ING PRACTICE. THE COURT, ACCORDINGLY, DID NOT FIND ANY INCONSISTENCY OR CONT RADICTION BETWEEN THE CIRCULAR SO ISSUED AND SECTION 145 OF THE INCOME TAX ACT. IN THE AFORESAID PREMISES, UNTIL THE CIRCULAR IS REVOKED, THE SAME CONTINUES TO BE I N FORCE AND THE SAME HAVING BEEN ISSUED TO MITIGATE THE HARDSHIPS CAUSED TO THE CLASS OF ASSESSEES COVERED BY THE CIRCULAR, SUCH ASSESSEES WOULD BE ENTITLED TO T HE BENEFIT THEREOF. MERELY BECAUSE BY VIRTUE OF THE PROVISIONS OF SECTION 43D OF THE ACT, A CERTAIN CLASS OF ASSESSEES IS GIVEN BENEFIT UNDER THE PROVISIONS OF THE ACT WOULD NOT MEAN THAT THE SAME WOULD OVERRIDE THE CIRCULAR. 29. ON BEHALF OF THE APPELLANT IT HAS BEEN CONTEND ED THAT SECTION 43D OF THE ACT ITSELF RECOGNIZES RECOGNITION OF TAXABILITY OF SUCH INTEREST AND THAT WHEN A SPECIFIC PROVISION IN THE NATURE OF SECTION 43D OF THE ACT H AS BEEN MADE, AND ENTITIES LIKE THE ASSESSEE ARE EXCLUDED FROM THE PURVIEW THEREOF, THE ASSESSEE CANNOT INDIRECTLY - 7 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 CLAIM BENEFIT WHICH WOULD AMOUNT TO A BENEFIT SIMIL AR TO THAT UNDER SECTION 43D OF THE ACT. IN THIS REGARD, IT MAY BE NOTED THAT THE B ENEFIT CLAIMED BY THE ASSESSEE IS NOT UNDER ANY PROVISION OF THE INCOME TAX ACT, 1961 . THE ASSESSEE BEING BOUND BY THE RBI GUIDELINES WHICH ARE ISSUED UNDER THE PROVI SIONS OF THE RBI ACT HAS NOT SHOWN THE INTEREST ON NPA AS INCOME. BY VIRTUE OF T HE PROVISIONS OF SECTION 45Q OF THE RBI ACT, THE PROVISIONS OF CHAPTER IIIB THEREOF HAVE AN OVERRIDING EFFECT OVER OTHER LAWS INCLUDING THE INCOME TAX ACT, 1961. THER EFORE, NOTWITHSTANDING THE PROVISIONS OF SECTION 43D OF THE ACT, SINCE THE PRO VISIONS OF SECTION 45Q OF THE RBI ACT HAVE AN OVERRIDING EFFECT VIS-A-VIS INCOME RCCO GNITION PRINCIPLES IN THE COMPANIES ACT, THE ASSESSING OFFICER IS BOUND, TO F OLLOW THE RBI DIRECTIONS SO FAR AS INCOME RECOGNITION IS CONCERNED. THE CONTENTION THAT THE ASSESSEE CANNOT INDIRECTLY CLAIM THE BENEFIT WHICH WOULD AMOUNT TO A BENEFIT SIMILAR TO THAT , UNDER SECTION 43D OF THE ACT, THEREFORE, DOES NOT MERIT A CCEPTANCE. 30. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, BEFO RE THE ASSESSING OFFICER THE ASSESSEE HAD INTER ALIA SUBMITTED THAT INTEREST ON NPA WAS NOT CHARGED AS MANDATORILY STIPULATED UNDER INCOME RECOGNITION AND ASSET CLASSIFICATION NORMS OF THE RESERVE BANK OF INDIA. IT HAS ALSO BEEN SUBM ITTED THAT THE CBDT CIRCULAR BEARING F.NO.201/21/S4-ITA-II DATED 9.10.1984 ISSUE D UNDER SECTION 119 OF THE ACT FOR ALL BANKING AND NON-BANKING FINANCIAL COMPA NIES STATING THAT IF THE INTEREST HAS NOT BEEN RECEIVED FOR THREE YEARS, THE SAME WILL NOT BE TAXED AS AN INCOME EVEN ON ACCRUAL BASIS EVEN IF INTEREST HAS B EEN CREDITED TO 'INTEREST SUSPENSE ACCOUNT' WOULD BE APPLICABLE IN ITS CASE. THE ASSESSING OFFICER BRUSHED ASIDE THE SUBMISSION BASED UPON THE CIRCULAR OF 198 4, ON THE GROUND THAT THE SAME IS APPLICABLE ONLY TO BANKING COMPANIES AND NOT TO COOPERATIVE BANKS, ON A MISCONCEPTION OF LAW THAT A COOPERATIVE BANK IS NOT A BANKING COMPANY. IN THIS REGARD IT MAY BE NOTED THAT THE EXPRESSION 'BANKING COMPANY' HAS BEEN DEFINED UNDER SECTION 5 OF THE BANKING REGULATION ACT, 194 9 TO MEAN ANY COMPANY WHICH TRANSACTS THE BUSINESS OF BANKING IN INDIA. P ART V OF THE BANKING REGULATION ACT BEARS THE HEADING 'APPLICATION OF THE ACT TO CO -OPERATIVE SOCIETIES'. SECTION 56 THEREOF PROVIDES THAT THE PROVISIONS OF THE ACT, AS IN FORCE FOR THE TIME BEING, SHALL APPLY TO, OR IN RELATION TO CO-OPERATIVE SOCI ETIES AS THEY APPLY TO, OR IN RELATION TO BANKING COMPANIES SUBJECT TO THE MODIFI CATIONS STATED THEREUNDER. CLAUSE (A) OF SECTION 56, TO THE EXTENT THE SAME IS RELEVANT FOR THE PRESENT PURPOSE, PROVIDES THAT THROUGHOUT THE ACT, UNLESS THE CONTEX T OTHERWISE REQUIRES, - (I) REFERENCES TO A 'BANKING COMPANY' OR 'THE COMPANY' OR 'SUCH COMPANY' SHALL BE CONSTRUED AS REFERENCES TO A CO-OPERATIVE BANK. SEC TION 2(I) OF THE RBI ACT PROVIDES THAT 'COOPERATIVE BANK', 'CO-OPERATIVE CRE DIT SOCIETY', 'DIRECTOR', 'PRIMARY AGRICULTURAL CREDIT SOCIETY', 'PRIMARY CO- OPERATIVE SOCIETY' AND 'PRIMARY CREDIT SOCIETY' SHALL HAVE THE MEANINGS RE SPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949. EVIDE NTLY THEREFORE, THE EXPRESSION 'BANKING COMPANY' WOULD TAKE WITHIN ITS SWEEP A CO- OPERATIVE BANK. THE - 8 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 ASSESSING OFFICER HAS THEREAFTER ENTERED INTO A DIS CUSSION ON THE PROVISIONS OF THE SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSE TS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002, WHICH PROVIDES FOR ENFORCEMENT OF SECURITY INTEREST OF BANKS AND FINANCIAL INSTITUTIONS AND HAS OBSERVED THAT IN THE INSTANT CASE, NO MATERIAL HAS BEEN BROUGHT ONRECORD BY THE ASSESSEE TO PROVE ITS EFFORTS MADE IN A BID TO RECOVER SUCH DEBTS WHICH ARE CLASSIFIED AS NPA AND OTHER CATEGORIES. THE ASSESSING OFFICER HAS ALSO ENTERED INTO A DISCUSSIO N AS REGARDS THE QUALITY OF MANAGEMENT, ETC., WITHOUT EVEN EXAMINING AS TO WHET HER OR NOT THERE WAS ANY PROBABILITY OF INTEREST BEING RECEIVED ON THE NPAS. THE COMMISSIONER (APPEALS) HAS PLACED RELIANCE UPON THE DECISION OF THE SUPREM E COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED (SUPRA) AND HELD THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT UNDER COMMERCIAL AC COUNTING, INTEREST ON NPAS CANNOT BE CHARGED. ON THE QUESTION OF APPLICABILITY OF THE CBDT CIRCULAR DATED 9.10.1984, THE COMMISSIONER (APPEALS) HELD THAT THE SAME WOULD NOT BE APPLICABLE FOR THE REASON THAT THE PROVISIONS OF SE CTION 43D OF THE ACT ARE CLEAR AND CANNOT BE OVERRIDDEN THROUGH DELEGATED LEGISLAT ION VIZ. CIRCULARS AND NOTIFICATIONS. THE COMMISSIONER (APPEALS) WAS FURTH ER OF THE OPINION THAT THE STATUTORY PROVISIONS WERE BROUGHT ON THE ACT MUCH L ATER THAN THE SAID CIRCULAR (WHICH WAS ISSUED IN 1984) AND THEREFORE THE SAID C IRCULAR WOULD NOT HAVE ANY EFFECT OR BINDING FORCE UPON THE ASSESSING OFFICER. THE VIEW ADOPTED BY THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) IS CLEARLY CONTRARY TO THE VIEW EXPRESSED BY THIS COURT HEREINABOVE. THE TRIBUNAL W AS THEREFORE, WHOLLY JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSION ER (APPEALS) CONFIRMING THE ASSESSMENT ORDER. 31. IN THE LIGHT OF THE ABOVE DISCUSSION, THIS COUR T DOES NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE TRIBUNAL SO AS TO WARRANT INTERFERENCE. THE QUESTION IS, ACCORDINGLY, ANSWERED IN THE AFFIRMATI VE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CONSEQUENTLY, THE APPEAL FAILS AND IS, ACCORDINGLY, DISMISSED.....' 8. IT IS THEREFORE A SETTLED POSITION OF LAW THAT IN T ERMS OF HIS GUIDELINES FRAMED BY THE RBI INTEREST ON NPAS NOT DEBITED TO PARTYS ACCOUNTS AN D NOT CREDITED TO P&L ACCOUNT BY THE ASSESSEE IS NOT LIABLE TO TAX AND IN THIS PARTICULA R CASE AS RIGHTLY DONE BY THE ASSESSEE BY NOT OFFERING SUCH AS INCOME FOR THE YEAR UNDER REFERENC E. BUT NOW THE QUESTION WOULD BE WHETHER THE RBI GUIDELINES HAS AN OVERRIDING EFFECT ON THE TAXI NG STATUTE OR NOT. THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT CLEARLY EXPLAINED THAT THE BENEFIT CLAIMED BY THE ASSESSEE IS NOT UNDER THE PROVISION OF INCOME TAX ACT, 1961 BUT THE ASSESSEE BEING BOUND BY THE RBI GUIDELINES WHICH ARE ISSUED UNDER THE PROVISIONS OF THE RBI ACT HAS NOT SHOWN THE - 9 - IT(SS)A NOS.142, 143, 144 & 145/AHD/2 017 ACIT VS. BHUJ MERCANTILE COOP. BANK LTD. ASST.YEARS-2011-12, 2012-13, 2013-14 & 2014-15 INTEREST ON NPA AS INCOME. THEREFORE, NOTWITHSTANDI NG THE PROVISIONS OF SECTION 43D OF THE ACT, SINCE THE PROVISIONS OF SECTION 45Q OF THE RBI ACT HAVE AN OVERRIDING EFFECT VIS- A-VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIE S ACT, THE ASSESSING OFFICER IS BOUND, TO FOLLOW THE RBI DIRECTIONS SO FAR AS INCOM E RECOGNITION IS CONCERNED. THE CONTENTION THAT THE ASSESSEE CANNOT INDIRECTLY CLAI M THE BENEFIT WHICH WOULD AMOUNT TO A BENEFIT SIMILAR TO THAT, UNDER SECTION 43D OF THE A CT, THEREFORE, DOES SUSTAINABLE. 9. IN THAT VIEW OF THE MATTER, WE FIND NO DISCREPAN CY IN THE ORDER PASSED BY THE LEARNED CIT(A). IN THE ABSENCE OF ANY INFIRMITY FOU ND IN THE SAID ORDER WE CONFIRM THE SAME. 10. IN THE RESULT, ALL THE REVENUES APPEALS ARE DI SMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 30/01/2019 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/01/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-12, AHMEDABAD. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD