2014 (1) TMI 1728 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Section 43D, interest income treatment.

ITO, Ward 1 (1), Versus. Kolhappur Mahila Sahakari Bank Ltd.,

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision regarding the applicability of Section 43D to the non-scheduled bank and the ... Applicability of provisions of Section 43D to the assessee Society being a non-scheduled bank - CIT(A) allowed the claim - Held that:- We are not inclined to interfere in the findings of CIT(A) who has held that the provisions of section 43D were applicable to assessee’s society being non scheduled bank by following the decision of Osmanabad Janta Sahakari Bank Ltd.[2015 (3) TMI 886 - ITAT PUNE] Further, the CIT(A) was justified in holding that the interest income directly credited to the balance sheet was not real income. Accordingly, the order of CIT(A) is upheld. - Decided against revenue Issues:1. Applicability of Section 43D to a non-scheduled bank.2. Treatment of interest income directly credited to the balance sheet.Analysis:1. The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeal) regarding the applicability of Section 43D to a non-scheduled bank for the assessment year 2009-10. The Assessing Officer had taxed the accrued interest on nonperforming assets of the Co-operative Bank, which was not credited to the profit and loss account. The Assessing Officer held that the RBI guidelines did not regulate income tax law for co-operative banks and assessed the bank on an accrual basis. However, the CIT(A) decided in favor of the bank, following the decision in the case of Osmanabad Janta Sahakari Bank Ltd. The Tribunal upheld the CIT(A)'s decision, citing similar cases and confirming that the provisions of Section 43D were applicable to the bank as a non-scheduled bank.2. The second issue revolved around the treatment of interest income directly credited to the balance sheet. The Tribunal noted that the interest income was not routed through the profit and loss account, and the taxability of interest on sticky losses/advances was covered in favor of the bank based on previous decisions. The Tribunal found no reason to interfere with the CIT(A)'s order, as it was reasoned and consistent with previous judgments. The Tribunal upheld the CIT(A)'s decision that the interest income directly credited to the balance sheet was not considered real income, following the decision in the case of Osmanabad Janta Sahakari Bank Ltd. The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order.In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision regarding the applicability of Section 43D to the non-scheduled bank and the treatment of interest income directly credited to the balance sheet. The judgment provided a detailed analysis of the issues involved, citing relevant legal precedents and confirming the decisions based on consistent legal interpretations.