2012 (9) TMI 1023 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions in favor of assessee on various tax issues

Asstt. CIT Cir. 3, Nanded Versus Bhagyalaxmi Mahila Sahakari Bank Ltd. and vice-versa

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decisions in favor of the assessee on all issues raised, including deletion of ... Addition made on account of sticky advances - Decided in favour of assessee - See ACIT Versus Osmanabad Janta Sah. Bank Ltd. [2015 (3) TMI 886 - ITAT PUNE] Accrual of interest - interest on FDRs with NDCC Bank accrued with period of time - Held that:- there is no dispute to the factual position that the NDCC Bank is restrained from carrying on routine business transactions, inter alia, which pertains to accepting fresh deposits and/or repaying existing deposits, etc. As a consequence, it is quite clear that there is a genuine impairment on the part of the assessee to earn the impugned amount of interest on FDRs with NDCC Bank. In this background, the ultimate direction of the CIT(A) that the Assessing Officer may tax the interest on accrual basis, whenever NDCC Bank is allowed by the Reserve Bank of India to repay deposits or interest to the assessee, is reasonable and cannot be faulted with. We accordingly find no justifiable reasons to uphold the action of the Assessing Officer in taxing the amoun Addition made on account of payment of ex-gratia - Held that:- We find no error on the part of the CIT(A) in giving a direction to the Assessing Officer to verify the facts and then allow the deduction subject to payment having been made. We uphold the order of the CIT(A) on this issue. Addition on leave encashment - Held that:- The account statement shows that the expenditure claimed and actually paid during the year which reflects the liability arising during the year itself and it has been actually paid. In this view of above factual matrix, we find that the CIT(A) made no error in deleting the addition Issues:1. Deletion of addition made on account of sticky advances.2. Deletion of addition made on account of interest accrued on deposits with a specific bank.3. Deletion of addition made on account of payment of ex-gratia.4. Deletion of addition made on account of leave encashment.Deletion of Addition on Account of Sticky Advances:The Revenue appealed against the deletion of an addition made on account of sticky advances. The Revenue argued that the interest on a loan, doubtful of recovery, should be included in the income of the assessee. However, the Tribunal cited previous decisions in favor of the assessee, stating that the interest was not routed through the Profit & Loss account. The Tribunal upheld the decision in favor of the assessee, following the precedent set by previous cases.Deletion of Addition on Account of Interest Accrued on Deposits:The dispute involved the addition of interest accrued on Fixed Deposits with a specific bank. The Assessing Officer taxed the interest on an accrual basis, but the CIT(A) ruled in favor of the assessee. The CIT(A) considered the bank's financial problems, as it was barred by the RBI from repaying deposits. The Tribunal agreed with the CIT(A), stating that the interest cannot be taxed until the bank is allowed to resume normal operations. The Tribunal upheld the CIT(A)'s decision, noting the genuine impairment faced by the assessee.Deletion of Addition on Account of Ex-Gratia Payment:The Revenue challenged the deletion of an addition made on account of an ex-gratia payment. The Assessing Officer disallowed the payment, stating it was voluntary and not a statutory obligation. However, the CIT(A) directed verification of facts and allowed the deduction if the payment was made exclusively for business purposes. The Tribunal upheld the CIT(A)'s decision, citing relevant legal provisions and previous court decisions.Deletion of Addition on Account of Leave Encashment:The Revenue disputed the deletion of an addition made on account of leave encashment. The Assessing Officer disallowed the expenditure, claiming it pertained to a prior period. The CIT(A) deleted the addition, as the amount had been actually paid during the year. The Tribunal confirmed the CIT(A)'s decision, as the expenditure had been paid out during the relevant year.In conclusion, the Tribunal dismissed the appeal of the Revenue and upheld the decisions made by the CIT(A) in favor of the assessee on all the issues raised. The cross objection filed by the assessee was also dismissed as infructuous.