Tribunal rules on interest income, capital gains, gratuity disallowance, and TDS credit for bank.

The tribunal allowed the assessee's appeal regarding the addition of interest income on NPAs, ruling that it should be taxed only on a receipt basis. The tribunal also upheld the assessee's method of allocating deemed short-term capital gains and concluded that section 115JB did not apply to the assessee bank. Additionally, the tribunal allowed the provision for gratuity disallowance under section 43B and directed the granting of TDS credit. The appeal of the assessee was allowed, while the revenue's appeal was dismissed.

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Issues Involved:
1. Addition of Rs. 14,57,051/- on account of interest income related to Non-Performing Advances (NPAs).
2. Addition of Rs. 1,02,54,946/- on account of deemed short-term capital gains.
3. Applicability of provisions of section 115JB of the Income Tax Act.
4. Disallowance on account of provision for gratuity amounting to Rs. 2,18,00,000/-.
5. Adjustments in the computation of book profits under section 115JB.
6. Granting of TDS credit amounting to Rs. 10,19,31,487/-.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 14,57,051/- on Account of Interest Income Related to NPAs:
The first issue pertains to the addition of Rs. 14,57,051/- due to interest income on NPAs. The assessee, a bank incorporated in the Netherlands, argued that interest income on NPAs should be recognized only on receipt basis as per RBI guidelines and Accounting Standard -9 (AS 9). The AO contended that unless advances were overdue for more than six months as per Rule 6EA, interest should be recognized on an accrual basis. The assessee cited various judicial precedents and CBDT instructions to support its stance. The tribunal, following the Hon'ble Delhi High Court's decision in CIT vs Vasisth Chay Vyapar Ltd, ruled that interest income on NPAs should not be assessed on a mercantile basis and should be taxed only on receipt basis. Thus, the assessee's appeal on this ground was allowed.

2. Addition of Rs. 1,02,54,946/- on Account of Deemed Short-Term Capital Gains:
The second issue involves the addition of Rs. 1,02,54,946/- as deemed short-term capital gains from the sale of a residential building. The assessee had allocated the sale consideration between 5% and 10% blocks of assets and computed the gains accordingly. The AO, however, adjusted the entire sale consideration against the 5% block, resulting in a higher STCG. The tribunal upheld the assessee's method of allocation based on the principle of consistency and allowed the appeal, stating that the allocation and computation were correctly done by the assessee.

3. Applicability of Provisions of Section 115JB of the Income Tax Act:
The third issue concerns the applicability of section 115JB (Minimum Alternate Tax) to the assessee bank. The tribunal referred to several decisions, including UCO Bank vs DCIT, which held that section 115JB does not apply to entities not registered under the Companies Act, 1956. The tribunal concluded that section 115JB was not applicable to the assessee bank for the year under appeal, and the ground raised by the assessee was allowed.

4. Disallowance on Account of Provision for Gratuity Amounting to Rs. 2,18,00,000/-:
The fourth issue deals with the disallowance of Rs. 2,18,00,000/- towards gratuity provision under section 43B. The AO disallowed the provision as it was not paid by the due date. The assessee argued that the liability was incurred in the current year, though the payment was made in the previous year. The tribunal, agreeing with the assessee and citing the Hon'ble Kerala High Court's decision in CIT vs Kerala Solvent Extractions Ltd, allowed the provision as the payment was already made, thus satisfying the conditions of section 43B. The revenue's appeal on this ground was dismissed.

5. Adjustments in the Computation of Book Profits Under Section 115JB:
Given the tribunal's ruling that section 115JB does not apply to the assessee bank, the issue of adjustments in the computation of book profits became academic. Consequently, this ground raised by the revenue was dismissed.

6. Granting of TDS Credit Amounting to Rs. 10,19,31,487/-:
The final issue involves the granting of TDS credit of Rs. 10,19,31,487/-. The AO denied the refund of TDS, stating it should be claimed from the TDS Officer. The tribunal found that the TDS was duly reflected in Form 26AS and directed the AO to grant the credit, emphasizing that the revenue was unjustly enriched by the TDS amount. The tribunal upheld the DRP's direction to grant TDS credit, dismissing the revenue's appeal on this ground.

Conclusion:
The appeal of the assessee in ITA No. 477/Kol/2015 was allowed, and the appeal of the revenue in ITA No. 496/Kol/2015 was dismissed.

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