https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=459106 https://www.taxtmi.com/caselaws?id=459106 Additions made on account of Interest Accrued on NPA - addition was made on ground that assessee was following mercantile system of accounting and, hence, whole amount of accrued interest had to be brought to tax - Assessee submitted that the assessee is a co-operative bank and was following the Prudential Norms Directions issued by the Reserve Bank of India and the accounting standards notified by the Central Government - HELD THAT:- Assessee had been consistently following cash method of accounting recognizing income in respect of asset qualified as bad and doubtful debt (NPA) as per RBI guideline in view of provision of sections 145 and 43D. ITAT held, following the case of Asstt. CIT v. Osmanabad Janta Sahari Bank Ltd. [ 2015 (3) TMI 886 - ITAT PUNE] that assessee could offer to tax amount of interest received from bad and doubtful debts (NPA) on actual receipt basis as per RBI guideline, even though assessee was following mercantile system of accounting. In the case of Karnavati Co-op. Bank Ltd. [ 2011 (11) TMI 367 - ITAT AHMEDABAD] the assessee, a co-operative bank, was following mercantile system of accounting. It had neither credited in profit and loss account nor offered for taxation amount of interest that had accrued on non-performing assets [NPA] - ITAT held that in view of clear provisions of section 43D, the Assessing Officer was wrong in adding accrued interest on NPA to income of assessee Thus, we hold that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made in the hands of the assessee on account of accrued interest on NPA. Disallowance of deduction u/s. 36(l)(viia) on provision for bad and doubtful debts - AO disallowed the claim of deduction of the assessee on the ground that section 36(1)(viia) of the Act applies only in cases where assessee has given rural advances - CIT(A) deleted addition - HELD THAT:- In the case of Kodungallur Town Co-op Bank Ltd. [ 2016 (7) TMI 1413 - ITAT COCHIN] a Cooperative Bank is entitled to claim deduction of bad debts provided in first part of clause (viia)(a) of section 36(1) being 7.5 per cent of total income and same cannot be denied linking it to rural advances. In the case of ING Vysya Bank Ltd [ 2014 (9) TMI 44 - ITAT BANGALORE] the ITAT held that in order to allow assessee s claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts (PBDD) is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent PBDD is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section. Thus, it is clear that the benefit of section 36(1)(viia) of the Act is available irrespective of whether the provision is created in respect of rural advances are not, subject to the prescribed limit specified in the said section. Case-Laws Income Tax Fri, 23 Dec 2022 00:00:00 +0530