TaxTMI 
TaxTMI 
2014 (11) TMI 288
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....eme Court in the case of Southern Technologies Vs. JCIT 320 1TR 577 (SC). 5. The order of the A.O. be restored and the CIT(A), Aurangabad be vacated. 6. The appellant craves leave to add, amend or alter any grounds of appeal. 3. The only issue raised in the present appeal is against the deletion of addition made on account of interest accrued on Non Performing Assets (NPAs). 4. The learned Authorized Representative for the assessee pointed out that the issue raised in the present appeal is squarely covered by the ratio laid down by the Tribunal in assessee's own case relating to assessment year 2007-08. 5. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the order of Assessing Officer. 6. The brief facts of the case are that the assessee was a cooperative bank engaged in the banking business. The assessee was following Mercantile System of Accounting. The Assessing Officer during the assessment proceedings, from the examination of the books of account, noted that the assessee had shown interest receivable on NPAs at Rs. 1,05,61,620/-. Since the assessee was following Mercantile System of Accounting, as per the Assessing Officer, th....
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....The Ld. Counsel has filed the copy of the Tribunal order which is placed on record. We have also heard the Ld. D.R. We find that the issue before us is squarely covered, as rightly submitted by the Ld. Counsel, in favour of the assessee by the decision of ITAT Pune in the case of Osmanabad Janta Sah. Bank Ltd. The operative part of the decision giving reasons and findings is as under: "5. We heard the rival submissions of the parties and perused the record. We find that the identical issue has been considered by the ITAT, Visakhapatnam Bench, in the case of DCIT, Vijayawada vs. The Durga Cooperative Urban Bank Ltd., Vijayawada, in ITA.No.511/Vizag/2010 dated 10.03.2011. In the said case also, it was noticed by the Assessing Officer that assessee did not include the interest of Rs. 18,26,306/- on the NPA advances. Again the issue of applicability of section 43D was considered to the nonscheduled banks. The Tribunal placed its heavy reliance on the decision of the Hon'ble High Court of Delhi in the case of Vashist Chay Vyapar Ltd. [330 ITR 440 (Del.)], in which the Hon'ble Delhi High Court has considered the decision in the case of Southern Technologies Ltd. [320 ITR 577 (SC....
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...., whichever is earlier, then it is compulsory to abide by the said Rule. According to us, no scope is left with the Revenue Authorities to ignore these provisions due to unambiguous use of language in the Section. (ii) Status of assessee for the purpose of application Section 43-D. As far as the status of the assessee is concerned, the Assessing Officer has stated that the assessee-bank is a co-operative bank. Undisputedly, the assessee is also governed by the RBI guidelines. Vide an explanation (d) r.w.s. 36(1)(viia) annexed to section 43-D the definition of the entities incorporated by the section have been defined and in the absence of any contrary material, we hereby hold that the assessee is covered by one of the entities, hence the provisions of section 43-D are to be applied. (iii) Applicability of CBDT Circular. Next issue is that whether a Circular having effect of relaxing rigour of law can be treated as inconsistent with the provisions of a statute. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes has issued a Circular dated October 6, 1952, providing that where interest accruing on doubtful debts is cred....
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....of the Hon'ble Judge and commented that whether an income on receipt basis or on accrual basis, it is the real income and not any hypothetical income which may have theoretically accrued, i.e. subject to tax under the Act. Nevertheless, that decision was not followed while deciding the appeal of UCO Bank (supra) by the Hon'ble three Judges of the Supreme Court, already discussed by us supra. We, therefore summarize that as of now the law as laid down in UCO Bank is that in terms of CBDT Circular the interest is to be added as income only when actually received or credited in respect of the "sticky advances" while making assessment for a financial institution. (iv) Interpretation of the language of the statute : We have reproduced verbatim the provisions of section 43-D of the I.T.Act and expressed an opinion that if the statute has used the terminology for the chargeability of interest on the basis when "credited" or "actually received", then in our opinion no ambiguity has been left by the Statute. If the statute is so clear that an interpretation can easily be made, then that exact meaning should be given to the language of the Section. For this legal proposition we pla....
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....pressed that quote " Prior to insertion of section 43D with effect from 1-4-1991, recognition of income was on the basis of circular of 9-101984. It said that for first three years the income may be taken on accrual basis and from 4th year onwards, the income in respect of doubtful debts was to be recognized on receipt basis. Since the income was to be assessed for first three years on accrual basis, provisions of section 43D were inserted in the Act. Circular No.621, dated 19-12-1991 gives the legislative intention stating that section 43D was inserted with a view to improving the viability of banks, public financial institutions etc., so as to provide that interest on sticky loans shall be charged to tax only in the year in which the interest is actually received or credited to the profit and loss account. This benefit was extended with effect from 1-4- 2000 in the case of public companies engaged in long-term financing of housing projects approved by National Housing Banks. The Legislature in their wisdom did not extend the same benefit to NBFCs which has been given to scheduled banks, public financial institutions, etc. The provisions of section 43D as stood at relevant time co....
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.... clear that the question for consideration before the Hon'ble Court was that if a provision for doubtful debt is made then what will be the legal position of the applicability of ITA No.1713/PN/2011 Maharashtra Nagari Sahakari Bank Ltd., Latur Explanation to section 36(1)(vii) of the I.T. Act. For the sake of ready reference, relevant paragraph from the held portion is reproduced below: " The income-tax is a tax on "real income", i.e., the profits arrived at on commercial principles subject to the provisions of the Act. Therefore, if by the Explanation to section 36(1)(vii) a provision for doubtful debt is kept out of the ambit of bad debt which is written off, then one has to take into account the Explanation in computing the total income under the Income-tax Act failing which one cannot ascertain the real profits. The provision for non-performing assets debited in the profit and loss account under the Reserve Bank Directions of 1998 is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the Income-tax Act." Therefore the distinction can easily be drawn that in the appeal before us the question is accrual of....