AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 558
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....at the outset submitted that this issue stands decided against the assessee by the decision of the Tribunal in assessee's own case for the A.Y. 2008-09 vide ITA No.1658/PN/2011 order dated 29-10-2013 which has been followed by the Tribunal in assessee's own case in A.Y. 2009-10 vide ITA No.162/PN/2013. Therefore, this ground has to be decided against the assessee. The Ld. Departmental Representative has no objection for the above proposition. Therefore, following the decision of the Tribunal in assessee's own case for A.Yrs. 2008-09 and 2009-10, the above ground by the assessee is dismissed. 3. Ground of appeal No.2 by the assessee reads as under : "2. Hon CIT (Appeals) erred on facts and law by adding amount of Rs. 64,66,409/-on account of interest on NPA accounts which is not recognized as income. Treatment of interest has been correctly made as prescribed by RBI. This being a covered issue, the learned CIT (A) has ignored the jurisdictional Tribunal decisions on the issue. The addition of above amount on this account please be deleted." 3.1 Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that interest receivable or ac....
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....gories of debts as may be having regard to the guidelines issued by the National Housing Bank shall be chargeable to tax in the previous year in which such income is credited by the aforesaid prescribed entities to their Profit and Loss account or in the year when it is actually received, whichever is earlier. The Assessing Officer noted that assessee was not an entity prescribed in section 43D of the Act and therefore the assessee having followed the mercantile system of accounting did not have the option of accounting for interest income relating to NPAs advances on receipt basis. Therefore, according to the Assessing Officer, interest of NPAs accrued to the assessee and accordingly, he brought to tax such interest income of Rs. 57,19,885/-. 9. The learned CIT(A) disagreed with the Assessing Officer, and thus the Revenue is in appeal before us. At the time of hearing, it was a common point between the parties that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of ACIT vs. The Omerga Janta Sahakari Bank Ltd. vide order in ITA No.350/PN/2013 dated 31.10.2013. In the said precedent the Pune Bench of the Tribunal considered the decision of....
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....cope of section 43D of the Act. The issue related to taxability of interest income relating to NPAs, which as per the Revenue was liable to be taxed on accrual basis in line with mercantile system of accounting adopted by the assessee therein. The assessee, on the other hand, contended that having regard to the guidelines issued by RBI regarding accounting of interest on NPAs, no interest income accrued in respect of NPAs and that the same was to be taxed only on receipt basis. The Tribunal observed that the question of taxability of interest on NPAs classified by RBI, was considered by the Hon'ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd. (supra) wherein after considering the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd. (supra) it was held that interest income relatable to NPAs was not includible in total income on accrual basis since the same did not accrue to the assessee. The following discussion by the Visakhapatnam Bench of the Tribunal in the case of The Durga Cooperative Urban Bank Ltd. (supra) is worthy of notice :- "8. We have heard the rival contentions and carefully perused the record. The question of taxabi....
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....de. Where there is no uncertainty as to ultimate collection, revenue is recognized at the time of sale or rendering of service even though payments are made by instalments. 9.3 When the uncertainty relating to collectability arises subsequent to the time of sale or the rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. 9.4 An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use of others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized". 8.2 The Delhi High Court also considered the decision rendered in the following cases: i) CIT vs. Elgi Finance Ltd., 293 ITR 357 (Mad) ii) CIT vs. KKM Investments (Cal) - SLP dismissed by Supreme Court (310 ITR 4) iii) CIT vs. Motor Credit Co (P) Ltd., 127 ITR....
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....he relevant conditions stipulated therefore under the Act. To that extent, it was observed that the Prudential Norms do not override the provisions of the Act. However, the Apex Court made a distinction with regard to "Income Recognition" and held that income had to be recognized in terms of the Prudential Norms, even though the same deviated from mercantile system of accounting and/or section 45 (sic. 145) of the Income Tax Act. It can be said, therefore, that the Apex Court approved the 'real income' theory which is engrained in the Prudential Norms for recognition of revenue by NBFC". 9. The Hon'ble Supreme Court in the case of M/s Southern Technologies Ltd (Supra) dissected the matter into two parts viz., a) Income Recognition and b) permissible deduction/exclusions under the Income Tax Act. In so far as income recognition is concerned, the Hon'ble Supreme Court held that Section 145 of the Income Tax Act has no role to play and the Assessing Officer has to follow Reserve Bank of India directions 1998, since by virtue of 45Q of the Reserve Bank of India Act, an overriding effect is given to the directions of Reserve Bank of India vis-à-vis income recogni....
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.... Act has an overriding effect vis-à-vis income recognition principle under the Companies Act. Hence Sec.45 Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks also. Hence the Assessing Officer has to follow the Reserve Bank of India directions 1998, as held by the Hon'ble Supreme Court. 10.1 Based on the prudential norms, the assessee herein did not admit the interest relatable to NPA advances in its total income. The Hon'ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd (Supra) has held that the interest on NPA assets cannot be said to have accrued to the assessee. In this regard, the following observations of Hon'ble Delhi High Court in the above cited case are relevant: "What to talk of interest, even the principle amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not "accrued". The said decision of the Hon'ble Delhi High Court is equally applicable to the issue in our hands. Accordingly we do not find any infirmity with the decision of the learned CIT (A) in holding that the interest income relatable on....
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.... Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). 13. Therefore, in view of the aforesaid discussion, we are inclined to follow the decision of our co-ordinate Bench in the case of The Durga Cooperative Urban Bank Ltd. (supra) and accordingly the order of the CIT(A) is liable to the affirmed. We hold so. 14. In the result, the appeal of the Revenue is dismissed." 10. Since it was a common point between the parties the facts and circumstances in the present case are identical to those considered by us in the case of The Omerga Janta Sahakari Bank Ltd. (supra) following the aforesaid precedent the present claim of the assessee deserves to be upheld. We hold so." 4.1 Following the decision of the Tribunal in assessee's own case in the immediately preceding assessment year and in the absence of any distinguishable feature brought on record by the Ld. Departmental Representative, the above ground by the assessee is allowed. 5. Ground of appeal No.3 by the assessee reads as under : "3. Hon'ble CIT (Appeals) has failed to give deduction of "Premium amortised on HTM Securities" which was not claimed as deduction in the return of....
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....nt of amortization of premium paid on Government Securities in the category of investments Held to Maturity (i.e. HTM). The said premium represented the excess of acquisition cost over the face value of the securities and the claim of the assessee was that the same was to be amortized over the remaining period of maturity of the securities. The claim of the assessee was based on the Master Circular dated 12.07.2006 issued by the Reserve Bank of India. The CIT(A) found it fit to admit such Additional Ground following the ratio of the judgement of the Hon'ble Bombay High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 23 taxmann.com 23 (Bom). After admitting such Additional Ground the CIT(A) has allowed the same, against which Revenue is in appeal before us. 14. In so far as the action of the CIT(A) in admitting the Additional Ground raised by the assessee on the impugned issue is concerned, the same is not challenged by the Revenue, as is evident from the Grounds of Appeal Nos.3 & 4 raised by the Revenue before us, which read as under :- "3. Whether on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in allowing amortiz....