TaxTMI 
TaxTMI 
2015 (3) TMI 920
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....ered by the assessee bank for last three years but has been kept in a suspense account and has not been brought to P & L A/c of the assessee could not be included in the income of the assessee. 2) On the facts and in the circumstances of the case, the Ld. CIT(A), Aurangabad did consider the Circular No. F 201/81/84 ITAII, dtd 9.10.1984 minutely, which reveals that the Circular has laid down two conditions for availing the benefit of the circular i.e. (1) the assessee should be a banking company and (2) such interest should have remained uncovered for consecutively for three previous years. It is observed that the assessee has not fulfilled both the conditions. 3) On the facts and in the circumstances of the case, the Ld. CIT(A), Aurangabad was not justified in deleting the disallowance on account of proportionate expenses in respect of income not forming part of income u/s 14A RW Rule 8D." 3. The briefly stated facts are as under. The assessee is a Co- Operative Bank carrying on the Banking business and Banking Regulation Act, 1949 is also a....
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....and then debited to Profit and Loss account on account of Provision for Overdue Interest Reserve or interest on NPA accounts. Ground No. 1 is allowed accordingly." Now the Revenue is in appeal before us. 5. We have heard the parties and perused the material on record. We find that the identical issue has been considered by the Tribunal in the case of Osmanabad Janta Sahakari Bank Ltd., ITA No. 795/PN/2011, order dated 31.8.2012. The operative part of the Tribunal order 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 non-scheduled banks. The Tribunal placed its heavy reliance on the decision of the Hon'ble High Court of Delhi ....
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....ovisions. Once the Statute has categorically made a law in respect of public financial institutions that interest is chargeable to tax either in the year in which credited or actually received, 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 determ....
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....sticky advances" was rightly treated as income which had accrued to the appellant. There was a descending note by one 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 eas....
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.... as to unfold the controversy. In the said decision of the Tribunal, viz. Jt.CIT v/s. India Equipment leasing Ltd. (2008)111 ITD 37 (Chennai), the Respected Co-ordinate Bench has expressed 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 w....
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....debited to P&L Account by a NBFC. The said provision was undisputedly made by the said NBFC as per the prudential norms made by the Reserve Bank. Therefore we want to make it 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 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 Incometax 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....
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....ra) and Karnavati Cooperative Bank Ltd. (supra). We find no reason to interfere with the reasoned order of the Ld. CIT(A) and accordingly the same is confirmed. In the result, the Revenue's ground is dismissed." 6. As the facts are identical in this case, we therefore, following the decision in the case of Osmanabad Janta Sahakari Bank Ltd. (Supra) confirm the order of the Ld CIT(A) and dismiss the grounds taken by the Revenue. 7. Ground No. 3 reads as under : "3) On the facts and in the circumstances of the case, the Ld. CIT(A), Aurangabad was not justified in deleting the disallowance on account of proportionate expenses in respect of income not forming part of income u/s 14A RW Rule 8D." 8. We have heard the parties. The A.O has observed that the assessee has made an investment in UTI Mutual Fund and received the dividend of Rs. 4,95,212/- which has been claimed as exempt income. The A.O made disallowance of Rs. 2,00,834/-, evoked Sec. 14A and Rule AD of the I.T. Rules. 9. The Ld CIT(A) sustained the part disallowance and operative part of the reasons of CIT(A) are as under : &....
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....directions as the directions are specific and also for the verification whether assessee has received any interest on the NPA A/c. and whether any inter account adjustment is made. Admittedly in this year, the assessee has not credited interest to the Profit & Loss Account, but it is likely that when the interest is taken directly to the Balance Sheet under the separate head, then there is a possibility of inter-head adjustment. In our opinion, as on principles, if the assessee's claim is accepted and only for the verification purpose, the issue is restored, the assessee should not have a grievance as the Ld CIT(A) has given finding on the issue. We find no merit in the Ground No. 1 and accordingly, same is dismissed. 13. So far as Ground No. 2 is concerned, it is in respect of the disallowances on the loss on sale of surplus of Rs. 14,70,000/-. The A.O has observed that an amount of Rs. 14,70,000/- is debited to the Profit & Loss A/c on account of loss on sale of securities. The A.O has further observed that the assessee in its submission has stated that securities of the Bank are held under the head "to maturity category" and, therefore, loss arising on the sale of investment is....