TaxTMI 
TaxTMI 
2012 (12) TMI 1021
X X X X Extracts X X X X
X X X X Extracts X X X X
....der of the CIT(A) in deleting the addition of Rs. 8,07430/- made on account of accrued interest on loans and advances without appreciating the amendment to sec. 145 of the Income-tax Act made w.e.f 1.4.97 and also ignoring the mandatory requirement of RBI guidelines according to which the banks ought to comply with and follow mercantile system of accounting. 3. The brief facts of the case are that the assessee is a co-operative bank carrying on banking business as per the provisions of Karnataka Co-operative Societies Act of 1939 and Banking Regulation Act of 1949. It filed its return of income for the assessment year 2008-09 declaring a total income of Rs. 7,41,705/-. During the course of assessment proceedings u/s 143(3) of the Income-ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nk Vs. CIT reported in 237 ITR 829. After considering the assessee's contention at length, the CIT(A) observed that under the mercantile system of accounting it is required to account income which has become due but not received but such income should be expected to be received in the normal course of business and as per sec. 145 of the Income-tax Act, what is to be considered for taxation under mercantile system of accounting is only real income but not notional income. He observed that the interest which has been brought to tax by the AO is accrual of interest on non performing assets and as per the RBI guidelines, such interest is to be accounted for only when it is received. Therefore, he deleted the addition made by the AO. However wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he other hand supported the orders of the authorities below and placed reliance upon the following decisions : 1) CIT Vs. Vasisth Chay Vyapar Ltd., reported in 330 ITR 440 2) Karnavati Co-op. Bank Ltd., Vs. DCIT reported in 14 ITR 175 3) T.C.I Finance Ltd., Vs. ACIT reported in 274 ITR 69 4) CIT Vs. M/s Canfin Homes Ltd. reported in (2011) 5 TaxCorp (DT) 49593 8. Having heard both the parties and having considered their rival contentions, we find that undisputedly the assessee is in the banking business and is also governed by the Banking regulations. Whether the interst accured on NPA's which are doubtful of being recovered, should be recognized as assessee's income on accrual or on receipt basis is the question before us. Let us firs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt are entirely on a different set of facts and hence its finding on non-allowability of the provisions of NPA's cannot be applied to the facts of the case before us but its observation that for recognizing the interest income on NPA's, AO has to consider the facts of each case has relevance to the case before us. In view of the same, we hold that the decision of the Hon'ble Supreme Court is on a different set of facts. The second decision relied upon by the learned DR is that of Chennai Bench of the Tribunal in the case of India Equipment Leasing Ltd., which is on the same set of facts as before us, as it was held in favour of the Revenue. Coming to the decisions relied upon the learned AR, we find that the decision of the Jurisdictional ....