TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 910
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.... appreciating the fact that provisions of section 43D are only applicable to Financial Institutions and a Scheduled Bank. The assessee being a non-scheduled bank provision of section 43D would not apply. 3. The learned Commissioner of Income-Tax (Appeals) has grossly erred in interpreting the provisions of section 145 of the Income Tax Act, 1961 under which the assessee is not allowed to use the Mixed or Hybrid System of accounting. 4. The learned Commissioner of Income-Tax (Appeals) has grossly erred in appreciating the decision of Supreme Court in the case of Southern Technologies Limited Vs . JCIT 320 ITR 577 (SC) where the apex court has held that RBI provisions are disclosure norm and cannot override provisions of Income Tax Act, 1961 as both operate in different fields. 5. The learned Commissioner of Income-Tax (Appeals) has erred in facts that the assessee does not satisfy the two conditions in the CBDT's Circular No.F-201/81/84 ITA-Il dated 09/10/1984 and hence cannot avail the benefits of the circular. The appellant herein reproduces the two conditions of the Circular (a) The assessee should be Banking Company. (b) Such interest should have remained unco....
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....ness of banking. The Assessing Officer during the course of assessment proceedings noted that the assessee had not credited the interest receivable or accrued on Non-Performing Assets (referred to as NPAs) to its Profit & Loss Account for the captioned assessment year. The claim of the assessee in this regard was that in view of RBI guidelines, the said interest income on NPAs was to be recognized, but not to be offered to tax. However, the Assessing Officer was of the view that where the assessee was following mercantile system of accounting, the interest accrued on NPAs is to be added in the hands of assessee and addition to that extent was made in the hands of assessee. 6. The CIT(A) deleted the addition made by the Assessing Officer, against which the Revenue is in appeal. 7. The learned Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is squarely covered in favour of the assessee in view of the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. (1) Deogiri Nagari Sahakari Bank Ltd. (Income Tax Appeal No.53 of 2014), (2) Peoples Co-operative Bank Ltd. (Income Tax Appeal No.54 of 2014), (3) Nanded Distric....
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....in favour of the assessee by the decision of the coordinate Benches in the case of The Durga Cooperative Urban Bank Ltd., Vijayawada (supra) 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." The above decision has been followed in (i) ACIT, Circle -3, Nanded V/s Bhagyalaxmi Mahila Sahakar Bank Ltd. ITA No.793/PN/2011, (ii) ACIT, Circle -3 V/s Sidheshwar Sahakari Bank Ltd. ITA No.794/PN/2011, (iii) ACIT (Central) V/s Latur Urban Co-operative Bank Ltd. ITA No.792/PN/2011 and (iv) Asst. CIT, Circle-1 V/s Deogiri Nagari Sahakari Bank Ltd. ITA No.817 & 1114/PN/2011. " 9. The Hon'ble Bombay High Court in CIT Vs. M/s. Deogiri Nagari Sahakari Bank Ltd. in Income Tax Appeal No.53 of 2014 & Ors. has laid down the proposition that the interest accrued on NPAs is not taxable in the hands of assessee, in view of the guidelines issued by the RBI. 10. Following the same parity of reasoning, we hold that no addition is warranted on account of interest accrued on NPAs. Accordingly, we uphold the order of CIT(A) in deleting the addition m....
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....re done out of their own funds and were in the regular course of business and therefore no part of the interest could be disallowed. It was also pointed out that the Assessee had borrowed Rs. 43.62 crores by way of issue of debentures and the said amount was utilized as capital expenditure and inter-corporate deposit. It was the Assessee's submission that no part of the interest bearing funds (viz. Issue of debentures) had gone into making investments in the said two companies. It was pointed out that the income from the operations of the Assessee was Rs. 313.53 crores and with the availability of other interest free funds with the Assessee the amount available for investments out of its own funds were to the tune of Rs. 398.19 crores. In view thereof, it was submitted that from the analysis of the balance-sheet, the Assessee had enough interest free funds at its disposal for making the investments. The CIT (Appeals) on examining the said material, agreed with the contention of the Assessee and accordingly deleted the addition made by the Assessing Officer and directed him to allow the same under the provisions of the Income Tax Act, 1961. The Revenue being aggrieved by the order p....
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....he present case are squarely covered by the judgment in the case of Reliance Utilities and Power Ltd. (supra). The finding of fact given by the ITAT in the present case is that the Assessee's own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities and Power Ltd. (supra), it would have to be presumed that the investment made by the Assessee would be out of the interest-free funds available with the Assessee. We therefore, are unable to agree with the submission of Mr Suresh Kumar that the Tribunal had erred in dismissing the Appeal of the Revenue on this ground. We do not find that question (A) gives rise to any substantial question of law and is therefore rejected. 6. Even as far as question (B) is concerned, we find no infirmity in the orders passed by the CIT (Appeals) or the ITAT. In deciding this iss....