TaxTMI 
TaxTMI 
2012 (9) TMI 1023
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....me-tax Act, 1961 (in short "the Act), pertaining to the assessment year 2007-08. 2. The Revenue in its appeal has raised the following grounds: "1. On the facts and in the circumstances of the case, the ld. CIT(A) Aurangabad was not justified in deleting addition made on account of sticky advances of Rs. 36,97,369/-. The ld. CIT(A) erred in holding that ratio of the Hon'ble Apex Court's decision in the case of UCO Bank Vs. CIT (1991) 237 ITR 889 (SC) is applicable to the instant case which lays down that interest on a loan whose recovery is doubtful and which has not been recovered by the assessee bank for last three years but has not been kept in a suspense account and has not been brought to P & L a/c of the assessee could not be inclu....
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....ssion that the amount of leave encashment has actuall7y been paid to the employees and deduction to this extent is allowable to the assessee." 3. At the outset, it is common ground that Grounds no. 1 and 2 of the appeal raised by the Revenue are covered in favour of the assessee by the decision of co-ordinate Bench of the Tribunal in the case of ACIT Cir. 3, Nanded Vs. Osmanabad Janta Sahakari Bank Ltd. Latur in ITA No. 795/PN/2011 for A.Y. 2007-08 dated 31-8-2012 wherein the issue has been decided by observing as under: "In the case before us, admittedly, assessee has directly taken the interest to the Balance sheet and it is not routed through the P & L a/c. Moreover, the issue of the taxability of the interest on the sticky losses/adv....
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....xed in this year itself on accrual basis. Accordingly, a sum of Rs. 95,86,440/- representing interest on FDRs with NDCC Bank for the year under consideration was added to the total income of the assessee. 5. In appeal, the assessee made various submissions, inter alia, pointing out that the Reserve Bank of India has invoked section 35A of the R.B.I. Act, in the case of NDCC Bank whereby NDCC Bank was barred from accepting any deposits/giving loans and also restrained the bank from accepting the cash in saving or current accounts. Considering the aforesaid, the CIT(A) has deleted the addition by making the following discussion in para 5.3 of his order. "I have considered facts of the case, AO's order, appellant's submission and position o....
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....en as per the Prudential Norms and Income Recognition policy laid down by the Reserve Bank of India, no income can accrue to the bank on such debts which are doubtful of recovery, inasmuch as there was a moratoriam on the NDCC Bank to accept/refund the deposits. 7. We have carefully considered the rival submissions. In this case, the dispute is with respect to an amount of Rs. 95,86,440/- which is stated to be interest on FDRs placed with NDCC Bank. In the revised return filed by the assessee on 24-4-2008 which was accompanied by a revised P & L a/c, the interest of Rs. 95,86,440/- on FDRs with NDCC Bank was not accounted for as income. The Assessing Officer however, assessed the same in the year under consideration on the ground that the....
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....x the interest on accrual basis, whenever NDCC Bank is allowed by the Reserve Bank of India to repay deposits or interest to the assessee, is reasonable and cannot be faulted with. We accordingly find no justifiable reasons to uphold the action of the Assessing Officer in taxing the amount of Rs. 95,86,440/- in the year under consideration. Thus the Revenue fails on this Ground of Appeal. 6. Ground no. 4 relates to deletion of addition made on account of payment of ex-gratia amounting to Rs. 24,31,102/-. The Assessing Officer observed that the said payment is voluntary and not a statutory obligation of the assessee. According to the Assessing Officer since the impugned amount is not covered under Payment of Bonus Act or Factories Act, he d....
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....o verification." 7. Having heard the rival submissions and perused the material on record, we find no error on the part of the CIT(A) in giving a direction to the Assessing Officer to verify the facts and then allow the deduction subject to payment having been made. We uphold the order of the CIT(A) on this issue. 8. The next grievance of the Revenue is with regard to action of the CIT(A) in deleting the addition of Rs. 7,73,584/- made by the Assessing Officer on account of leave encashment. The Assessing Officer has disallowed the expenditure by observing that it pertained to prior period, hence not liable to be allowed in the current year on payment basis. The CIT(A) has since deleted the addition by noticing the submission of the asses....