TaxTMI 
TaxTMI 
2015 (6) TMI 1098
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....interest of NPA to the extent of Rs. 10.93 crores not allowed to be added to the income of the assessee bank. 2. On the facts and circumstances of the case and in law, the CIT(A) erred in not accepting the decision of Hon'ble ITAT Lucknow Bench, in the case of The Hamirpur District Co-Operative Bank Ltd. V/s. DCIT (2012) 25 Taxman 306 where in it has been held that just because the account is an NPA accounts it does not form a valid ground for non recognition of interest income accrued thereon and the deduction for provision for bad and doubtful debts can be given only as per the provisions of Sec. 36(1)(viia) of IT Act 1961. 2. The short issue as discussed in the corresponding assessment order passed under section 143(3) dated 22-11-201....
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....ed in OIR and interest receivable account. For the sake of reference verbatim reproduced from page 2 of asstt. Order : "The working of OIR Account is as under :- When the interest is charged to NPA account - Interest received account is credited and party account is debited and at the same time interest received account is debited and party account is credited and by the same amount Overdue Interest Reserve (OIR) account is credited and Overdue Interest Receivable (OIR) is debited. 2.1 The Assessing Officer has made a detailed discussion on the subject. However, the assessee was of the view that certain prudential norms have been enacted to by RBI which were applicable to NBFC (Non Banking Financial Corporation) as well. The Assessing O....
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....n'ble Court has considered the question of effect of instruction issued under 5(8) of the I.T. Act 1922 and held ghat decision of the Hon'ble Supreme Court in Navnit Lai C. Javeri V/s. K.K. Sen, 56 ITR 198 is relevant. "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision", The directions given in that circular clear....
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.... only applicable in respect of schedule bank but the assessee is cooperative bank. Therefore, the exception prescribed under section 43D is not applicable to the assessee. 5. On the other hand, from the side of the respondent assessee, learned A.R. Mr. K.P. Dewani appeared and informed that a consistent view has been taken by various Courts as well as by ITAT wherein it is held that the Banks which are following RBI guide lines are also entitled for the exception prescribed under section 43D of the I.T. Act. In support, the case laws supported are as under: (1) (2012) 114 ITR (Trib) 175 (Ahm), Karnavati Coo-op. Bank Ltd. v/s. Dy.CIT (2) (2014) 166 TTJ 0375 (Pune) ACIT v/s. The Omerga Janta Sahakari Bank Ltd. 6. In the light of the above....
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....heir financial accounts. By virtue of section 45Q an overriding effect is given to said directions vis-a-vis principles of income recognition. The Hon'ble Court has observed that the accounting policies adopted by NBFC cannot determine the taxability of income. It was held that the Assessing Officer has to consider the directions of Reserve Bank of India as per section 45Q of Reserve Bank of India Act and examine the issue as per the prudential norms issued by RBI in connection with the income recognition of a bank. The Court has also commented that in such a situation the provisions of section 145 had no role to play. 7. Therefore, we hereby conclude that in a situation when the Benches of the Tribunal have followed the decisions of Hon'b....
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....aking it reasonable to expect realization despite the account being a NPA. Further, on facts, it is found that there has been in fact recognition of income, and the assessee's claim is only qua ' provision for bad and doubtful debts' with reference to total assets, including the interest income booked and debited to the account of respective borrower, and qua which the assessee is entitled to and has claimed deduction u/s 36(1)(viia)" 8. An order of ITAT, Ahmedabad Bench has also been cited before us pronounced in the case of Karnavati Cooperative Bank 144 TTJ 769 (Ahd) wherein the identical issue has been dealt with at length and the CBDT Instructions have also been considered. It is also worth to mention that in this decision as well the....