TaxTMI 
TaxTMI 
2017 (2) TMI 734
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....ncial Year, which were not so far encashed by the concerned customers. Therefore treating the same as cessation of liability under Section 41(1) of the Act, the learned Assessing Authority added back the said amount to the declared income of the assessee. 3. The learned Tribunal's findings in this regard as recorded in para 8.5.1. are quoted below for ready reference: "8.5.1 We have heard both parties and perused and carefully considered the material on record including the judicial decisions cited on either side. The Assessing Officer has invoked the provisions of Section 41(1) of the Act to bring the amount of Rs. 73,58,708 received for making drafts and pay orders to tax in the hands of the assessee in the period under consideration. Section 41(1) of the Act, specifically deals with amounts that were allowed as a deduction in the past assessments as trading liabilities which in a later year ceases OR are remitted by the creditors. If and when in a later year there is evidence to show that the liability is remitted, it can be brought to tax. In order to invoke section 41(1) of the Act, it must be first established that the assessee had obtained some benefit in respect....
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.... the arguments put forth by the learned Authorised Representative which is further fortified by the decisions rendered by the co-ordinate bench of this Tribunal in the cases of Canara Bank (ITA No.390/Bang/2011 dt.8.6.2012) and Vijay Bank (ITA No.455/Bang/2011 dt.22.4.2012). Following, the aforesaid decisions of the co- ordinate bench of the Tribunal (supra), we delete this addition of Rs. 73,58,708 made by the Assessing Officer under Section 41(1) of the Act as being unsustainable." 4. The learned counsels at bar submitted before the Court that this controversy is no longer res integra and the Division Bench of this Court in The Commissioner of Income Tax Vs. Karnataka Vikas Grameen Bank in ITA No.100014/2014 and connected case, decided on 14.12.2015, has held, following the decision of the Hon'ble Supreme Court in the case of T. V. Sundaram Iyengar and Sons Limited reported in (1996) 222 ITR 344, that such an addition cannot be made under Section 41(1) of the Act, since the liability of the assessee Bank to pay back the amounts to the customers in respect of such stale Demand Drafts and Pay Orders does not cease in law. The relevant extract from the judgment of the Di....
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....uestion of law as stated in the memorandum of appeal filed by the Revenue about the taxability of the accrued interest on the non-performing assets of the borrowers, this Court in the case of The Commissioner of Income Tax Vs. Shri. Siddeshwar Co-operative Bank Limited (ITA No.200002/2015 along with other connected appeals, decided on 22.06.2016, following the previous decisions of this Court in the case of Commissioner of Income Tax and another Vs. Canfin Homes Ltd., reported in (2012) 347 ITR 382 (Karn), has held that such accrued interest on non-performing assets cannot be brought to tax in the hands of the assessee. The relevant portion of the judgment of the Division bench of this Court in Commissioner of Income Tax Vs. Shri. Siddeshwar Co- Operative Bank Limited (supra) is also quoted below for ready reference: "5. One other substantial question of law framed is, "Whether interest receivable from non- performing assets, bad and doubtful debts though the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted?" In this regard, the learned counsel for the assessee has produced a judgment of this C....
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....ch would come within the purview of non-performing assets. In this regard, he would draw attention to the prudential norms for income recognition, asset classification and provisioning pertaining to advances. Volume I of 'Tannan's Banking Law and Practice in India', has extracted these prudential norms in line with the international practices and as per the recommendations of the Narasimham Committee on the financial system, the Reserve Bank of India has introduced, in a phased manner, prudential norms for income recognition, asset classification and provisioning for the advances portfolio of the Banks so as to move towards greater consistency and transparency in the published accounts. The definition of non-performing assets is as follows: 1. Non-performing assets: An asset including a leased asset, becomes non-performing when it ceases to generate income from the bank. A "non-performing asset" (NPA)is a loan or an advance where; (i) The interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan; (ii) the account remains 'out of order' for a period of more than 9....