TaxTMI 
TaxTMI 
2018 (6) TMI 824
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.... deposits from the non members which is in contraventions of section 80P(2)(a)(i) of the IT. 2. CIT(A) has erred in deleting the addition of Rs. 99,84,841/- made by the AO on account of interest on NPA as the assessee follows mercantile system but for realizing the interest income that become due on the NPA accounts it follows cash system which is not permissible after 1/4/1997. The assessee bank have not accounted for interest income on NPA accounts without writing off the accounts. 3. The decision of Supreme court in-the case of UCO bank as relied by the assessee and ITAT was delivered prior to the amendment of section 43 D with effect from 01.04.2000 and the assessee being co-operative bank is not covered by the provisi....
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....alled upon by the DCIT, Rewari Circle through a notice u/s. 143(2) along with a questionnaire related to various items. The assessee filed written reply and produced books of accounts & accounting records & appeared personally before the Assessing Officer. The Assessing Officer observed that during the previous year, the assessee bank was claiming exemption u/s 80P(2)(a)(i) and was also getting the deposit from non members. The assessee was asked to give bifurcation of the deposits from members and non members. Vide order sheet entry dt 16.01.2015, the assessee was asked to justify its claim for deduction. Vide reply dt 20.02.2015, the assessee stated that it was not possible to bifurcate deposits from members and non members. Further, it w....
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.... despites from non members, if any is the part of banking activity. Since assessee is providing credit facilities to its members only and is very well eligible for claiming deduction section 80P(2)(a)(i) of the Act. Since bank is a banking institution and to keep the record of defaulter borrowers to recover accrued interest on NPA accounts which was accumulated balance of previous years shown in balance sheet of the bank. Such interest was not earned by the bank since the borrower account was defined as "NPA" account and interest on such account can't be accounted for as income. Since it is the normal practice in the banking business these expenditures should be treated as allowable. All these facts were explained in detailed to the Assessi....
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....l explained to Ld. AO that PARDB is fulfilling all the necessary requirement to claim deduction U/s 80P(2)(a)(i) and also that accrued Interest on NPA shown in balance sheet is accumulated balance of previous years and also such income was not earned by the bank since the borrower account was defined as "NPA" account and interest on such account can't be accounted for as income. In view of the both the above citation we hereby humbly request you to delete both the additions made by Ld. AO. Since, there is no concealment of income at all as per ground No. l, 2 & 3, there cannot penalty also u/s. 271(l)(c) & the penalty proceeding needs to be deleted. The facts of the case are squarely covered by the Hon'ble....
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....come is ultimately from the credit facility provided to its members or from sale of seeds agricultural implements etc. contemplated in section 80P(2)(a)(iv). The calculation made by the Assessing Officer is on hypothesis only. He assumes that for example hundred rupees are taken as a deposit from non-member, then hundred would be given to its members as a credit facility which would generate interest income from the members, namely, ten rupees. In this ten rupees, the element of income on the contribution made by the depositor is involved. To our mind, the net income generated to the assessee is only from its members. On the deposits, it will pay interest which would be its expenses and would be set off against the total income generated fr....
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.... 17.08.2002 vide para no. 3.1 clearly states that the policy of income recognition should be based on record of recovery and therefore unrealized income should not be taken into profit and Loss account by State Co-op Bank 1 Central Co-op Banks and that the provisions of Section 43D of the Act are clear regarding the recognition of interest income on NPA. The Ld. CIT(A) in our view has thus rightly held that overdue interest not realized during the year and credited to suspense interest account cannot be taken to be the income of the assessee. Thus the Ld. CIT(A) has thus rightly deleted the addition in question. The same is upheld. There is no substance in the contention of the Ld. DR that the assessee was having no objection to this additi....