TaxTMI 
TaxTMI 
2019 (10) TMI 1068
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmon order. ITA No.770/Ahd/2017 - assessee's appeal : 2. Ground No.1 & 5 : These grounds of appeal are general in nature and, therefore, no order needs to be passed. 3. Ground No.2: The assessee is not pressing this ground of appeal before us. Hence, this ground of appeal is dismissed as not pressed. 3. Ground No.3 & 4: These grounds are consequential in nature therefore no order need to be passed. ITA No.1088/Ahd/2017 for A.Y. 2013-14 - Revenue's appeal : 4. The revenue has filed this appeal with the following grounds: "(1) That the ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of FDR written off Rs. 23,88,83 704/-. (2) That the ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of interest accrued on non performing assets of Rs. 79,57,37,478/-. (3) That the ld.CIT(A) has erred in law and on facts in deleting the disallowance made by the AO u/s 14A r.w. Rule 8D of Rs. 53,68,445/-. (4) That the Ld.CIT(A) has erred in law and on facts in deleting the addition made by the AO on account of Amortized of Premium amounting to Rs. 2,74,57,365/-. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not stated for writing off. It is respectfully clarified that content are not correct and out of context. Towards the corroboratory evidence regarding the claim of write off, in addition to earlier submission enclose please find following. - Annexure I (Page 01 to 06) (a) A copy of Press Release: 2011-12/ 1949 dated June 7, 2012 made by Reserve Bank of India. (b) Documents relating to revival are appended. As regard to revival scheme, certainly scheme of reconstruction was made applicable from the close of business of August 23, 2001 for a period often years. But no progress is made in ten years due to non fulfillment of commitments for contribution by UCB and poor track record of recovery lead to expiry of scheme on August 23, 2011. Thus your goodself has refer to revival scheme which was recommended long back and upon its failure it closed down also. Finally for writing of debts / deposits the Reserve Bank of India will prepare the rules the norms a prior permission is not necessary for write off. It is well settled proposition that, to be a permissible deduction there must be direct & intimate Connection b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i) The co-operative bank is not complying with the provision of Sections 11(1) and 22(3) (a) & (b) of the Act. There is no revival plan or merger proposal pending with RBI. ii) There is no likelihood of the co-operative bank being able to resume normal functioning in the foreseeable future. iii) The co-operative bank is not in a position to pay its present and future depositors in full as and when their claims accrue. iv) The affairs of the co-operative bank are being conducted in a manner detrimental to the Interests of its depositors. , v) The financial position of the co-operative bank is so precarious that there is no scope for its revival. vi) The public interest would be adversely affected if the co-operative bank is allowed to carry on its business any further. Therefore, Reserve Bank of India took the extreme measure of cancelling the licence of the cooperative bank in the interest of co-operative bank's depositors. Consequent to the cancellation of licence, The Madhavpura Mercantile Co-operative Bank Ltd., Ahmedabad (Gujarat) is prohibited from carrying on the business of 'banking' as defined in Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal income of the assessee. The penalty proceedings under section 271 (l)(c) of the I. T. Act are being initiated for furnishing inaccurate particulars of income and concealment of particulars of income." 8. The Learned CIT(A) in appeal, took into consideration this particular aspect of the matter that the RBI has conducted statutory inspection of the Co-operative Bank u/s 35 of the Act in regard to the financial position as on 31.03.2011. It is further mentioned that the net worth of the said bank was assessed at Rs.(-) 1316.50 crores and the Bank was not having adequate assets to meet its liabilities. The entire capital and reserves of the cooperative bank has eroded as also observed by the RBI and NPA where Rs. 1126.55 crores i.e. almost 99.99% to its gross advances and the bank has accumulated loss of Rs. 1357.41 Crores and deposit erosion was 100%. In that view of the matter, the Learned CIT(A) was of the opinion that the justification made by the Learned AO upon verification of the written off income filed by the MMC Bank for A.Y. 2013-14 that the said bank is having cash and the Bank balance amounting to Rs. 654.89 crores, cannot be the basis of disallowance of claim of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at in case of a public financial institution or a scheduled bank or state financial corporation, Income by way of interest on such categories of bad & doubtful debt as may be prescribed having regard to guidelines issued by RBI in relation to such debt i.e. in other words interest on (N.P.A) non performing asset classified as such on the basis of guidelines prescribed by the RBI shall be chargeable to tax (a) In the previous year in which it is credited to its profit and loss account by the said institution or bank or corporation OR (b) In the previous year in which it is actually received by the institution or bank, Whichever is earlier On facts of the case, assessee bank has not credited any such interest nor any part of interest which is actually received is not shown as income and therefore provision of section 43D are not applicable. (II) Kindly refer to" Income ARecognition Policy contain in Master Circular issued by the RBI dt. July 1, 2015 relating to Income Recognition, Asset classification provisioning and other related matters-UCB on Page 16 A copy of the said circular is appended - Annexure III (Page No. 13 to 64) Therein ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specific reasons has been assigned for disallowance. c. Your assessee bank is obviously in business of banking and therefore accepts deposits and gives advances and makes investments in Government Securities and other Securities as per the norms laid down and within the framework of the Banking Regulation Act. d. As per the rule laid down, question of any part of interest will be disallowed if it is expenditure only. Thus to disallow any part of interest it is to be charged to e. Profit and Loss Account as an expenditure whereas assessee being banking company, obviously interest has to be paid on deposits accepted are banking and investment being the core activity, its income will also consist of interest only. And from the Profit and loss account your good self will appreciate that bank has earned interest of Rs. 356.71 crore and paid interest on deposits of Rs. 222.68 crore so to say there is net interest income of Rs. 134.03 crore. f. Also from the balance sheet your good self will appreciate that bank has its own funds as follow. Capital 66.67 crores Reserves 705.94 crores Total 772.61 crores g. As against....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o.Op. Bank Ltd. 41 Taxman. Com 110 (Pune Tribunal) ,Sir M Vishveswaraya co-op bank ltd vs. Jt CIT in ITA no. 1122/Bang/2010 dt.11/05/2012 & Cit v. Hdfc Bank(Bom.)." However, such plea of the assessee was not found fit by Learned AO and he thus rejected the claim. In appeal, the Learned CIT(A) observed the following while allowing the claim of the assessee: "Notwithstanding anything to the contrary contained in any other provision of this Act.- (a) in the case of a public financial institution or a scheduled bank or a State financial corporation or a State industrial investment corporation- the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts. (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, Shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... effective date of inclusion of the aforesaid banks in the Second Schedule shall be 1 September. 1988 A perusal of the above notification clearly proves that the appellant has been listed at Sr.No.8 and has been granted the status of a "Scheduled Bank" as per the RBI notification. Therefore, the conditions enumerated in the provisions of Sec.43D has been complied with When the appellant qualifies as a Scheduled Bank as per the provisions of the section, it is clear that the income by way of interest in relation to such categories of bank or doubtful debts as may be prescribed having regard to the guidelines issued" by RBI in relation to such debts shall be chargeable to tax in the previous year in which it is credited by the Scheduled Bank to its P & L A/c for that year or as the case may be in which it is actually received by that bank whichever is earlier. On a perusal of the assessment order it is noticed that the A.O has not disputed that the issue in question is regarding interest on non-performing assets The focus of the A.O has all along been that since the appellant follows mercantile system of accounting as per sec. 145 of the I.T. Act, the appellant cann....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Learned Advocate appearing for the assessee submitted before us that the Learned CIT(A) has relied upon the order passed by him in assessee's own case for A.Y. 2012-13. He, further relies upon the judgment passed by the co-ordinate bench in assessee's own case for A.Y. 2012-13 in ITA No.2124/Ahd/2016 copy whereof has been submitted before us. 14. Heard the respective parties, perused the relevant materials available on record including the order passed by the co-ordinate Bench. The relevant portion whereof is as follows: "Second ground of appeal pertaining to disallowance u/s. 14A of the act. And ground number 3 of appeal of the assessee. 11. During the course of assessment proceedings, the assessing officer has noticed that assessee has claimed dividend income of Rs. 1.52 crores and interest earned on other trustee securities of Rs. 85,91,096/- as exempt income. He observed that assessee has not disallowed any expenditure incurred towards earning exempt income as per the provision of section 14A of the act. Therefore, the assessing officer has worked out disallowance according to section 14A r.w. Rule 8D of the act and disallowed an amount of Rs. 42,65.343/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Learned Advocate appearing for the assessee further relied upon the order passed by the Co-ordinate Bench in Assessee's own case for A.Y. 2012- 13 in ITA No.2124/Ahd/2016; copy whereof has been submitted before us. On the contrary the Learned DR relied upon the order passed by the authorities below. 17. Heard the respective parties, perused the relevant materials available on record including the order passed by the co-ordinate Bench in ITA No.2124/Ahd/2016 the relevant portion whereof is as follows: "8. During the year under consideration, the assessee has written off govt. security premium to the extent of Rs. 2,10,11,715/-. The assessing officer has disallowed the premium amount amortized by the asssessee bank in respect of purchase of securities under the category held to be maturity stating that definitely the same is of capital outlay which cannot be allowed as expenditure. 9. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has deleted the addition stating that his predecessor has deleted the same in the case of the assessee in the earlier years. 10. We have heard the rival contentions and perused the material on record....