TaxTMI 
TaxTMI 
TaxTMI 
2021 (2) TMI 416
X X X X Extracts X X X X
X X X X Extracts X X X X
....17 w.e.f. 01-04-2018 only. Meaning thereby that the said amendment does not carry retrospective effect. This tribunal's co-ordinate bench's decision The Taliparamba Co-operative Bank Ltd., Vs. ITO, ITA No.35/Coch/2018, dt.13-03-2019, deletes the very nature of additions of interest on NPAs in view of the foregoing statutory amendment as follows: "2. The facts of the case are that the assessment in this case of for A.Y. 2013-14 was completed u/s 143(3) on 28.3.2016 determining a total income at Rs. 28,25,030/-. On perusal of records, it was noticed that the assessment order was prima facie erroneous in so far as it was prejudicial to the interest of revenue. 2.1 The CIT found that deduction of Rs. 7,26,695/- u/s 43D in profit & Loss account for the previous year relevant to AY 2013-14 was allowed which was not in accordance with the provisions of section 43D. Section 43D gives special provision in case of income of public financial institutions or a scheduled bank or a state financial corporation or a state industrial investment corporation, public companies etc. It was noticed that the assessee does not belong to any of these categories mentioned above. However, this was allowe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in operation. The Ld. Submitted that this view was supported by the decision in the case of Allied Motors (P) Ltd., Vs. CIT (1997) 139 CTR 0364 (SC). 3.1 The Ld. AR submitted that the assessee was following mercantile system of accounting as per the laid out procedure and was providing interest on non-per forming assets, as per the procedure laid out by Reserve Bank of India as evident from accounts and hence, was eligible for deductions under section 43D as provided therein. For this, the Ld. AR relied on the decision in the case of UCO Bank, Calcutta Vs.CIT ( 1999) 45 CC 599 (SC) read with circular No: F- 201/81/84 ITA-II dated 09/10/1984. Thus, it was submitted that the assessee was eligible for deduction under section 43D even if it not a "scheduled bank". Further, the Ld. AR relied on the following case laws: 1. CIT vs. Canfin Homes Ltd. (347 ITR 382) (Kar.) 2. The Sindagi Urban Co-op. Bank vs. Department of Income Tax (ITA No.1530/Bang/2013 dated 05/03/2015) (ITAT, Bangalore) 3. Dy.CIT vs. The Saurashtra Co-op. Bank Ltd. (ITA No. 690/Ahd/2016 dated 31/01/2018 (ITAT, Ahmedabad) 4. Dy. CIT vs. Gondal Nagarik Sahakari Bank (ITA No. 504/Rjt/2015 dated 16/01/2018 (ITAT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chever is earlier, then it is compulsory to abide by the said rule. No scope is left with the Revenue authorities to ignore these provisions due to unambiguous use of language in the section. As far as the status of the assessee is concerned, the AO has stated that the assessee-bank is a co-operative bank. Undisputedly, the assessee is also governed by the RBI guidelines. Vide an Expln. (d) r.w.s. 36(i)(viia) annexed to s. 430 the definition of the entities incorporated by the section have been defined and in the absence of any contrary material, it is hereby held that the assessee is covered by one of the entities, hence the provisions of s. 43D are to be applied. Next issue is that whether a circular having effect of relaxing rigour of law can be treated as inconsistent with the provisions of a statute. In order to aid proper determination of the income of moneylenders and banks, the CBDT has issued a Circular dt. 6th Oct., 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, it need not be included in assessee's taxable income, provided the ITO is satisfied that recovery is practically improbable. The CBDT under s.119 has power to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. 9. Section 43D of the Act was brought in basically intended to overcome the decision of the Supreme Court in State Bank of Travancore Vs. CIT 158 ITR 102 (SC) wherein it was held that interest on doubtful advances credited to "interest suspense account" and not transferred to "profit and loss account" should be considered as accrued according to the mercantile system of accounting and was taxable as such. The benefit of exception from the said Supreme Court's decision was given through section 43D to public financial institutions as defined in section 4A of the Companies Act, 1956 scheduled banks as per Expln. (ii) to Section 36(i)(viia) of the Act, State financial corporations established under section 3 or 3A of the State Financial Corporations Act, 1951 and institutions notified under section 46 of the said Act, and State industrial investment corporations which are Government companies as per section 617 of the Companies Act, 1956 and which are engaged in providing long term finance for industrial projects and appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome recognition to be objective should be based on record of recovery. Income from a non- performing asset may not be recognised merely on the basis of accrual. An asset becomes non-performing when it ceases to yield income. The income from non-performing assets, therefore, should be recognised only when it is actually received. A non-performing asset is an asset in respect of which interest has remained unpaid and has become "past due". An amount is to be treated as "past due" when it remains unpaid for 30 days beyond the due date. Interest on the non-performing assets should not be looked upon as income if such interest has remained outstanding for more than six months on and from March 31,1995. Therefore, if an assessee adopts the mercantile system of accounting and in his accounts he shows a particular income as accruing, whether that amount is really accrued or not, it is liable to tax. His accounts should reflect the true and correct statement of affairs. Merely because the amount accrued but was not realised immediately that cannot be a ground to avoid payment of tax. But, if in his account it is clearly stated that though a particular income is due to him it is not possib....