2014 (12) TMI 1367

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....einafter referred to as 'the Act') vide order dt.29.12.2010, wherein the income of the assessee was determined at Rs. 4,55,09,110, as against the returned income of Rs. 41,15,662 in view of the following additions / disallowances thereto :- i. Addition to interest income :  Rs. 2,33,08,318. ii. Provision for NPA : Rs. 1,50,00,000. iii. Donation : Rs. 2,13,000. iv. Capital expenditure : Rs. 15,20,350. v. Income Tax paid : Rs. 50,41,908 2.2 Aggrieved by the order of assessment for Assessment Year 2008-09 dt.29.12.2010, the assessee preferred an appeal before the CIT(Appeals), Hubli. The learned CIT (Appeals) vide order dt.11.5.2012 disposed off the assessee's appeal allowing the assessee partial relief. 3. Aggrieved by the order of the CIT(Appeals), Hubli dt.11.5.2012 for Assessment Year 2008-09, Revenue has preferred this appeal before Tribunal raising the following grounds :- " 1. The order of the Commissioner of Income Tax (Appeals), Hubli, is bad in law. 2. The order of the Commissioner of Income Tax (Appeals), Hubli, is opposed to law and not on the facts and circumstances of the case. ....

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....vention of the provisions of section 145 of the Act. As per the Assessing Officer, in terms of section 145 of the Act, the income chargeable under the head 'profits and gains from business and profession' shall be computed in accordance with either cash or Mercantile System of Accounting regularly employed by the assessee. The Assessing Officer observed that the assessee is accounting for the interest on receipt basis and others on accrual basis. In support of his view, the Assessing Officer placed reliance on the decision of the ITAT, Chennai in the case of JCIT V India Equipment Leasing Ltd. (2008) 296 ITR (AT) 177. In that view of the matter, the Assessing Officer held that interest which is accrued on loans and advances is to be treated as income for the relevant assessment year and accordingly brought the amount of Rs. 2,33,08,318 to tax in the assessee's hands. 5.3.1 On appeal before the learned CIT (Appeals), the assessee submitted that being bound by RBI Guidelines in this regard, it has been recognising the interest receivable on loans and advances which are doubtful (non-performing assets) on receipt basis. According to the assessee, as per section 145 of the Act, ....

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....p. Bank Ltd. [ ITA No.471 of 2013 (Kar. High Court) ] dt.30.6.2014. (ii) Shiva Sahakari Bank Niyamitha (ITA No.257/Bang/2007) of ITAT, Bangalore. (iii) The assessee's own case in ITA No.889/Bang/2012 dt.10.10.2014 of the co-ordinate bench of Bangalore Tribunal wherein this issue was adjudicated in favour of the assessee. 5.6.1 We have heard both parties and perused and considered the material on record. As submitted by the learned Authorised Representative, we find that this very issue was considered and adjudicated upon in the decision of the co-ordinate bench of this Tribunal in the assessee's own case in ITA No.889/Bang/2012 dt.10.10.2012 for Assessment Year 2007-08 wherein the Tribunal at paras 5.6.1 and 5.6.2 has held as under :- " 5.6.1 We have heard both parties and perused and carefully considered the material on record, including the judicial decisions placed reliance upon. It is not in dispute that the assessee is in the business of banking and is governed by the Banking Regulations Act, 1949. The question for consideration before us is whether the interest accrued on NPAs, which are doubtful of being recovered, should be recognised a....

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....nally is without any basis. In that view of the mater, the second substantial question frame is answered against, the revenue and in favour of the assessee." 5.6.2 We find that the facts of the case on hand before us and the question of law raised in the above referred case are identical and therefore respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Urban Cooperative Bank Ltd. (supra), we decide the issue in favour of the assessee. Consequently, grounds raised by revenue at S.Nos.3 and 5 are dismissed." 5.6.2 Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of CIT V Urban Co-operative Bank (supra) and the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra), we decide the issue in favour of the assessee. Consequently, the grounds raised at S.Nos.3 & 4 and amended ground No.3 raised by revenue are dismissed. 6. Provision for Non-Performing Assets ('NPA') 6.1 The grounds raised at S.No.5 & 6 and amended ground at S.No.5 pertain to the issue of provision for NPAs. In the course of assessment proceedings, the Assessing....