TaxTMI 
TaxTMI 
2024 (9) TMI 90
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....rior to the amendment in the said section and is a regular assessee with the Income Tax Department through the Assistant Commissioner of Income Tax Circle 2(1) Chandigarh. 3. That the assessee society filed its return for the year under consideration on 30th September 2013 declaring therein Rs. 33,39,71,300/- as net taxable income. The same is stated to have been processed under the provision of Section 143(1) of the Income Tax Act, 1961 on 14th November 2013. No intimation to this effect has however been received by the assessee. The assessee has also not received the refund claimed while filing the return of income. The case of the assessee society was subsequently selected for scrutiny assessment under CASS list. A notice under section 143(2) was issued on 3rd September 2014. 4. That the perusal of the assessment records of the assessee would reveal that the only source of Income of the assessee is interest income besides income from house property. The main business of the assessee society includes lending of money to earn interest thereon from the various banks, institutions, investment in Government securities and other various deposits including investment in bonds and....
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....ase were finalized under the provisions of Section 143(3) of the income Tax Act 1961 by the worthy Assessing Officer by making following additions: a) Disallowance of premium paid on government securities Rs. 12,39,000/- holding the same to be capital expenditure. b) Loss on sale of vehicles Rs. 22,940/-. c) Rs. 7,43,000/- on the basis of the audit report of the Chartered Account considering the same as being depicted in the Sundries Miscellaneous on account of OTS scheme. The addition made by the assessing officer is against the facts and the provisions of law. Hence the assessee filed an appeal. The issue at a) was decided in the favour of the assessee by the CIT(A) and matter at (c) was decided against the assessee. Both assessee as well the department filed the appeal before the Hon'ble ITAT whereas the appeal of the department in relation to the issue a) was dismissed by ITAT and the assessee's appeal on issue (c) was remanded back to the file of the CIT(A) on the basis of the additional evidence filed by the assessee during the proceedings before the Hon'ble ITAT in respect of 2 grounds of appeal: a) Taxability of inter....
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....pon credit, the amount is firstly adjusted against the principal amount due from the borrower and the excess if any after that is shown by the banks as interest income and assessed to tax in the year of adjustment as per the provisions of Section 43D of the Income Tax Act 1961. The same uniform accounting principle is followed by the banks in India for accounting of amount received under OTS. Sir, the assessing officer has disallowed the amount Rs. 7,43,000/- as income of the assessee by holding as under: The assessee claims NPA as an expenditure under the Income Tax Act 1961. However, it has failed to show the amount as income which has been recovered from the NPAs. Therefore, the amount of Rs. 743,000/- is added to the Income of the assessee. Further the amount has not been shown in the Notes of accounts of the assessee but was covered in the Long Form Audit report which is enclosed. Sir, the Assessing Officer's claim that the NPA is claimed as expenditure is wrong, The assessee is allowed deduction on account of provision for bad and doubtful debts and deduction allowable is subject to the ceiling of 7.5% of the total income of the assessee. On rec....
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.... According to the Ld. AO the assessee claims NPA as expenditure under the Income Tax Act 1961, which is without any basis and is factually wrong. The assessee is instead allowed claim for the provision for NPA's and such claim is also restricted to 7.5% or 10% of the Net profits of the assessee before making such provision. The provision for NPA of the assessee as on 31st March 2013 is Rs. 5179.04 Lakhs against the gross NPA of Rs. 5689.47 Lakhs and whereas the provision for NPA claimed under the Income Tax Act 1961 is Rs. 1350.10 Lakhs(Form A Balance Sheet Schedule 2(i)) as against provision of Rs. 5689.47 Lakhs. This clearly shows that against the NPA of Rs. 5689.47 Lakhs, the assessee has merely claimed an amount of Rs. 1350.10 Lakhs under Section 36(1)(vii)(a) of the Income Tax Act 1961. Further, the provision allowed under the Income Tax Act 1961 under Section 36(1)(vii)(a) is not against specific advance the provisions for NPA provided by the bank is allowed only to the extent of the 7.5% or 10% of the net profit of the bank before adjusting for the provision. Further, at the time of receipt of the complete amount, the provision for bad debts is written back bu....
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....see has received a sum of Rs. 173.73 Lacs as on 31.03.2014 and whole of the amount was lying under the head "Sundries Payable". Out of the same, the amount of Rs. 170,00,000/-pertains to the amount received from the sale of assets of the guarantor in a loan on 24.12.2012 and the guarantor had filed the proceedings in the court of law against sale of such asset which was settled by the lower court by its order dated 20.01.2015. Against which the party filed an appeal before the Hon'ble Punjab and Haryana High Court and when the Hon'ble High Court did not grant stay to the guarantor the amount was credited to the account of the customer M/s Heels and Toes Footwear Pvt Ltd on 13.05.2015 and the amount of Rs. 91,00,000/- was recognized as interest income by the assessee for the AY 2016- 17 and remaining amount of Rs. 79,00,000 was adjusted against the principal outstanding. Similarly the assessee also received a sum of Rs. 29,87,000/- from the customer M/s Heels and Toes Foot wears Pvt Ltd on 22.03.2013. The amount was credited to the account of customer on 31.03.2017 and the amount was shown as interest income of the assessee for the AY 2017-18. In light of the provis....
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....vide response dt. 24/02/2023 that it had received the said sum of money i.e; Rs. 1,20,87,000/- but it has treated them as liability because the guarantor / borrower has instituted litigation in Court of law and therefore the said some of Rs. 1,20,87,000/- was not actually accrued to it. The Ld. CIT(A) held that "The contention of the appellant has been perused but not found acceptable. As per master circular of RBI, the banks needs to consider income from NPA on receipt basis and not on accrual basis. In view of the above, I am of the considerate view that amount of NPA recovered should be offered to tax in the year of receipt. Therefore, the addition made by the learned AO is upheld." 12. The assessee society being aggrieved by the aforesaid finding of Ld. CIT(A) in the impugned order has raised following grounds of appeal in Form No. 36 which is form of appeal to this Tribunal: 1. That the Ld. AO has erred in law and on facts on making the addition of Rs. 120,87,000 when the amount has already been added by the Ld. CIT(A) in A.Y. 2014-15 leading to double taxation. 2. That the Ld. CIT(A) has erred in law and on facts in considering the amount of Rs. 120870....
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....ontended that mere receipts of money does not become income of the Assessee until the assessee appropriates the same to its income and therefore amount of Rs. 1,20,87,000/- is not exigible to tax during the A.Y. 2013-14. It was further contended that since the assessee society has voluntarily charged the amount to interest income during the A.Y 2016-17 and 2017-18, taxability of the amount during the A.Y. 2013-14 would amount to double taxation. It was contended that the Ld. CIT(A) has failed to take into consideration submissions made on the year of taxability and has erroneously held it to be for A.Y. 2013-14 and has rejected the appeal of the assessee society. The Ld. AR laid much emphasis on the year under consideration, the year of receipt and year of taxability and concluded his arguments. 13.1 The core issue is that Ld. CIT(A) enhanced the income of the assessee to the extent of Rs. 1,20,87,000/- holding that since the amount has been received during the A.Y. 2013-14 the same is taxable under the year under consideration as per the provisions of Section 43D of the Act. 13.2 The Ld. AR has placed reliance on following: i. Section 43D ii. Section 5 of t....
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....without any imports having been made (c) the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view It was contended further that the assessee has received a sum of Rs. 1,70,00,000/- from the sale of immovable property and the amount of Rs. 29,87,000/- alongwith an application under one time settlement scheme (OTS). The whole of the amount is not income of the assessee. As per law only the interest income received by the assessee is taxable and not whole of the amount. The assessee has credited the amount in the account of Heels & Toes Rs. 1,70,00,000/- during F.Y. 2015-16 (A.Y. 2016-17 ) and Rs. 29,87,000/- in F.Y. 2016- 17 (A.Y. 2017-18 ) and therefore the amount cannot be taxed during A.Y. 2013- 14 further, the improbability existed due to the proceedings filed by the 'guarantor' against the order and since the proceedings against the order of Lower Court was decided by District Court on 20/01/2015 and the Hon'ble High Court had not granted any stay against the amount of Rs. 1,70 Crores same was credited into account of bank's customer M/s Heels & Toes in July 2015 and the interest income of....
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....Act as below:- 43D. 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 cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank or a State financial corporation or a State industrial investment corporation or a deposit taking nonbanking financial company or a systemically important non-deposit taking nonbanking financial 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 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 a co-operative bank other than a primary agricultural credit society or a primary....
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.... realised in the F.Y. 2013-14 but it was appropriated recognised and accounted as interest income in the A.Y. 2016-17 and A.Y. 2017-18 as the assessee has statutory obligation by virtue of section 43D of the Income Tax Act, 1961 to treat income by way of interest as per RBI guidelines too [ vide Master Circular No. RBI/2023-24 /06 dt. 01/04/2023 (DOR.STR.REC.3/21.04.048/2023-24) and Master Circular (DOR. STR.REC.4/21.04.048/20222-23) dt. 1/04/2022]. The bank has the right of appropriation recognition of recoveries with a rider that it should be uniform and consistent. Even otherwise under the Indian Contract Act, 1872 which deals with the appropriation of payments from Section 59 to 61; Section 60 gives right to bank (the creditor) " where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, , whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits." We further therefore hold that even otherwise the bank has a right to appropriate and recogn....
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....ing principle and exercise the right of appropriation of recoveries in a uniform and consistent manner". We hold that assessee bank has followed Section 43D of Income Tax Act, 1961. We also hold that assessee has already brought to the return of income the amount of Rs. 91,00,000/-during A.Y. 2016-17 and Rs. 29,87,000/- during A.Y. 2017- 18 subjecting the amount to the return of income in A.Y. 2013-14 would certainly lead to double taxation. Further we hold that there is no change in the rate of tax for A.Y. 2013-14 or A.Y. 2016-17 and A.Y. 2017-18, the assessee in all these years was subject to tax @ 30% and the assessee had earned profit during each of the assessment year. Hence there would be no loss to the Revenue due to year of taxability. We gainfully refer to observation of Hon'ble Supreme Court in case of CIT, Central III Vs. Excel Industries Ltd. (2013) 358 ITR 215 held as under: 32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and p....