TaxTMI 
TaxTMI 
2024 (5) TMI 1497
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....r Ground which may be raised during the course of hearing." 3. Facts in Brief:- The assessee is a Co-operative Bank working under the guidelines and regulations of Reserve Bank of India. Return of income for the year under consideration was electronically filed on 29/09/2009, declaring total income of Rs. 99,65,218. The assessee has also debited an amount of Rs. 1,43,97,123, in the Profit & Loss Account for provision for interest accrued on NPA. The amount was debited as the principal amount was itself doubtful of receiving back by the assessee, so the interest accrued on those NPA loans is not to be recognized as income, as per prudent norms of income, issued by the Reserve Bank of India. However, the Assessing Officer has disallowed the claim under section 36(1)(viia) of the Act of Rs. 1,94,57,134, and also made addition of Rs. 1,43,97,123, on account of accrued interest on NPA on due basis. Being aggrieved, the assessee filed appeal before the first appellate authority. 4. Insofar as the issue relating to disallowance of claim under section 36(1)(viia) of the Act of Rs. 1,94,57,134 is concerned,, the learned CIT (A) deleted the addition on account of bad and doubtful debts un....
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....ed AO disallowed the deduction as claimed by the appellant and as discussed above made total disallowance of Rs. 1,94,57,134/- on account of provision for bad and doubtful debts. 5.1.2 As mentioned above in para no.4, in these appeal proceedings the learned counsel submitted a written reply dated 07.03.2019 on 08.03.2019 related to the above addition i.e. disallowance on account of bad and doubtful debts. Related to this issue, it has been submitted that the same has been already decided in favour of the appellant in the Assessment Years which are immediately succeeding to the Assessment Year in question i.e. A.Y. 2010-11 as well as another AY i.e. AY 2012-13. The same has been quoted and which has been mentioned that in addition to this order of the then learned CIT (A) the same has also been upheld by the learned ITAT Nagpur Bench wherein it has appreciated the fact that RBI has issued a list of banks titled as "List of DCCBs in Maharashtra" wherein at Sr. No. 6 the name of the Assessee is mentioned. Hon'ble Bench also relied on the Order passed by ITAT Nagpur Bench in the case of ACIT v/s Arvind Sahakari Bank Ltd., Katol [ITA No. 376 & 377/Nag/2013]. Thus, ....
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....red the submission made by the appellant submission made by the appellant and came to the conclusion that neither RBI norms nor the accounting standards stop accrual interest income on NPAs. He based his findings on the judgment of Hon'ble Apex Court in the case of Southern Technologies Ltd. Vs. JCIT wherein it was held that the RBI directions issued under RBI Act do not override the provisions of Income tax Act and that the RBI directions and the Income tax Act operating different fields. He further noted that the form no. 3CD of Tax Audit Report showed that the method of accounting followed by the appellant is "mercantile" and also that the tax audit report mentions that interest on NPAs is accounted for on cash basis and that the tax audit report is bad in law to the extent that hybrid system of accounting is not permitted in view of the provisions of section 145 of the Act. In view of the same the Ld.AO added an amount of Rs. 27,03,083/- as income of the appellant being interest accrued on NPAs. 5. Upon assessee's appeal, as regards the first issue as to whether the assessee is entitled to claim deduction u/s 36(1)(viia) the learned CIT(Appeals) decided the issu....
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....ng 27,03,083/- as income of the appellant being interest accrued on NPAs. This ground is therefore allowed." 8. Since the issue for our adjudication is covered by the aforesaid decision of the Tribunal, consistent with the view taken therein, we decline to interfere with the order passed by the learned CIT (A) by dismissing the ground no.1, raised by the Revenue. 9. Insofar as gorund no. 2, which relates to the addition of Rs. 1,43,97,123, towards accrued interest on non-performing assets is concerned, we find that the issue is covered in favour of the assessee by the judgment of the Hon'ble Bombay High Court, rendered in CIT v/s Deogiri Nagari Sahakari Bank Ltd., ITA no.53 of 2014, judgment dated 22/01/2015, wherein the Hon'ble Court has held as under:- "11. The learned counsel for respondent has placed reliance in a case of Mercantile Bank Ltd., Bombay Vs. The Commissioner of Income Tax, Bombay City-III reported in (2006) 5 SCC 221, where similar question was raised before the Apex Court. The question was whether the assessee is under Income Tax Act, 1961 in respect of the interest on doubtful advances credited to the interest suspense account. In this case, the Uco Bank'....
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....d by the provisions of the Income Tax Act. The relevant observations of the Hon'ble Supreme Court are extracted below: "Applicability of Section 145 40. At the outset, we may state that in essence RBI Directions 1998 are Prudential/Provisioning Norms issued by RBI under Chapter'i.JIB of the RBI Act, 1934. These Norms deal essentially with Income Recognition. They force the NBFCs to disclose the amount of NPA in their financial accounts. They force the NBFC to reflect "true and correct" profits. By virtue of Section 45Q. an overriding effect is given to the Directions 1998 vis-a-vis "Income Recognition" principles in the Companies Act. 1956. These Directions constitute a code by itself. However, these Directions 1998 and the IT Act operate in different areas. These Directions 1998 have nothing to do with computation of taxable income. These Directions cannot overrule the 'permissible deductions" or "their exclusion" under the IT Act. The inconsistency between these Directions and Companies Act is only in the matter of Income Recognition and presentation of Financial Statements. The Accounting policies adopted by an NBFC cannot determine the taxable income. It is we....