The Sarangpur Co.Op.Bank Ltd., Ahmedabad v. The Dy.CIT.,Circle-11,, Ahmedabad

ITA 2838/AHD/2010 | 2007-2008
Pronouncement Date: 25-01-2011 | Result: Allowed

Appeal Details

RSA Number 283820514 RSA 2010
Assessee PAN AAAAT2465R
Bench Ahmedabad
Appeal Number ITA 2838/AHD/2010
Duration Of Justice 3 month(s) 14 day(s)
Appellant The Sarangpur Co.Op.Bank Ltd., Ahmedabad
Respondent The Dy.CIT.,Circle-11,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 25-01-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2007-2008
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON' BLE SHRI N.S. SAINI A.M. ) I.T.A. NO. 2838/AHD./2010 ASSESSMENT YEAR : 2007-2008 SARANGPUR CO-OP. BANK LTD. AHMEDABAD VS.- DEPUT Y COMMISSIONER OF INCOME TAX (PAN : AAAAT 2465 R) CIRCLE-11 AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N. SOPARKAR S R. ADV. RESPONDENT BY : SHRI SANJAY RAI SR. D. R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 12.08.2010 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XVI AHMEDABAD CONFIRMING THE ADDITION OF RS.85 36 517/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF INTEREST ALLEGEDLY ACCRUED ON NON- PERFORMING ASSETS (NPA) FOR THE ASSESSMENT YEAR 200 7-08. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COOPERATIVE BANK AND IS GOVERNED BY BANKING REGULATION ACT 1949. THE MAIN ACTIVITY OF BANK IS TO ACCEPT DEPOSITS AND TO GRANT LOANS AND ADVANCES AND THUS IT IS CARRYING ON ACTIVITY OF BANKING BUSINESS. FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE-COOPERATIVE BANK FILED T HE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.(-)10 26 419/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 29.12.2009 AT TOTAL INCOME OF RS.85 39 540/- WHERE IN HE MADE THE ADDITION OF RS.85 36 517/- BEING INTEREST ACCRUED ON THE LOANS AND ADVANCES AS PER PROVISIONS CONTAINED IN SECTION 5 READ WITH SECTION 43D OF THE INCOME TAX ACT 1961. ON AP PEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE CONTENDED THAT WH ILE MAKING THE AFORESAID ADDITION THE ASSESSING OFFICER HAS NOT FOLLOWED THE GUIDELINES A S WELL AS NOT FOLLOW THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GODHARA ELECTR ICITY CO. LTD. REPORTED IN 225 ITR 746 (SC) AND UCO BANK REPORTED IN 237 ITR 889 (SC). IT WAS A LSO CONTENDED THAT ALL THE BANKS ARE REQUIRED TO IDENTIFY NON-PERFORMING ASSETS PORTFOLI O AS PER INSTRUCTIONS AND GUIDELINES OF RESERVE BANK OF INDIA. IT WAS ALSO CONTENDED THAT THE HON'B LE SUPREME COURT IN THE AFORESAID CASES HELD 2 ITA NO. 2838-AHD-2010 THAT INTEREST ON A LOAN WHOSE RECOVERY IS DOUBTFUL AND W HICH WAS NOT RECOVERED BY THE ASSESSEE-BANK FOR THE LAST THREE YEARS AND HAS BEEN KEPT IN SUSPENSE ACCOUNT AND HAS NOT BEEN BROUGHT TO THE P & L A/C. COULD NOT BE INCLUDE D IN THE INCOME OF THE ASSESSEE. 3. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IT WAS ALSO CONTENDED THAT THE AFORESAID PRINCIPLE HAS BEEN RECOGNIZED BY SECT ION 43D OF THE INCOME TAX ACT. AS PER PROVISION OF THIS SECTION IN THE CASE OF A PUBLIC F INANCIAL INSTITUTE OR SCHEDULED BANK THE INCOME BY WAY OF INTEREST IN RELATION TO CATEGORIES OF BAD DEBT OR DOUBTFUL DEBTS HAVING REGARD TO THE GUIDELINES OF RBI SHALL BE CHARGEABLE TO TAX IN PRE VIOUS YEAR IN WHICH IT IS CREDITED BY THE BANK TO ITS PROFIT & LOSS A/C. CLAUSE (B) OF SECTION 43D IS SIMILAR PROVISION IN RESPECT OF PUBLIC COMPANY IN RESPECT OF GUIDELINES ISSUED BY NON-HOUS ING BANK. HOWEVER SECTION 43D PROVIDES THAT THE APPLICABILITY OF THIS SECTION IS SUBJECT T O RULES FRAMED IN RULE 6EA AND 6EB APPLICABLE TO BANKING OR PUBLIC COMPANY RESPECTIVELY. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IT WAS ALSO ARGUED THAT SECTION 43D DO ES NOT MENTION COOPERATIVE BANK OR NON- SCHEDULED BANK BECAUSE THEY WERE ENTITLED TO DEDU CTION UNDER SECTION 80P(2)(A)(I) AND HENCE NOT IN RESPECT OF INTEREST INCOME. RELIANCE WAS ALS O PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GODHARA ELECTRICITY CO . REPORTED IN 225 ITR 746 WHEREIN THE HON'BLE SUPREME COURT HELD THAT INTEREST INCOME WHI CH IS NOT REALIZED SHOULD NOT BE TAXED ON ACCRUAL BASIS. 4. AFTER CONSIDERING ALL THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ACT ION OF ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARA 2.3 WHICH IS REPRODUCED HERE UNDER :- 2.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATION OF THE A.O . IN THE CASE OF SOUTHERN TE CHNOLOGIES LTD. THE HON'BLE SUPREME COURT HAS CLEARLY STATED THAT THE R BI GUIDELINES DO NOT OVERRIDE THE PROVISIONS OF I.T. ACT. THE RBI DIREC TIONS AND I T ACT OPERATE IN DIFFERENT FIELDS. THE HON'BLE SUPREME COURT STA TED THAT THE PROVISIONS FOR NPA MADE IN TERMS OF RBI DIRECTIONS DO NOT CONFLICT FOR THE PURPOSE OF I T ACT. EVEN THOUGH THIS DECISION IS NOT ON ACCRUED INCOME BUT THE DECISION OF SUPREME COURT IS CLEAR THAT THE RBI GUIDELINE DO NOT OVERRIDE TO I T ACT. THEREFORE IT IS VERY CLEAR THAT THE PROVISIONS OF S ECTION 43D READ WITH RULE 6EA WOULD NOT BE APPLICABLE. THE APPELLANT IS CLEAR LY NOT COVERED BY THIS PROVISION BECAUSE IT IS NOT A SCHEDULED BANK AND IT IS NOT A PUBLIC INSTITUTION AS DEFINED IN THE EXPLANATION BELOW SECTION 43D TH EREFORE IT CANNOT TAKE 3 ITA NO. 2838-AHD-2010 COVER OF SECTION 43D. FURTHER AND WITHOUT PREJUDICE TO THE ABOVE THE APPELLANT ALSO DOES NOT QUALIFY THE CONDITIONS MENT IONED UNDER RULE 6EA AS IT HAS TREATED NPA ACCOUNT WHOSE ADVANCE IN RESPECT OF MORE THAN TWO INSTALLMENTS HAVE NOT COME WHEREAS THE CONDITIONS M ENTIONED IN RULE 6EA FOR NON VIABLE AND STICKY ADVANCES ARE QUITE DIFFER ENT THE APPELLANT HAS NOT MENTIONED CLEARLY THAT THESE CONDITIONS IN RULE 6EA ARE SATISFIED. THE APPELLANT RELIED ON VARIOUS DECISION THAT IF THE LO ANS ARE STICK THEN INTEREST SHOULD NOT BE CHARGED IS NOT CORRECT. IN THOSE DECI SIONS THE FACTS WERE THAT LOANS WERE STICK FOR A LONG PERIOD WHEREAS THE APPE LLANT IS NOT TREATING SUCH LOANS AS DOUBTFUL WHERE TWO INSTALLMENTS ARE NOT RE CEIVED. SUCH LOANS CANNOT BE CALLED STICKY. THEREFORE THE CLAIM OF THE ASSESSEE IS NOT CORRECT. THE ADDITION MADE BY THE AO IS CONFIRMED THESE GRO UNDS OF APPEALS ARE DISMISSED. APART FROM THE AFORESAID ADDITION THE ASSESSING OF FICER DISALLOWED RS.60 917/- BY INVOKING THE PROVISIONS CONTAINED IN SECTION 40(A)(IA) OF THE IN COME TAX ACT AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE SAID DISALLOWANCE . 5. AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME TAX(APPEALS) CONFIRMING BOTH THE AFORESAID TWO ADDITIONS THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS :- 1. THE ID. CIT (A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS 85 36 517/- MADE BY AO ON ACCOUNT OF INTEREST ALLEGEDLY ACCRUED ON NON PERFORMING ASSETS (NPA) WITHOUT APPRECIATING THE CONTENTS OF RBI CIRCULAR RELIED UPON BY THE APPELLANT. LD. CIT (A) HAS GRAVELY ERRED IN NOT CONSIDERING THE SUBMISSIONS OF THE APPELLANT THAT T HE NOTIONAL INCOME ON ACCRUAL BASIS ON BAD AND DOUBTFUL ADVANCES IS AGAINST THE P RINCIPLES OF TAXING REAL INCOME. LD. CTT (A) OUGHT TO HAVE DELETED THE ADDIT ION MADE BY AO AND ALLOWED THE CLAIM OF THE APPELLANT OF TAXING ONLY ACTUAL RE CEIPT OF INTEREST. BOTH THE LOWER AUTHORITIES FAILED TO FOLLOW THE RATIO LAID DOWN IN UCO BANK (237 ITR 889) BY THE APEX COURT AS WELL THE CONTENTS OF THE GUIDELINES O F RESERVE BANK OF INDIA. 2. ALTERNATIVELY THE ID. CIT (A) HAS FURTHER ERRED IN LAW AND ON THE FACTS IN HOLDING THAT THE PROVISIONS OF SECTION 43D READ WIT H RULE 6EA WOULD NOT QUALIFY THE APPELLANT TO CLAIM CREDIT OF INTEREST ON ACTUAL BASIS ON BAD AND DOUBTFUL ADVANCES SINCE IT WAS NEITHER A SCHEDULED BANK NOR PUBLIC INSTITUTION AS DEFINED IN THE EXPLANATION BELOW SECTION 43D THE ORDER OF CIT (A) BEING HARSH UNJUST AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE DESERVES TO BE QUASHED. 3. WITHOUT PREJUDICE LO THE ABOVE BOTH THE LOWER AU THORITIES HAVE ERRED IN LAW AND ON THE FACTS IN NOT APPRECIATING THE CONTEN TIONS RAISED BY THE APPELLANT THAT THE FIGURE OF INTEREST ACCRUAL ON NPA ACCOUNT ADDED BY AO AND CONFIRMED BY CIT (A) IS THE AMOUNT OF INTEREST FROM THE YEAR 199 9 TO 2007 WHEREAS THE INTEREST ACCRUED FOR THE YEAR UNDER CONSIDERATION WOULD BE R S. 51 08 475/- AS PER DETAILS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND THE SAME ONLY COULD HAVE BEEN 4 ITA NO. 2838-AHD-2010 ALTERNATIVELY ADDED TO INCOME. LD. CIT (A) OUGHT TO HAVE DELETED THE ADDITION OF THE INTEREST NOT RECEIVED BUT ACCRUED ON THE BAD AN D DOUBTFUL DEBTS. 4. THE ID. CIT (A) HAS ERRED IN LAW AND ON FA CTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS. 60 917/- PAID FOR PROFESSIONAL SE RVICES/AUDIT FEES AND OF RS.59 783/- OF LEGAL CHARGES U/S 40(A)(IA) OF THE A CT AS TDS WAS NOT MADE FROM PROVISION FOR THE SAME. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THAT THE TAX WAS DEDUCTED AND PAID TO THE TREASURY AT TH E TIME OF THE PAYMENT OF THE FEES IN THE SUBSEQUENT YEAR LD. CIT (A) OUGHT TO HAVE D ELETED THE DISALLOWANCE. 5. LEVY OF INTEREST UNDER SECTION 234B/234C O F THE ACT IS NOT JUSTIFIED. 6. INITIATION OF PENALTY U/S 27 L(L)(C) OF TH E ACT IS NOT JUSTIFIED. 6. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI S.N. SOPARKAR LD. SENIOR ADVOCATE APPEARED AND DREW OUR ATTENTION TO GROUND NO. 5 RAISED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WHICH READS AS UNDER :- 5. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE LEARNED DCIT HAS FURTHER ERRED IN ADOPTING THE FIGURE OF INTEREST AC CRUAL ON NPA ACCOUNT AT RS.85.34 LACS WHICH IS THE AMOUNT OF ACCUMULATE D INTEREST CHARGED BUT NOT RECOVERED FROM 1999 TO 2007 AND OUTSTANDIN G ON 31.03.2007 AND NOT THE AMOUNT OF INTEREST ACCRUED FOR THE YEAR 2006-07 WHICH WAS RS.51 08 475/- AS PER DETAILS SUBMITTED IN ASSESSME NT PROCEEDINGS. 7. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD NOT ADJUDI CATED THE AFORESAID GROUND NO. 5. THE LD. COUNSEL OF THE ASSESSEE ALSO POINTED OUT THAT THE P ROVISIONS FOR INTEREST ON NON-PERFORMING ASSETS MADE IS ONLY RS.51 08 475/- AS SUBMITTED BEFORE THE ASSESSING OFFICER. THE LD. D.R. OBJECTED TO THE SAME ON THE GROUND THAT ASSETS CLASSIFICATION I S WRONG. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEREFORE THE ADDITION WAS RIG HTLY MADE AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNE D ORDER. THE LD. D.R. SUBMITTED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) IS IN CONFORMITY WITH THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F SOUTHERN TECHNOLOGIES LTD. VS.- JOINT COMMISSIONER OF INCOME TAX REPORTED IN 320 ITR 577 (SC). 8. WITH REGARD TO GROUND NO. 4 THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT TDS HAS BEEN DEDUCTED IN THE NEXT FINANCIAL YEAR THEREFORE THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE DEDUCTION OF RS.60 917/- IN THE YEAR WHEN TAX WAS D EDUCTED AND PAID. THE LD. D.R. FAIRLY AGREED 5 ITA NO. 2838-AHD-2010 THAT HE HAS NO OBJECTION IF THE DIRECTION WHICH IS IN ACCORDANCE WITH THE PROVISION OF LAW IS GIVEN. 9. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS A W ELL SETTLED LAW THAT POWER OF FIRST APPELLATE AUTHORITY IS CO-TERMINUS WITH THAT OF ASSESSING OFF ICER. THIS PLEA WAS ALSO RAISED BEFORE THE ASSESSING OFFICER BUT THE ASSESSING OFFICER IGNORE D THE SAME. BE THAT IT MAY BE WE ARE OF THE VIEW THAT IT WILL MEET THE END OF JUSTICE IF THE OR DER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF CONFIRMING THE DISALLOWA NCE OF RS.85 36 517/- ON ACCRUED INTEREST ON NPA IS SET ASIDE AND HE BE DIRECTED TO DECIDE THE S AME AFRESH. HE WILL CALL THE ASSESSMENT RECORD AND ASCERTAIN THE CORRECT AMOUNT OF INTEREST ACCRUE D FOR THE YEAR UNDER CONSIDERATION. AFTER VERIFYING THE SAME HE WILL CONSIDER ALL THE ARGUME NTS OF THE ASSESSEE AND RE-ADJUDICATE THIS ADDITION DE NOVO AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. NEEDLESS TO ADD IF REQUIRED LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) MAY CALL THE REMAND REPORT TO ASCERTAIN THE CORRECT AMOUNT OF INTEREST ALLEGED TO BE ACCRUED ON NON-PERFORMING ASSETS (NPA). 10. IN RESPECT OF GROUND NO. 4 WE FOUND CONSIDERAB LE FORCE IN PRAYER OF THE LD. COUNSEL OF THE ASSESSEE. WE ACCORDINGLY DIRECT THE ASSESSING O FFICER TO ALLOW THE DEDUCTION OF RS.60 917/- IN THE YEAR IN WHICH TAX IS DEDUCTED AND TAX AS CLA IMED BY THE ASSESSEE AFTER VERIFICATION. 11. IN THE RESULT FOR STATISTICAL PURPOSES THE AP PEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED TO THE EXTENT INDICATED ABOVE. THE ORDER WAS PRONOUNCED IN THE COURT ON 25.01.20 11 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.