Gujarat High Court
Principal Commisisoner Of Income ... vs Jivan Commercial Cooperative Bank Ltd. ... on 23 August, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/584/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 584 of 2017
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PRINCIPAL COMMISISONER OF INCOME TAX-II, RAJKOT....Appellant(s)
Versus
JIVAN COMMERCIAL COOPERATIVE BANK LTD. RAJKOT....Opponent(s)
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Appearance:
MR PRANAV G DESAI, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 23/08/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 22.03.2017 raising following question for our consideration:
"Whether the ITAT is justified in law and on facts in quashing and setting aside the order passed by the AO as per provisions of Section 145 of the Income Tax Act, adding back to the total income of Rs.1,42,85,155/ on account of accrued interest in relation to NPA, which not brought to the tax by the assessee?
2. Respondent assessee is a cooperative bank. For the assessment year 201112, the Assessing Officer taxed the income in relation to the accounts which had become non performing accounts on the basis of accrual of income. When the issue ultimately reached the Tribunal, the Tribunal allowed the assessee's appeal Page 1 of 4 HC-NIC Page 1 of 4 Created On Thu Aug 24 23:20:50 IST 2017 O/TAXAP/584/2017 ORDER making following observations:
"3. Having heard both the parties we find that this issue is no more resintegra. In the written submissions the assessee has relied on the decision of Hon'ble Gujarat High Court in the case of Principal CIT Vs Mahila Seva Sarkari Bank Limited wherein after referring to a plethora of decisions on this issue, the Hon'ble Gujarat High Court held that assessee was correct in not charging interest on NPA. The Hon'ble Gujarat High Court agreed with the view taken by the Hon'ble Delhi High Court in the CIT Vs. Vasisth Chay Vyapar Ltd., 330 ITR 440 wherein it was held that interest income could not be said to have accrued to the assessee having regard to provisions of section 45Q of the RBI and prudential Norms issued by the RBI in exercise of its statutory powers.
4. Respectfully, following the decision of Hon'ble Gujarat High Court, assessee's claim of not including the interest on NPA in the profit and loss count is allowed."
3. It can thus be seen that the Tribunal followed the decision of this Court in case of Principal Commissioner of IncomeTax v. Shri Mahila Sewa Sahakari Bank Ltd. reported in [2017] 395 ITR 324 (Guj). It was the case in which the assessee cooperative bank had not recognized the interest on NPAs as per the guidelines of the Reserve Bank of India. The Court was of the opinion that the bank was bound by such directives of RBI. The Court relied upon a CBDT circular in this respect and held that the Page 2 of 4 HC-NIC Page 2 of 4 Created On Thu Aug 24 23:20:50 IST 2017 O/TAXAP/584/2017 ORDER interest was not taxable on the basis of accrual. The situation being identical, the issue is covered by the decision of this Court in case of Shri Mahila Sewa Sahakari Bank Ltd. (supra). Learned counsel for the Revenue however submitted that the Supreme Court in case of Southern Technologies Ltd. v. Joint Commissioner of IncomeTax reported in [2010] 320 ITR 577 (SC) has made a clear distinction with respect to the RBI directions holding that the said directives may apply for the purpose of drawing the accounts of the bank, nevertheless, the same cannot have effect on the computation of the assessee's taxable income. We however notice that the High Court in case of Shri Mahila Sewa Sahakari Bank Ltd. (supra) has considered such a contention and referred to the decision of Supreme Court in case of Southern Technologies Ltd. (supra) before coming to the above noted conclusions in law.
4. In the result, Tax Appeal is dismissed.
(AKIL KURESHI, J.)
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O/TAXAP/584/2017 ORDER
(BIREN VAISHNAV, J.)
ANKIT
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