Income Tax Appellate Tribunal - Bangalore
Shri Basaveshwar Sahakari Bank Niyamit ... vs Department Of Income Tax on 27 June, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SHRI PRAMOD M. JAGTAP, ACCOUNTANT MEMBER
AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
ITA NOs. A.Y. APPELLANT V RESPONDENT
S.
275/Bang/2012 2008-09 The Assistant Shri Basaveshwara
Commissioner of Sahakari Bank
797/Bang/2013 2009-10 Income Tax, Niyamith, No.25,
Circle 1, Bijapur. Basaveshwar Circle,
Navanagar, Bagalkot.
PAN: AAAAS 1703P
534/Bang/2013 2009-10 Shri Basaveshwara The ACIT,
Sahakari Bank Circle 1, Bijapur.
1774/Bang/2013 2010-11 Niyamith, The Deputy CIT,
Bagalkot. Circle 1, Bijapur.
789/Bang/2013 2009-10 Shri Siddeshwar The Joint CIT,
Co-op. Bank Ltd., Bijapur Range,
S.S. Road, Bijapur.
Bijapur.
PAN: AAAAS 4391P
799/Bang/2013 2009-10 The ACIT, Shri Siddeshwar
Circle 1, Bijapur. Co-op. Bank Ltd.,
Bijapur.
798/Bang/2013 2009-10 The ACIT, The Sindagi Urban
Circle 1, Bijapur. Co-op. Bank Ltd.,
Bank Road,
A/P Sindgi,
Sindgi - 586 128.
PAN: AAAAT 3801F
802/Bang/2013 2009-10 The Sindagi Urban The JCIT,
Co-op. Bank Ltd., Bijapur Range,
1573/Bang/2013 2010-11 Sindgi. Bijapur.
ITA Nos. 275/B/12,
789 & 798/Bang/2013
& connected appeals.
Page 2 of 37
Assessee(s) by : Shri S. Ramasubramanian, C.A.
Revenue by : Shri L.V. Bhaskar Reddy, Addl.CIT(DR)
Date of hearing : 25.06.2014
Date of Pronouncement : 27.06.2014
ORDER
Per Bench These nine appeals filed in the case of three assessees involve some common issues and the same therefore are heard together and being disposed of by this single consolidated order for the sake of convenience.
ITA No.275/B/12
2. First, we will take up the appeal filed by the revenue in the case of Shri Basaveshwara Sahakari Bank Niyamith for the A.Y. 2008-09, which is directed against the order of the ld. CIT(Appeals), Belgaum dated 30.11.2011.
3. The assessee in the present case is a co-operative society which is engaged in the business of banking. It is having the necessary licence issued by Reserve Bank of India for carrying on its banking operations as a co-operative bank. The return of income for the year under consideration i.e., A.Y. 2008-09 was filed by the assessee on 26.5.2008 declaring a total ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 3 of 37income of Rs.3,02,11,590. In the profit & loss account filed along with the said return, interest on term deposits amounting to Rs.9,81,17,982 was debited by the assessee, which included interest of Rs.1,76,26,539 paid by the assessee to its members in excess of Rs.10,000. According to the AO, the assessee was liable to deduct tax at source from such interest paid to its members and since no such deduction of tax at source was made by the assessee, he disallowed the interest of Rs.1,76,26,539 paid by the assessee society to its members by invoking the provisions of section 40(a)(ia) of the Act. The AO also made a further addition of Rs.2,35,20,043 on account of interest receivable on loans and advances, which was not offered by the assessee on the ground that the concerned loans & advances had already become Non-Performing Assets (NPA). The AO accordingly completed the assessment u/s. 143(3) of the Act vide order dated 24.12.2010 computing the total income of the assessee at Rs.7,38,49,672, after making one more addition of Rs.24,91,500 on account of disallowance of 10% on average rural advances.
4. Against the order passed by the AO u/s. 143(3), appeal was preferred by the assessee before the ld. CIT(Appeals). After considering the submissions made on behalf of the assessee as well material available on record, the ld. CIT(A) deleted the addition of Rs.1,76,26,539 made by the AO invoking the provisions of section 40(a)(ia) for the following reasons given in para 3.3 of his impugned order:-
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.Page 4 of 37
"3.3 The first question of appeal is that, whether the assessee is entitled for claiming exemption u/s 194A(3)(v) of the Act in respect of interest payments exceeding Rs.10,000 made to members. The relevant provisions of section 194A(3) with regard to co-operative societies are reproduced below:
(3) The provisions of sub-section (1) shall not apply -- [(i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, [does not exceed --
(a) ........... (b) ten thousand rupees, where the payer is a co-operative
society engaged in carrying on the business of banking;
(c) .......... (d) ..........
Provided that in respect of the income credited or paid in respect of --
(a) ............
(b) time deposits with a co-operative society engaged in
carrying on the business of banking;
the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society or the public company, as the case may be;
(v) to such income credited or paid by a co-operative society [to a member thereof or] to any other co-operative society (viia) to such income credited or paid in respect of, --ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 5 of 37
(a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank;
(b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;
B. On reading of the above sections I draw the following inferences Section 194A(3)(i)(b) :Exemption of interest paid by a co- operative society engaged in Banking business, upto Rs.10,000 to members as well as non-members, irrespective of the nature of the deposit is exempt;
Section 194A(3)(v) : Exemption of interest paid by a co-operative society to its members irrespective of the nature of deposit or amount;
Section 194A(3)(viia)(a) : Exemption of interest paid by persons namely, Primary Agriculture credit society, Primary credit society, Co-operative Land Mortgage Bank or a Co-operative Land Development Bank to members or non-members without any monetary limit.
Section 194A(3)(viia)(b) : Exemption of interest paid by persons namely, Co-operative society engaged in Banking Business irrespective of membership or amount only to non-time deposits. From the above summary it is clear that income paid by a co- operative society to its members is exempt irrespective of the nature of deposits or any monetary limits and no conflicts would arise if one were to consider the applicability of section 194A(3)(v) only to members and the other sections solely for non-members.
C. The contention of the AO is that a co-operative society engaged in banking business will not fall within the ambit of section 194A(3)(v). Circular No. 9 of 2002 dated 11/09/2002 257 ITR 36 issued by CBDT (quoted earlier) clarifies that a member ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 6 of 37of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such cooperative bank without TDS under Section 194A by virtue of exemption granted vide clause (v) of sub-section (3) of the said section. The reliance placed by the AO to the decision of Hon'ble Income Tax Appellate Tribunal, Pune in Bhagani Nivedita Sahakari Bank Ltd. V. Asst. CIT (2003) 87 ITD 569 was without noting that the ITAT at the time of the order didn't have the privilege of the circular of CBDT. Reliance also placed by the AO to the decision of Hon'ble Bombay High Court in The Jalgaon District Central Cooperative Bank Ltd. & Anr. V Union of India & Ors. (2004) 265 ITR 423 was without fully comprehending the facts of the said case. If the interest paid by a co-operative society, engaged in banking business, to its members was not exempt then there was no requirement of the Hon'ble court to ponder about the coverage of the term members used in section 194A(3)(v). It should also be stated here that the only point the courts considered was that of who is a member of a co-operative society.
D. In light of the above facts and analysis of the provisions, one can conclude that the intention of the Act was to confer some benefit to the members of co-operative society, including a co- operative society engaged in banking business that is co- operative bank. Therefore the appellant is entitled to exemption specified in section 194A(3)(v). The AO is not justified in disallowing a sum of Rs. 1,76,26,539 u/s 40(a)(ia). Hence it is directed to the AO to delete the addition of Rs.1,76,26,539. Thus appellant gets relief of Rs. 1,76,26,539."
5. The ld. CIT(Appeals) also deleted the addition of Rs.2,35,20,043 made by the AO on account of interest accrued on loans & advances, which were classified as 'non-performing assets' for the following reasons given in his impugned order :-
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.Page 7 of 37
"I have carefully considered the appellant submissions and perused the views of the AO as discussed in the assessment order.
In the case of Non-performing Assets (NPA Loans, which are doubtful of recovery), in the light of the circulars issued by the Reserve Bank on Classification of assets and the AS-9 issued by the CBDT, it is to be seen that the question of accrual can be considered only after recognizing income from such assets. If no income is recognized at all from such assets, there is no question of applying the principle of accrual. The principle of accrual comes into play only when income is recognized and certainty of collection.
In the present case, the appellant has classified its assets on the basis of the circulars issued by the RBI and found that certain assets are coming under the category of Non-performing Assets. From such Non-performing Assets, the appellant has not recognized any income in accordance with the circulars issued by the RBI and AS-9 issued by the ICAI. Therefore, the appellant is justified in not recognizing the interest as income. Once that is the case, there is no occasion to consider whether the principle of accrual would arise or not. In view of the matter, I am of the considered view that the AO has erred in treating the interest on Non-performing Assets as income of the appellant. I direct the AO to delete the said interest from the computation of taxable income. The issue of the interest from Non-performing Assets is therefore decided in the favor of the appellant, and appellant gets a relief of Rs. 91,17,603.
D. The third question for consideration is that, whether interest receivable on standard loans and advances, be treated as the income of the assessee. The provisions of section 5 of the Act, stated earlier require that the assessee recognize income when it is either received or deemed to be received or accrues or deemed to accrue. Interest on Standard Loans and advances must be recognized as income since there is virtual certainty as to their final collectability and there is not an iota of doubt even in the mind of the assessee as to their collectability. The Master circular issued by RBI, relied on by the assessee requires that the assessee has to recognize the interest on standard loans and advances on ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 8 of 37
accrual basis. Therefore the addition of Rs. 1,44,02,440 made by the AC is confirmed.
E. The fourth question for consideration is that, whether the AO was right in considering the income of the assessee as Rs.18,39,03,637 instead of Rs.15,88,09,148. The AO had to compute the income of the assessee as per accrual policy and not as per cash basis. The income of Rs.18,39,03,637 was arrived after considering the amount of Rs. 1,73,99,971, Rs. 39,12,422, Rs. 16,19,458 and Rs. 21,62,638 received during AY 2008-09 pertaining to earlier years. The AO in para 7.13 had observed that "During the course of hearing on 13.12.2010, the assessee submitted that the interest on Standard Loans and advances receivable as on 31.03.2008 is to the tune of Rs.1,44,02,440. This amount is different from that of the interest receivable on account of overdues. Hence, this amount also has to be taxed on accrual basis in view of the detailed reasons given in the above paragraphs". As the AO observed the assessee has to follow accrual policy. If the amount of Rs.18,39,03,637 were to be considered as the income of the assessee it would be equivalent to accounting on hybrid system. The assessee could not be compelled to account interest receivable on accrual basis and as well as Interest income on cash basis."
6. Aggrieved by the order of the CIT(Appeals), the revenue has preferred this appeal before the Tribunal on the following grounds:-
(1) The learned CIT(Appeals) erred in not following the procedure laid down in section 250 in particularly sub-sections (1) and erred in passing the order without giving notice of hearing to the Assessing Officer and therefore, the order passed by the CIT(Appeals) is bad in law and requires to be set aside.
(2) The learned CIT(Appeals) erred in not allowing the right to be heard to the Assessing Officer either in person or by a representative as per section 250(2) of the I.T. Act, 1961 and therefore, the order passed by the CIT(Appeals) is bad in law and requires to be set aside.ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 9 of 37(3) The learned CIT(Appeals) erred in depriving the Assessing Officer to avail right to be heard at the hearing of the appeal as envisaged in section 250(2)(b) which was confirmed by him vide his letter F.No.CIT(A)/BGM/Orders/11-12 dated 11.01.2012 and as such, the order passed lacks procedural aspect as well as invalid in the eyes of law.
(4) Without prejudice to the above
(a) The learned CIT(Appeals) erred in deleting the
disallowance u/s 40(a)(ia) of Rs.1,76,26,539 ignoring the ratio of the decision of Pune ITAT in the case of Bhagini Nivedita Sahakari Bank Ltd v. ACIT87 lTD 569.
(b) The learned CIT(Appeals) erred in deleting the addition of Rs.91,17,603 on account of accrued interest on loans which are classified as "Non-performing Assets" without considering the decision of Hon'ble Supreme Court in the case of State Bank of Travancore v. CIT 158 ITR 102 and without considering the new provisions of section 43D.
(c) The learned CIT(Appeals) erred in not considering the fact that section 43D was inserted to over come the decision of Hon'ble supreme Court in State Bank of Travancore v. CIT and the benefit of the exception from the said decision of the Hon'ble Supreme Court was not available to a co- operative bank.
(5) For these and other grounds that may be urged at the time of hearing, the order of the learned CIT(A) may be set aside and that the order of the Assessing Officer be restored."
7. We have heard the arguments of both the sides and also perused the relevant record. In ground No.4(a) of its appeal, the revenue has challenged the action of the ld. CIT(Appeals) in deleting the disallowance of Rs.1,76,26,539 made by the AO on account of interest on loans & advances paid by the assessee society to its members in excess of ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 10 of 37Rs.10,000 invoking the provisions section 40(a)(ia) and as agreed by the ld. representatives of both the sides, this issue is squarely covered in favour of the assessee by the order of the co-ordinate Bench of this Tribunal dated 30.5.2014 passed in ITA No.1572/Bang/2013 in the case of Bagalkot District Central Co-operative Bank. A copy of the said order is placed on record before us and a perusal of the same shows that a similar issue has been decided by the Tribunal in favour of the assessee, after discussing all the relevant aspects of the matter elaborately in paragraphs 15 to 21 of its order, which are reproduced hereunder:-
15. We have given a very careful consideration to the rival submissions. We are of the view that the submissions made by the learned counsel for the Assessee deserves to be accepted. As rightly contended by him Sec.194A(3)(i)(b) of the Act is a provision which mandates deduction of tax at source by a co-
operative Society carrying on the business of banking, where the income in the form of interest which is paid by such society is in excess of ten thousand rupees. Sec.194A(3)(v) of the Act provides that tax need not be deducted at source where the income in the form of interest is credited or paid by a co- operative society to a member thereof or to any other co- operative society. This provision therefore applies to all co- operative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in the business of banking from the provisions of Sec.194A(3)(v) of the Act on the ground that the same is covered by the provisions of Sec.194A(3)(i)(b) of the Act. Sec.194A(3)(v) of the Act refers to payment by a co-operative Society to a member and payment by a co-operative society to non-member would continue to be governed by the provisions of Sec.194A(3)(i)(b) of the Act. Similarly u/s.194A(3)(viia)(b) interest on deposits other than time deposits even if the payment is made to a non-member by a co-operative society, the co- ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 11 of 37operative society need not deduct tax at source. Thus this section carves out another exception to Sec.194A(3)(i)(b) of the Act. We do not think that any of the above provisions can be called a general provision and other provisions called specific provisions. Each provision over-lap and if read in the manner as indicated above, there is perfect harmony to the various provisions. We do not agree with the view expressed by the Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra) when it says that Co-operative society as mentioned in cl. (v) is a general species, whereas the other five categories of co-operative societies which are specifically referred to in other provisions are specific co-operative societies. The further conclusion in the said decision that the term 'co-operative society' in cl. (v) of s. 194A(3) has to be interpreted as co-operative society other than co-operative bank, is again unsustainable. The law is well settled that by a process of interpretation one cannot add on words that are not found in the text of the statute. Such a course is permitted only when there is "causus omisus". We do not think that the provisions of Sec.194A(3)(v) suffers from any causus omisus as has been interpreted by the ITAT Pune Bench SMC.
16. We are also of the view that the decision of the Hon'ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd. (supra) supports the plea of the Assessee before us. The petitioners in that case were primary credit societies registered under the Kerala Co-operative Societies Act. In view of the specific provisions of Sec.194A(3(viia) of the Act, they claimed that they need not deduct tax at source on interest paid. It was submitted by the petitioner that sub- s.194A(3)(v) deals with such income credited or paid by a co- operative society to a member whereas sub-s. (3)(viia)(a) provides a total exemption to deposits with the primary credit society. The Hon'ble Kerala High Court accepted their plea and in their judgment have observed that Sec.194A (3)(i) exemption limit of Rs. 10,000 to interest paid on time deposits with co- operative societies engaged in carrying on business of banking is allowed but that does not mean that all co-operative societies who have credited or paid exceeding Rs. 10,000 are liable to deduct tax at source. The Court held that co-operative society engaged in carrying on business of banking and primary credit societies stand on different footing and belong to different class. That does ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 12 of 37not mean that Sec.194A(3)(v) of the Act is applicable only to Co- operative Societies other than co-operative societies carrying on the business of banking as observed in para-37 of its judgment the Pune ITAT in the case of Bhagani Nivedita Sah Bank Ltd. (supra). In fact in para-2 of Circular No.9 dated 11.9.2002, the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act.
17. We also find that the CBDT in Circular No.9 dated 11.9.2002 clarified certain aspects which are relevant to the present case. The same reads thus:
"Circular No.9 of 2002
"Sub : Tax deduction at source under section 194A of the Income-tax Act, 1961 --Applicability of the provisions in respect of income paid or credited to a member of co-operative bank--Reg.
11/09/2002 TDS 194A Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of section 194A exempts such income credited or paid by a co-operative society to a member thereof from the requirement of TDS. On the other hand, clause (viia) of sub-section (3) of section 194A exempts from the requirement of TDS such income credited or paid in respect of deposits (other than time-deposits made on or after 1st July, 1995) with a co-operative society engaged in carrying on the business of banking.
2. Representations have been received in the Board seeking clarification as to whether a member of a co- operative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such co-operative bank ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 13 of 37
without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non- member depositor of the co-operative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDS under section 194A.
3. A question has also been raised as to whether normal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v). It is hereby clarified that the exemption is available only to such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption under section 194A(3)(v) must have subscribed to and fully paid for at least one share of the co-operative bank, must be entitled to participate and vote in the General Body Meetings and/or Special General Body Meetings of the co- operative bank and must be entitled to receive share from the profits of the co-operative bank.
[F. No. 275/106/2000-IT(B)] (2002) 177 CTR (St) 1"
18. It can be seen from para-2 of the Circular referred to above that the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source. The above interpretation of the provisions by the CBDT which is in favour of the Assessee, in our view is binding on the tax authorities.
19. In the case decided by ITAT Panaji Bench in ITA No.85/PN/2013 for AY 09-10 in the case of The Bailhongal Urban Co-op Bank Ltd. Vs. JCIT order dated 28.8.2013, the tribunal proceeded on the footing that the aforesaid circular has been quashed by the Hon'ble Bombay High Court in the case of The Jalgaon District Central Co-operative Bank Ltd. Vs. Union ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 14 of 37of India 265 ITR 423 (Bom) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra). In our view the Hon'ble Bombay High Court in the case of Jalgaon District Central Co- operative Bank Ltd.'s case was dealing with a case of challenge to para-3 of CBDT Circular No.9 dated 11.9.2002 which tried to interpret the word "member" as given in Sec.194A(3)(v) of the Act. It is only that part of the Circular that had been quashed by the Hon'ble Bombay High Court and the other paragraphs of the Circular had no connection with the issue before the Hon'ble Bombay high Court. How could it be said that the entire circular has been quashed by the Hon'ble Bombay High Court? In our view para-2 of the Circular still holds good and the conclusion of the ITAT Pune Bench in the case of The Bailhongal Urban Co-op Bank Ltd.(supra) are not factually correct. Consequently, the conclusions drawn in the aforesaid decision also contrary to facts and hence cannot be considered as precedent.
20. The learned counsel for the Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Co-operative Bank ITA No.5 and 19 of 2011 order dated 29.8.2011 has held that co-operative societies carrying on banking business when it pays interest to its members on deposits it need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Similar view has also been expressed by the Pune Bench of the ITAT in the case of Ozer Merchant Co-operative Bank ITA No.1588/PN/2012 order dated 30.10.2013. We may add that in both these decisions the discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-a-vis Sec.194A(3)(v) of the Act. It is thus clear that the preponderance of judicial opinion on this issue is that co- operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act.
21. For the reasons given above, we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 15 of 37virtue of the exemption granted vide clause (v) of sub-section (3) of the said section."
8. As the issue involved in the present case as well as all the material facts relevant thereto are similar to that of the case of Bagalkot District Central Co-operative Bank (supra), we respectfully follow the decision rendered by the co-ordinate Bench of this Tribunal in the said case and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the AO on account of interest paid by the assessee society to its members on deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia). Ground No.4(a) of the revenue's appeal is accordingly dismissed.
9. As regards ground Nos. 1 to 3 of the revenue's appeal, it is observed that the grievance of the revenue raised therein is that no opportunity of being heard was given by the ld. CIT(A) to the AO before deleting the disallowance made u/s. 40(a)(ia) on account of interest paid by the assessee society to its members on deposits in excess of Rs.10,000. Although a similar grievance of the revenue was addressed by the co- ordinate Bench of this Tribunal in the case of The Sindgi Urban Co-op. Bank Ltd. by sending the matter back to the ld. CIT(A), vide its order dated 9.5.2004 passed in ITA No.276/Bang/2012 for giving the Assessing Officer an opportunity of being heard, it is observed that the ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 16 of 37issue now stands decided by the Tribunal in favour of the assessee on merits, by its order dated 30.5.2014 (supra). Keeping in view this recent development, we do not find any justifiable reason to entertain the grievance of the revenue as projected in grounds No.1 to 3 and dismiss the said grounds.
10. As regards the issue raised in ground Nos. 4(b) & 4(c) relating to the addition made by the AO and deleted by the ld. CIT(A) on account of interest accrued on the loans & advances, which were classified as non- performing assets, the ld. representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench of this Tribunal rendered in the case of ITO v. M/s. Shiva Sahakari Bank Niyamitha vide its order dated 21.12.2012 passed in ITA No.257/Bang/2012, wherein a similar issue was decided by the Tribunal by recording its findings in paras 8 & 9 as under:-
"8. Having heard both the parties and having considered their rival contentions, we find that undisputedly the assessee is in the banking business and is also governed by the Banking regulations. Whether the interest accrued on NPA's which are doubtful of being recovered, should be recognized as assessee's income on accrual or on receipt basis is the question before us. Let us first consider the applicability of the decisions relied upon by the learned DR. The Hon'ble Supreme Court in the case of Southern Technologies Ltd was considering the issue of allowability of provisions of NPA u/s 36(1)(vii) of the Income- tax Act while the case before us is with regard to the accrual of ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 17 of 37
interest on NPA's and recognition of the same on receipt basis and not on accrual basis. Further, the Hon'ble Supreme Court, while holding that the RBI directions are only norms and act in a different field as against the Income-tax Act, has also observed that collectability of a receipt is different from accrual and hence in each case, the assessee has to prove that interest is not recognized or taken into account due to uncertainty in calculation of the income and it is for the AO accept the claim of the assessee under the IT Act or not to accept it, in which case there will be added- back even under the real income theory. It was also observed that the Income-tax Act is tax on real income i.e the profits arrived at on commercial principles subject to the provisions of Act but a provision for doubtful debts is only a notional expense which is a debit to the P & L account which is expressly disallowed by explanation to sec. 36(1)(vii) which if claimed has got to be added back to the total income of the assessee because Act seeks to tax the real income and for this purpose write off is a condition for allowance. It is, therefore, clear that the facts of the case before the Apex Court are entirely on a different set of facts and hence its finding on non- allowability of the provisions of NPA's cannot be applied to the facts of the case before us but its observation that for recognizing the interest income on NPA's, AO has to consider the facts of each case has relevance to the case before us. In view of the same, we hold that the decision of the Hon'ble Supreme Court is on a different set of facts. The second decision relied upon by the learned DR is that of Chennai Bench of the Tribunal in the case of India Equipment Leasing Ltd., which is on the same set of facts as before us, as it was held in favour of the Revenue. Coming to the decisions relied upon the learned AR, we find that the decision of the Jurisdictional High Court in the case of Canfin Homes Ltd., is also on the same set facts as before us and is binding on this tribunal. In the said decision, at para 8 of the order, the Hon'ble High Court has held as under :
"Therefore, it is clear if an assessee adopts mercantile system of accounting and in his accounts he shows a particular income as accruing, whether that amount is really accrued or not is liable to bring the said income to tax. His accounts should reflect true and correct statement of affairs. Merely because the said amount; accrued was not realized immediately cannot be a ground ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 18 of 37
to avoid payment of tax. But, if in his account it is clearly stated that though a particular income is due to him but is not possible to recover the same, then it cannot be said to have been accrued and the said amount cannot be brought to tax. In the instant case we are concerned with a non performing asset. As the definition of non performing asset shows an asset becomes non performing when it ceases to yield income. Non performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non performing asset then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise. As is clear from the policy guidelines issued by the National Housing Bank, the income from non performing asset should be recognized only when it is actually received. That is what the Tribunal held in the instant case. Therefore, the contention of the revenue that in respect of non performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In that view of the matter, the second substantial question framed is answered against the revenue and in favour of the assessee."
9. In view of the same, respectfully following the decision of the Hon'ble Jurisdictional High Court (cited Supra), the Revenue's appeal is dismissed."
11. A similar issue involving identical facts thus has already been decided by the Tribunal in the case of ITO v. M/s. Shiva Sahakari Bank Niyamitha (supra) following the decision of the Hon'ble jurisdictional High Court in the case of Canfin Homes Ltd. (2011) 5 Taxcorp (DT) 49593 and respectfully following the same, we uphold the ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 19 of 37impugned order of the ld. CIT(Appeals) deleting the addition made by the AO on account of interest accrued on loans & advances classified as non- performing assets. Grounds No.4(b) & 4(c) of the revenue's appeals are accordingly dismissed.
ITA 534/B/13 & 797/B/13
12. Now we shall take up the cross appeals filed in the case of Shri Basaveshwar Sahakari Bank Niyamith for the A.Y. 2009-10, which are directed against the order of the ld. CIT(Appeals), Belgaum dated 20.2.2013.
ITA 534/B/13
13. As submitted by the ld. counsel for the assessee, ground No.1 raised in the appeal of the assessee is general in nature, seeking no specific decision from us.
14. As regards grounds No. 2 to 4 of the assessee's appeal, it is observed that the common issue involved therein, relating to disallowance made by the AO and confirmed by the CIT(A) on account of interest paid by the assessee society to its members on the deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia), has already been adjudicated in favour of the assessee while dealing with the ground No.4(a) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 20 of 37reasons stated therein, we hold this issue in favour of the assessee. Thus, these grounds of the assessee are allowed.
15. The issue involved in ground Nos.5 to 7 of the assessee's appeal relates to disallowance made by the AO and confirmed by the ld. CIT(A) on account of provision for bad and doubtful debts in respect of rural advances.
16. At the time of hearing before us, the ld. representatives of both the sides have agreed that this issue is squarely covered in favour of the revenue and against the assessee by the decision of the Tribunal rendered in the case of Syndicate Bank v. DCIT, ITA Nos.668 & 669/B/10, wherein a similar issue was decided against the assessee by the Tribunal for the following reasons given in paras 48 to 50 of the said order:-
48. As far as Gr.No.3 raised by the Revenue in the original grounds of appeal is concerned, the AO disallowed the entire claim for deduction of Rs.503,49,00,000/- on the following ground.
a) The provision for bad and doubtful debts in respect of rural advances was created by debit to profit and loss account of only a sum of Rs.295,55,54,682 whereas the claim for deduction actually made u/s.36(1)(viia) of the Act was a sum of Rs.503,49,00,000/-. The AO was of the view that as laid down by the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala Vs. CIT 272 ITR 53 (P & H), claim for deduction u/s.36(1)(viia) of the Act cannot be greater than the amount debited to the profit and loss account as provision. The AO therefore proposed to ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 21 of 37
disallow a sum of Rs.207,93,45,318 (Difference between Rs.503,49,00,000 and Rs.295,55,54,682).
b) Apart from the above the AO also disallowed the sum of Rs.295,55,54,682 out of Rs.503,49,00,000 claimed as deduction u/s.36(1)(viia) of the Act. The reasons given for disallowing claim for deduction of Rs.295,55,54,682/- u/s.36(1)(viia) of the Act by the AO was that there was already credit balance in the PBDD as on 1.04.2005 Balance B/F was Rs. 912,57,47,169. According to the AO 10% of AARA can be created as provision each year provided there is no brought forward balance as on the first day of the previous year in the PBDD account. 10% of the AARA as admitted by the Assessee as per revised census of 2001 was 352.53 crores. According to the AO even if Bad debts written off of Rs.179,21,88,992 is reduced still the balance in the PBDD account was Rs.733,35,58,177/-. Since the balance so available in PBDD account was more than 10% of AARA, the AO held that deduction on the basis of new provision of Rs.295,55,54,682/- cannot be allowed. In this regard the AO referred to the contention of the Assessee which was to the effect that in each year the Assessee can create 10% of AARA and concluded that the expression "not exceeding ten percent of the aggregate average advances" used in Sec.36(1)(viia) of the Act cannot mean that provision can be created each year irrespective of the available balance in the PBDD account. The AO also referred to a situation where there is no claim for bad debts in a year even then the Assessee will be entitled to claim deduction by way of PBDD which according to the AO would not be the intention of the legislature. The AO thus refused to allow the claim of the Assessee for deduction of 10% of AARA.
49. The CIT(A) deleted the addition made by the AO by following the decision of the decision of the ITAT in Assessee's own case reported in 78 ITD 103 wherein it was held that ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 22 of 37irrespective of the debit to the profit and loss account on account of provision for bad and doubtful debts (PBDD), an Assessee is entitled to 10% of the AARA as deduction u/s.36(1)(viia) of the Act. The relevant observations of the Tribunal in the aforesaid decision were as follows:
"20. The learned CIT has also acted under the misconception that deduction under cl. (viia) is related to the actual amount of provision made by the assessee for bad and doubtful debts. The true meaning of the clause, as indicated earlier, is that once a provision for bad and doubtful debts is made by a scheduled bank having rural branches, the assessee is entitled to a deduction which is quantified not with respect to the amount provided for in the accounts, but with respect to a certain percentage of the total income and also a certain percentage of the aggregate average advances made by the rural branches of the bank. In other words, this is a specific deduction given by the statute irrespective of the quantum provided by the assessee in its accounts towards provision for bad and doubtful debts."
50. In the appeal before the Tribunal, in Ground No.3 of the original grounds of appeal, the Revenue has challenged the order of CIT(A) in so far as it relates to the deletion of a sum of Rs.207,83,45,338 which is the difference between Rs.503,49,00,000 and Rs.295,55,54,682. The learned DR relied on the decision of the ITAT Bangalore Bench in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006. In the aforesaid decision this Bench considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra) and held that the decision rendered by the Hon'ble High Court has to be followed. The above decision is the decision brought to our notice on the issue rendered after the decision in Assessee's own case. Judicial discipline demands that we follow the later decision which has considered both the decisions on the issue. We therefore respectfully following the decision of the Tribunal in the case of Canara Bank (supra), allow Gr.No.3 raised by the Revenue and ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 23 of 37hold that disallowance to the extent of Rs.207,83,45,338/- be restored. Thus Gr.No.3 raised by the revenue is allowed."
17. As the issue involved in the present case as well as all the material facts thereto are similar to that of the case of Syndicate Bank (supra), we respectfully follow the decision rendered by the Tribunal in the said case and uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the AO on account of assessee's claim for deduction u/s. 36(1)(viia) on account of provision for bad and doubtful debts in respect of rural advances. Ground Nos.5 to 7 of the assessee's appeal are accordingly dismissed.
ITA 797/B/13
18. As regard the revenue's appeal for A.Y. 2009-10, it is observed that the issue raised in grounds (a) & (b) thereof relating to the addition made to the total income of the assessee on account of interest accrued on loans & advances classified as non-performing assets, has already been adjudicated in favour of the assessee and against the revenue, while dealing with the ground No.4(b) & (c) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue against the revenue. Thus, these grounds of the revenue are dismissed.
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 24 of 37
19. As regards grounds (c) to (e) of the revenue's appeal for the A.Y. 2009-10, the ld. representatives of both the sides agreed that the issue involved therein relating to disallowance on account of amortization of premium on Govt. securities is also squarely covered in principle in favour of the assessee by the decision of the Tribunal rendered in the case of ING Vysya Bank Ltd. vide its order dated 14.8.2013 passed in ITA No.443/B/2012, wherein a similar issue was decided by the Tribunal in favour of the assessee vide paras 10 & 11, which read as under:-
"10. We have heard the rival submissions. The issue raised by the assessee in ground No.2 is no longer res integra and has been decided by this Tribunal in the case of M/s. Sir M.Visweswaraya Cooperative Bank Ltd. Vs. JCIT ITA No.1122/Bang/2010 for AY 07-08 order dated 11.5.2012. The following were the relevant observations of the Tribunal:
"03. Let us first take up the issue relating to amortization of premium on investment in government securities. Relevant grounds read as under :
" i) The learned Commissioner (Appeals) ought to have appreciated that the appellant has to invest surplus fund in Government Securities as per RBI guidelines and the premium paid while investing in Government Securities that are bought in open market would have to be amortized till the maturity date of the security and thus the premium was written off was liable to be allowed as depreciation of value of securities ;
ii) The learned Commissioner (A) ought to have appreciated that the classification of securities for RBI purposes would not take away the benefit which the appellant was entitled to and he ought to have appreciated that the case law referred were distinguishable and ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 25 of 37
accordingly he ought to have allowed the deduction as claimed in full."
04. The brief facts pertaining to this issue are that while framing the assessment u/s.143(3) of the IT Act, for the assessment year 2007-08, the Assessing Officer noticed that the assessee has claimed a sum of Rs.26,40,237/- under amortization of premium on investments and the assessee had no explanation for the claim. Hence, he disallowed the same. While disallowing the same, the Assessing Officer followed the decision of the Madras High Court in the case of TN Power Finance and Infrastructure Development Corporation Ltd., v. JCIT (2006) 280 ITR 491. Aggrieved, the assessee moved the matter in appeal before the first appellate authority.
05. The learned Commissioner of Income-tax (Appeals) after considering the submissions made before him and following the decision of the Madras High Court cited supra, came to the conclusion that the Hon'ble Madras High Court has that merely because the RBI had directed the assessee to provide for non-performing assets, that direction cannot override the mandatory provisions of the Income-tax Act contained in section 36(1)(viia) which stipulate for deduction not exceeding 5 per cent of the total income only in respect of the provision for bad and doubtful debts which are predominantly revenue in nature or trade related and not for provision for non-performing assets which are of predominantly capital nature. Thus, he was of the view that the assessee was not entitled to deduction of amortization of premium on investments u/s.36(1)(vii). Aggrieved, the assessee is in second appeal before us with this issue.
06. The learned counsel for the assessee submitted that the Commissioner of Income-tax (Appeals) had failed to see the reason that a issue similar to that of the present one had been allowed by various benches of the Hon'ble Tribunals, namely:
• Catholic Syrian Bank Ltd., v. ACIT - Cochin (2010) 38 SOT 553 ;ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.Page 26 of 37
• Khanapur Coop.Bank Ltd., v. ITO in
ITA.141/PNJ/2011 (Panaji);
• Corporation Bank v. ACIT, M'lore in
ITA.112/Bang/2008 (Bang)
The learned counsel also placed reliance on Board's Instructions No.17 of 2008(vii) and pleaded that the claim of the assessee be allowed as the assessee had the powers to debit in its P&L account a sum of Rs.29,02 lakhs of amortization of premium.
07. Per contra, the learned DR was unable to controvert to the submissions of the learned counsel for the assessee.
08. We have carefully considered the rival submissions and perused the relevant facts and materials on record. We have also considered the findings of the various benches of the Tribunal, as under :
(i) Catholic Syrian Bank Ltd v. ACIT - (2010) 38 SOT 553 (Coch) :
An identical issue to that of the subject matter under consideration had arisen before the Cochin Bench. After analyzing the issue in depth, the bench has observed that with regard to amortization of premium on purchase of Government securities, it was clarified that this was made as per the prudential norms of the RBI. Following the Tribunal decision in the assessee's own case and considering that the assessee bank is following consistent and regular method of accounting system, there is no justification in interfering with the order of the Commissioner of Income-tax (Appeals) on this issue of amortization of premium on government securities. United Commercial Bank v. CIT (1999) 156 CTR (SC) 380 ; (1999) 240 ITR 355 (SC) and South Indian Bank Ltd., (ITA No.126/Coch/2004, dated.___ Sept, 2005 followed."
(ii) The Khanapur Co-op Bank Ltd v. ITO - ITA No.141/PNJ/2011, dated.8.9.2011 :
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.Page 27 of 37
The Hon'ble Bench of Panaji Tribunal had recorded its findings that "6. Likewise, the premium amortized at Rs.1,78,098/- is claimed to be in respect of securities held under the category 'held to maturity'. The Assessing Officer has taken them as long term investments. In other words, he has accepted the assessee's claim that the securities are 'held to maturity'. That being so and having regard to the CBDT Instruction No.17 of 2008 dated.26.11.2008 as reproduced herein above, the premium paid on such government securities is required to be amortized over the period remaining to maturity .........."
(iii) In the case of Corporation Bank v. ACIT, M'lore in ITA.112/Bang/2008 (Bang), for the assessment year 2004-05, the earlier bench had also held a similar view.
In the light of the above discussion and the case laws discussed supra, taking into account the totality of the facts and materials, we are of the considered view that the assessee is entitled to claim this deduction and hence we allow the grounds of the assessee relating to this issue."
11. We are of the view that in the light of the decision on the issue considered by the Tribunal, the claim made by the assessee has to be allowed. Accordingly, the AO is directed to allow the claim of the assessee for deduction."
20. As pointed out by the ld. DR, the decision of the Tribunal rendered in the case of ING Vysya Bank Ltd. (supra) is applicable in respect of securities "held to maturity" by the assessee. He has contended that it is, however, not clear as to whether the relevant securities in the present case are "held to maturity" by the assessee and the AO may therefore be directed to verify this aspect. We find merit in this contention of the ld. DR. ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 28 of 37Accordingly, the matter is restored to the file of the Assessing Officer for the limited purpose of verifying as to whether the relevant securities in the present case are "held to maturity" by the assessee and accordingly to allow relief to the assessee on such verification, keeping in view the decision of the Tribunal in the case of ING Vysya Bank Ltd. (supra). Grounds (c) to (e) of the revenue's appeal are accordingly dismissed, subject to this verification by the AO.
ITA 1774/B/13
21. Now we shall take up the appeal of the assessee for the A.Y. 2010- 11 which is directed against the order of the ld. CIT(Appeals), Belgaum dated 25.11.2013.
22. As submitted by the ld. counsel for the assessee, ground No.1 raised by the assessee in this appeal is general in nature, seeking no specific decision from us.
23. As regards grounds No. 2 to 4 of the assessee's appeal, it is observed that the common issue involved therein, relating to disallowance made by the AO and confirmed by the CIT(A) on account of interest paid by the assessee society to its members on the deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia), has already been adjudicated in favour of the assessee while dealing with the ground No.4(a) ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 29 of 37in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue in favour of the assessee. Thus, these grounds of the assessee are allowed.
24. As regards grounds No.5 to 7 of the assessee's appeal, the ld. representatives of both the sides agreed that the issue involved therein relating to disallowance of Rs.7,77,758 made by the AO and confirmed by the ld. CIT(A) on account of payment by the assessee towards unapproved gratuity fund is also squarely covered by the decision of the Tribunal rendered in the case of Bilagi Pattana Sahakari Bank Niyamit vide its order dated 24.5.2013 passed in ITA No.1073/Bang/2012, wherein a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in para 4.4 (including paras 4.4.1 to 4.4.3) thereof:
4.4. We shall now proceed to analyse the issue on merits as to whether the CIT was justified in coming to a conclusion that the contribution to unapproved gratuity fund was not an allowable deduction or otherwise.
4.4.1. At the outset, we would like to point out that there was an occasion for the Hon'ble jurisdictional High Court to consider almost an identical issue to that of the present issue under dispute in the case of Chief Commissioner (Admn) and another v.
Karnataka Electricity Board reported in 197 ITR 48 (Kar). After taking cognizance of rival submissions, the Hon'ble Court had observed that: -
"The concept of commercial expedience is not foreign to a statutory corporation which is obliged to carry on as venture which any other commercial enterprise can also carry on. Where ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.Page 30 of 37
an assessee, a statutory corporation, was obliged to pay pension to its employees under the rules governing it and provision was made by it towards the pension fund though no approval pension fund was in existence and the claim for deduction did not fall under section 36(1)(iv) of the Income-tax Act, 1961, such provision is an expenditure laid out wholly and exclusively for purposes of business and is deductible under section 37 of the Act".
4.4.2. Further, in a recent ruling, the Hon'ble Punjab and Haryana High Court in the case of CIT v. Punjab Financial Corporation Limited reported in (2007) 295 ITR 510 (P&H) had held thus:-
"(iii) That it was not disputed that the assessee had contributed to the provident fund for its employees under the Provident Funds Act, 1925.
Further, it could not be disputed that the expense was made wholly and exclusively for the purpose of business and was neither capital in nature nor personal. Section 36(1)(iv) of the Act does not specifically debar deduction on account of contribution made under the Provident Funds Act, 1925. It only talks about grant of deduction in respect of recognised provident fund. The contribution to the unrecognised provident fund was deductible."
4.4.3. In conformity with the judicial views (supra), we are of the view that the CIT was not justified in disallowing a sum of Rs.3,11,000/- and adding back the same to the total income of the assessee. In essence, the assessment order passed u/s 143 (3) of the Act dated 29.11.2010 by the assessing officer is upheld / restored. It is ordered accordingly."
25. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of Bilagi Pattana Sahakari Bank Niyamit (supra), we delete the disallowance made by the AO and confirmed by the ld. ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 31 of 37CIT(Appeals) on account of payment made by the assessee to unapproved gratuity fund and allow ground Nos.5 to 7 of the assessee's appeal. ITA Nos.798/B/2013 & 802/B/2013
26. Now we shall take up the cross appeals in the case of The Sindgi Urban Co-op. Bank Ltd., for the A.Y. 2009-10, which are directed against the order of the CIT(Appeals), Belgaum dated 20.2.2013. ITA 802/B/13 (Assessee's appeal)
27. As submitted by the ld. counsel for the assessee, ground No.1 raised in the appeal of the assessee is general in nature, seeking no specific decision from us.
28. As regards grounds No. 2 to 4 of the assessee's appeal, it is observed that the common issue involved therein, relating to disallowance made by the AO and confirmed by the CIT(A) on account of interest paid by the assessee society to its members on the deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia), has already been adjudicated in favour of the assessee while dealing with the ground No.4(a) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue in favour of the assessee. Thus, these grounds of the assessee are allowed.
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 32 of 37
29. As regards grounds No. 5 to 7, it is observed that the issue involved in the present case relating to disallowance made by the AO and confirmed by the ld. CIT(A) on account of provisions made by the assessee for bad and doubtful debts in respect of rural advances is similar to the one involved in grounds No.5 to 7 in the case of Sri Basveshwar Sahakari Bank Niyamitha (ITA No.534/Bang/2013) which has been dealt with and adjudicated upon hereinabove in the preceding paragraphs, wherein the issue is held against the assessee. For the reasons stated therein, we uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the AO on account of assessee's claim for deduction u/s. 36(1)(viia) on account of provision for bad and doubtful debts in respect of rural advances. Ground Nos.5 to 7 of the assessee's appeal are accordingly dismissed.
ITA 798/B/2013 (Revenue's appeal)
30. As regard the revenue's appeal for A.Y. 2009-10, it is observed that the issue raised in grounds (a) & (b) thereof relating to the addition made to the total income of the assessee on account of interest accrued on loans & advances classified as non-performing assets, has already been adjudicated in favour of the assessee and against the revenue, while dealing with the ground No.4(b) & (c) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 33 of 37this issue against the revenue. Thus, these grounds of the revenue are dismissed.
31. As far as grounds No. (c) to (e) are concerned, similar issue has been adjudicated upon hereinabove in the case of Sri Basveshwar Sahakari Bank Niyamitha vide ground Nos. (c) to (e) raised therein and the matter has been restored to the file of the Assessing Officer for the limited purpose of verifying as to whether the relevant securities in the present case are "held to maturity" by the assessee and accordingly allow relief to the assessee on such verification, keeping in view the decision of the Tribunal in the case of ING Vysya Bank Ltd. (supra). For the reasons stated therein, grounds (c) to (e) of the revenue's appeal are also dismissed, subject to the said verification by the AO. ITA 1573/Bang/2013 (Assessee's Appeal)
32. This appeal by the assessee is directed against the order of the CIT(Appeals), Belgaum dated 17.9.2013 for the A.Y. 2010-11.
33. As submitted by the ld. counsel for the assessee, ground No.1 raised in the appeal of the assessee is general in nature, seeking no specific decision from us.
34. As regards grounds No. 2 to 4 of the assessee's appeal, it is observed that the common issue involved therein, relating to disallowance ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 34 of 37made by the AO and confirmed by the CIT(A) on account of interest paid by the assessee society to its members on the deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia), has already been adjudicated in favour of the assessee while dealing with the ground No.4(a) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue in favour of the assessee. Thus, these grounds of the assessee are allowed.
35. As regards grounds No. 5 to 7, it is observed that the issue involved in the present case relating to disallowance made by the AO and confirmed by the ld. CIT(A) on account of provisions made by the assessee for bad and doubtful debts in respect of rural advances is similar to the one involved in grounds No.5 to 7 in the case of Sri Basveshwar Sahakari Bank Niyamitha (ITA No.534/Bang/2013) which has been dealt with and adjudicated upon hereinabove in the preceding paragraphs, wherein the issue is held against the assessee. For the reasons stated therein, we uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the AO on account of assessee's claim for deduction u/s. 36(1)(viia) on account of provision for bad and doubtful debts in respect of rural advances. Ground Nos.5 to 7 of the assessee's appeal are accordingly dismissed.
36. Ground Nos. 8 to 11 raised by the assessee is similar to ground Nos.5 to 7 raised in ITA No.1774/B/13 in the case of Shri Basveshwar ITA Nos. 275/B/12, 789 & 798/Bang/2013 & connected appeals.
Page 35 of 37Sahakari Bank Niyamitha for the A.Y. 2010-11, wherein the issue has been adjudicated in favour of the assessee. For similar reasons stated therein, we delete the disallowance made by the lower authorities on account of payment made by the assessee to unapproved gratuity fund and allow ground Nos.8 to 11 of the assessee's appeal.
ITA Nos. 799/B/13 & 789/B/13
37. Now we shall take up the cross appeals in the case of Shri Siddeshwar Co-op. Bank Ltd. for the A.Y. 2009-10, which are directed against the order of the CIT(Appeals), Belgaum dated 20.2.2013. ITA 799/B/13 (Revenue's appeal)
38. As regards grounds (a) & (b) raised in this appeal by the revenue, it is observed that the issue involved therein relating to addition of accrued interest classified as non-performing assets has already been adjudicated in favour of the assessee and against the revenue, while dealing with the ground No.4(b) & (c) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue against the revenue. Thus, these grounds of the revenue are dismissed. ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 36 of 37ITA 789/B/13 (Assessee's appeal)
39. As submitted by the ld. counsel for the assessee, ground No.1 raised in the appeal of the assessee is general in nature, seeking no specific decision from us.
40. As regards grounds No. 2 to 4 of the assessee's appeal, it is observed that the common issue involved therein, relating to disallowance made by the AO and confirmed by the CIT(A) on account of interest paid by the assessee society to its members on the deposits in excess of Rs.10,000 invoking the provisions of section 40(a)(ia), has already been adjudicated in favour of the assessee while dealing with the ground No.4(a) in the revenue's appeal in ITA No.275/Bang/2012 hereinabove and for the reasons stated therein, we hold this issue in favour of the assessee. Thus, these grounds of the assessee are allowed.
41. As regards grounds No. 5 to 7, the issue involved in the present case as well as all the material facts thereto are similar to ground Nos.5 to 7 raised in ITA No.1774/B/13 in the case of Shri Basveshwar Sahakari Bank Niyamitha for the A.Y. 2010-11, wherein the issue has been adjudicated in favour of the assessee. For similar reasons stated therein, we delete the disallowance made by the lower authorities on account of payment made by the assessee to unapproved gratuity fund and allow ground Nos.5 to 7 of the assessee's appeal.
ITA Nos. 275/B/12,
789 & 798/Bang/2013 & connected appeals.
Page 37 of 37
42. In the result -
- the assessees' appeals being ITA No.1774/Bang/2013 & 789/Bang/2013 are allowed;
- the assessees' appeals being ITA No.534/Bang/2013, 1573/Bang/2013 & 802/Bang/2013 are partly allowed;
- whereas all the four appeals of the Revenue are dismissed.
Pronounced in the open court on this 27th day of June, 2014.
Sd/- Sd/-
( P. MADHAVI DEVI ) ( PRAMOD M. JAGTAP)
Judicial Member Accountant Member
Bangalore,
Dated, the 27th June, 2014.
/D S/
Copy to:
1. Appellants 2. Respondents 3. CIT 4. CIT(A)
5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar/
Senior Private Secretary
ITAT, Bangalore.