Jain Co-Operative Bank Ltd., New Delhi vs Department Of Income Tax

ACIT, Vs M/s Jain Cooperative Bank Ltd., Circle-30(1), 510, New Delhi House 27, Room No. 106, Barakhamba Road, Drum Shape Building, New Delhi. I.P. Estate, (PAN: AAAAJ0060A) New Delhi. (Appellant) (Respondent) Appellant by: Shri Gaurav Dudeja, Sr. DR Respondent by: Shri S.L. Gupta, CA

ORDER

PER C.M. GARG, JUDICIAL MEMBER

This appeal has been preferred by the revenue against the order of the

CIT(A)- XXV, New Delhi dated 11.10.2012 in Appeal No.88/2011-12 for AY

2009-10.

2. The revenue has raised following grounds in this appeal:-

"1. On the facts and in circumstances of the case the Ld. CIT (A) -XXV, New Delhi has erred by deleting the addition of Rs. 29218109/- made by the AO.

2. On the facts and in circumstances of the case the Ld. CIT(A)- XXV, New Delhi has erred in deleting the addition of Rs. 29218109/- following of CIT Vs Shooji Vallabhdas & Co. 46 ITR 1 ITA No.20/Del/2013 Asstt.Year: 2009-10

144 (SC) (1962) which stands distinguished by the judgment In the case of Morvi Industries Ltd. Vs CIT (1971) 82 ITR 835 of Supreme Court.

3. On the facts and in circumstances of the case the Ld. CIT (A)

- XXV, New Delhi has erred in deleting the addition of Rs. 29218109/- made by the AO on account of interest on NPAs ignoring the ratio of the cases of the State Bank of Travancore Vs. CIT reported in (1986) 158 ITR 102 (SC)."

3. We have heard arguments of both the sides and carefully perused the

relevant material placed on record before us. At the outset, ld. AR submitted a

copy of the decision of ITAT 'B' Bench Delhi in assessee's own case for AY

2008-09 in ITA No.207/D/2012 dated 11.7.2014 and submitted that the main

issue raised by the revenue stands covered by the order of the Tribunal (supra)

and another order of ITAT 'H' Bench Delhi in ITA 5549/D/2012 DCIT vs

Vaish Cooperative New Bank Ltd. dated 21.6.2013. Ld. AR further contended

that this was a case of cooperative society which was engaged in the banking

business as per RBI guidelines and as per Accounting Standard 9 and the

assessee was not liable to offer income of interest on non-performing assets

whereas the AO did not agree with the contention of the assessee and made

addition in this regard. Ld. AR supporting the impugned order of the CIT(A)

submitted that the first appellate authority, after considering the entire facts and

circumstances of the case and considering the ratio of the relevant decisions on

the issue, granted relief for the assessee and deleted the addition. Ld. AR finally

submitted that the main ground of the revenue in the present appeal is squarely

2 ITA No.20/Del/2013 Asstt.Year: 2009-10

covered in favour of the assessee by the order of the Tribunal dated 11.7.2014

(supra) in assessee's own case for AY 2008-09.

4. Ld. DR submitted that the issue has not attained finality at the level of

Tribunal and we are moving to the higher forum. However, ld. DR could not

show us any contrary order which can lead us to take a contrary view on this

issue.

5. On careful consideration of above submissions, we note that the Tribunal

in assessee's own case for AY 2008-09 order dated 11.7.2014 (supra) decided

the issue in favour of the assessee and against the revenue with following

observations and conclusion:-

"4. We have heard rival parties and have gone through the material placed on record. The appeal was earlier heard on 10.07.2012 but it was released on 19.07.2012 for re-hearing in view of the retirement of one of the members. The Revenue has taken a specific ground vide ground No.1 by which it has challenged that Ld. CIT(A) has wrongly followed the judgement of CIT Vs Shoorji Vallabhdas & Co. 46 ITR 144 (S.C.), which was distinguished by the judgement in the case of Morvi Industries Ltd. Vs CIT 82 ITR 835. However, we find that Ld. CIT(A) had followed the former case law by applying the ratio which lays down that real income has to be considered with reference to commercial & business realities of the situation not with reference to his system of accounting. The facts in the case law of Morvi Industries Ltd. (supra) are quite different. Therefore, ground No.1 raised by Revenue deserves to be dismissed.

4.1 The Revenue has further taken ground No.2 by which it has challenged that Ld. CIT(A) has not followed the ratio of case law of State Bank of Travencore Vs CIT 158 ITR 102 (S.C.).

3 ITA No.20/Del/2013 Asstt.Year: 2009-10 4.2 We have gone through the case law and we find that in that case, accounts of borrowers were debited and interest income was credited to interest suspense account whereas in the present case, the interest on bad loans has not been provided as per RBI guidelines and as per accounting standard 9 issued by Institute of Chartered Accountants of India.

4.3 We find that the issue raised by Revenue is squarely covered by the order of the tribunal in the case of Vaish Cooperative Bank Ltd. in I.T.A.No. 5449 wherein the tribunal has deleted the addition under similar circumstances vide para 7 and the relevant portion is reproduced below:

"7. Against the above order, revenue is in appeal before us. We have heard both the counsels and perused the records. We find that the interest in this case was due on non-performing assets (NPA). As per the RBI guideline in this regard, interest on NPAs is not to be recognized. Accounting standard 9 issued by the Institute of Chartered Accountant of India also provides that income is to be recognized only when there is some reasonable certainty about the receipt of the income. We, further, find that this view is also supported by the decisions, as mentioned above. We find that in the case of CIT Vs Elgi Finance Ltd., 293 ITR 357, Hon'ble Madras High Court has held that interest on non-performing asset is not to be recognized in light of the RBI notification and accounting standard 9 issued by the Institute of Chartered Accountant of India."

5. We find that the facts and circumstances of the present case are similar, therefore, respectfully following the same, we dismiss the appeal of the Revenue."

6. In view of above, we are of the considered opinion that the interest on

non-performing assets is not to be recognised in the light of RBI notification and

Accounting Standard 9 issued by the Institute of Chartered Accountant of India.

We further respectfully note that the benefit of the ratio of the decision of

Hon'ble Supreme Court in the case of CIT Vs Shooji Vallabhdas & Co. (supra) 4 ITA No.20/Del/2013 Asstt.Year: 2009-10

and State Bank of Travancore vs CIT (supra) is not available for the revenue.

Under these facts and circumstances, we are inclined to hold that the issue is

squarely covered in favour of the assessee and against the revenue by the earlier

order of the Tribunal in assessee's own case for AY 2008-09 (supra). Therefore,

ground no. 1, 2 and 3 of the revenue being devoid of merits are dismissed.

7. In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 11.02.2015.

Sd/- Sd/-

(N.K. SAINI) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 11th February, 2015 'GS'

Copy forwarded to:-

1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order

Asstt. Registrar

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