Case Law Details
Statute makes the amended provision Section 80P(4) inserted by Finance Act, 2006 to be effective from 1.4.2007, which therefore clearly indicates that it is applicable from the Assessment Year 2007-08 onwards. The said provision clearly mandates that the provisions of Section 80P shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. As can be seen from the name of the assessee, it is clear that this is a District level Central Cooperative Bank Ltd. Hence, the provisions of Section 80P is not applicable to the assessee as not being a primary agricultural credit society or a primary co-operative agricultural and rural development bank.
INCOME TAX APPELLATE TRIBUNAL, CUTTACK
ITA No. 425/CTK/2010 – (Assessment Year 2007- 08)
The Sundergarh District Central Co-operative Bank Ltd.,
Versus
Dy.Commissioner of Income Tax
ORDER
ORDER
Shri K.S.S.Prasad Rao, Judicial Member: This appeal is filed by the assessee having been aggrieved by the order of the learned Commissioner of Income-tax (Appeals) dt.27.9.2010 for the Assessment Year 2007-08 in the case of the assessee.
2. The assessee has raised the following issues in its grounds of appeal.
“1) For that the Learned Assessing officer was not correct in adding a sum of ₹ 2,58,46,693 as the income of the appellant and the first appellate authority was also not correct in confirming the same.
2) For that as per the provision of Sec. 80-P of Income Tax Act, the appellant while being a cooperative society is entitled to deduction of income from interest from its investments made with other cooperative society. Therefore the addition of accrued interest is liable to be reduced to NIL.
3) For that the addition of interest of ₹ 2,58,46,693 relates to accrued interest which turned to be the Non performing Assets (NPA) and as such the addition of the same is arbitrary and unlawful.
4) For that the addition of ₹ 2,58,46,693 represents residual accrued interest income those were not received by the appellant. The appellant in this regard during the previous years was considering the interest income those were received during the respective particular years and such procedure as adopted earlier was also adopted during the Asst. Year 2007- 08. The above procedures as adopted earlier were also accepted consistently by the taxing authorities during the previous years. Therefore the addition of residual accrued interest which was not received during the current year should not have been considered as the income of the appellant.
5) For that the appellant being a Co-operative Bank has been adopting the particular method of accounting right from the beginning and any change in that will adversely affect it’s taxable income.
6) For that it is not practically possible for the appellant/bank to realize the entire accrued interest as many such loanees of the appellant are habitual defaulters in making loan repayment and such defaults do not occur in stray instances. Therefore the consideration of accrued interest as appellant’s income would be arbitrary and unjust in the present case of the appellant.
7) For that as a matter of fact any expenditure like re-payment of interest, are considered by the I.T. Authorities only when such expenditure like payment of interest are paid in actual basis but not under accrual basis. Therefore that being the position of law, for claim of expenditure under head repayment of interest, the income from interest would therefore be proper to consider on actual basis.
8) For that while adding a sum of ₹ 2,58,46,693 under Interest Income from NPA assets similarly under various heads of expenses the dis allowance of ₹ 1,48,91,426 would be not correct in the eye of law. The Deptt. on one hand while disallowing the provisions made by the appellant should also have considered not to add the provisions under different heads of expenses.
9) For that other grounds if any shall be canvassed during the hearing of this appeal.”
3. Both parties were heard regarding the issues raised by the assessee and their implications.
4. On careful consideration of the material made available to the Tribunal, the undisputed facts relating to the issues are that the assessee has filed its return at an income of ₹1,30,795 for taxation but the Assessing Officer has determined the income at ₹ 2,59,77,450. Aggrieved, the assessee went in appeal before the CIT(A). The learned CIT(A) after considering the material available in the assessment records and the contention of the assessee made before him came to the conclusion that a sum of ₹ 2,58,46,693 though interest receivable on loans and advances has to be included in the computation of total income for the period under consideration as the provisions contained in Section 4 of the I.T.Act includes the income earned though not received in cash. The assessee’s contention is that it follows cash system of accounting insofar as the interest received and following mercantile system of accounting regarding other interest. But this hybrid system of accounting was not accepted by the Department saying that it is not permissible under law as on date. Accordingly, the Assessing Officer has added this accrued income on loan and advances of ₹ 2,58,46,693. He also supported the addition made by the Assessing Officer on the ground that there is amendment in Section 80P of the I.T.Act by inclusion of Sub-section (4) therein to the effect that the provisions of this Section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The above provision was inserted by Finance Act, 2006 w.e.f. 1.4.2007 meaning thereby that the amendment applies for the Assessment Year 20l07- 08 onwards. Therefore, the learned CIT(A) applied the said provision and dismissed the appeal of the assessee on this aspect.
5. Aggrieved, the assessee has filed this appeal before the Tribunal.
6. During the course of hearing, the learned AR of the assessee has disputed vehemently contending that whether interest accrued or not is exempted u/s.80P of the I.T.Act the assessee being a Cooperative Society. Therefore, accrued or earned interest makes no difference. Regarding the amended provisions in sub-section (4) of Section 80P, the learned AR of the assessee contended that the amendment was effective from 1.4.2007 and therefore it has application from the Assessment Year 2008- 09 on wards and not for the Assessment Year 2007- 08.
7. Contrary to this, the learned DR supported the orders of the authorities below.
8. On careful analysis of the orders passed by the learned CIT(A) as well as the AO , it is found that undisputedly as per sub-section (4) of Section 80P of the I.T.Act, the interest whether accrued or received in cash is income asses sable in that year. Admittedly the interest accrued for the period under consideration only to be shown as receivable/ earned during the period under consideration. Now coming to the aspect as to whether the amount is exempt or not under Section 80P of the Act, we find that the statute makes the amended provision Section 80P(4) inserted by Finance Act, 2006 to be effective from 1.4.2007, which therefore clearly indicates that it is applicable from the Assessment Year 2007- 08 on wards. The said provision clearly mandates that the provisions of Section 80P shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. As can be seen from the name of the assessee, it is clear that this is a District level Central Cooperative Bank Ltd. Hence, the provisions of Section 80P is not applicable to the assessee as not being a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Under these facts and circumstance of the case, we are of the considered view that the impugned orders passed by the learned CIT(A) as well as the Assessing Officer are very much right and they require no interference as they are in accordance with law. We, therefore, uphold the impugned order of the learned CIT(A) and dismiss the appeal of the assessee being devoid of merits. 9. In the result, the appeal of the assessee is dismissed.
PRONOUNCED IN OPEN COURT ON Date- 30th June, 2011
