Case Law Details
DCIT Vs Jhajjar Central Coop Bank Ltd. (ITAT Delhi)
Ld. Authorised Representative submitted that the provision pertained to audit fee payable to the statutory auditor for the ensuing year. It was further submitted that the statutory audit has to be carried out by a CA Firm recommended by NABARD and the audit fee is also prescribed by NABARD. It was further submitted that the audit fee is approximately Rs. 6,000/- per branch and since the assessee bank had 25 branches, a provision of Rs. 1.50 lakhs was made. .
We find that the Ld. CIT (A) has given categorical finding that this expenditure has actually been incurred by the assessee. It is further seen that even the provision was created keeping in mind the audit fee prescribed by the NABARD and after taking into account the number of branches which the assessee was operating. Therefore, on this issue also there is no need for any interference by us.
FULL TEXT OF THE ITAT JUDGMENT
This appeal has been preferred by the department against order dated 10/12/2015 passed by the Ld. CIT (A)-2, Gurgaon for assessment year 2012-13.
2. The brief facts of the case are that the assessee is a Co-operative Society carrying on banking business. The return of income was filed declaring income of Rs. 1,52,15,180/-. The case as selected for scrutiny and during the course of assessment proceedings the AO noted that the assessee had not shown interest income on accrual basis on NPA accounts. Thereafter, the AO proceeded to hold that interest on NPA accounts was to be taxed on an accrual basis and proceeded to add an amount of Rs. 3,31,60,915/- to the income of the assessee on this account. The AO also made an addition of Rs. 11,98,774/- on account of dividend received from HARCO Bank. The AO further made an addition of Rs. 3,00,000/- on account of disallowance of provision for Standard Assets. Another addition made by the AO was disallowance of deduction claimed of Rs. 50,00,000/- on account of Provision for Loss Assets. The AO also disallowed an amount of Rs. 1.50 lakhs on account of provision created for CA audit fees.
2.1 Aggrieved, the assessee approached the Ld. CIT (A) who deleted the addition of Rs. 3,31,61,468/- in respect of accrued interest on NPA accounts and also directed the deletion of addition of Rs. 1.50 lakhs made by the AO on account of disallowance of provision for CA audit fee.
2.2 Now, the department has approached the ITAT challenging the deletion of these two additions / disallowances by the Ld. CIT (A).
3. The Ld. Sr. Departmental Representative vehemently supported the findings recorded by the assessing officer and submitted that the Ld. CIT (A) had erred in deleting the additions / disallowances which were now being challenged before the ITAT.
4. In response the Ld. Authorised Representative placed reliance on the order of ITAT Delhi in assessee’s own case for assessment year 2008-09 in ITA no. 2486/Del/2016 with respect to the ground pertaining to accrued interest on NPA Accounts. It was submitted that ITAT, vide order dated 31st October 2013, had dismissed the department’s appeal on identical issue and had held that overdue interest not realized during the year and credited to suspense interest account cannot be taken to be the income of the assessee.
4.1 With respect to the other ground regarding provision for CA audit fees, the Ld. Authorised Representative submitted that the provision pertained to audit fee payable to the statutory auditor for the ensuing year. It was further submitted that the statutory audit has to be carried out by a CA Firm recommended by NABARD and the audit fee is also prescribed by NABARD. It was further submitted that the audit fee is approximately Rs. 6,000/- per branch and since the assessee bank had 25 branches, a provision of Rs. 1.50 lakhs was made. The Ld. Authorised Representative also placed reliance on the findings of the Ld. CIT (A) in this regard.
5. We have heard the rival submissions and have also perused the material on record. As far as ground nos. 1 and 2 of the department’s appeal are concerned which challenge the action of the Ld. CIT(A) in deleting the addition of Rs. 3,31,61,468/- on account of accrued interest on loans classified under ‘non performing assets’, it is seen that this issue is squarely covered in favour of assessee by order of co-ordinate bench in assessee’s own case for assessment year 2008-09 in ITA no. 2486/Del/2011 wherein the issue has been discussed in Para 11 of the aforesaid order dated 31st October, 2013 and which reads as under:
“11. Considering the above submission of the assessee which is well supported by RBI / NABARD circular dated 17.8.2002 vide para No. 3.1 clearly states that the policy of income recognition should be based on record of recovery and therefore unrealized income should not be taken into profit and loss account by State Co-op Bank / Central Co-op Banks and that the provisions of Section 43D of the Act are clear regarding the recognition of interest income on NPA. The Ld. CIT(A) in our view has thus rightly held that overdue interest not realized during the year and credited to suspense interest account cannot be taken tobe the income of the assessee. Thus the Ld. CIT (A) has thus rightly deleted the addition in question. The same is upheld. There is no substance in the contention of the Ld. DR that the assessee was having no objection to this addition, since we find that it was an alternative submission of the assessee before the AO that “even if any addition is to be made of Rs. 1,29,91,989/- then addition of Rs. 1,00,51,715/- is to be made on account of interest of earlier years credited during the year to P & L account”. Even otherwise the AO is supposed to make just assessment based on the provisions of laws which can not be ignored since assessee is agreeable to the proposed wrong addition. The ground No. 3 is accordingly rejected.”
5.1 Therefore, in view of the adjudication of the Tribunal in assessee’s own case which has also been followed by the Ld. CIT (A) in the year under consideration we find no reason to interfere with the findings of the Ld. CIT(A) on this issue and we dismiss ground nos. 1 and 2.
5.2 Coming to ground no. 3 which challenges the deletion of addition of Rs. 1.50 lakhs pertaining to provision created for CA audit fee, we find that the Ld. CIT (A) has given categorical finding that this expenditure has actually been incurred by the assessee. It is further seen that even the provision was created keeping in mind the audit fee prescribed by the NABARD and after taking into account the number of branches which the assessee was operating. Therefore, on this issue also there is no need for any interference by us. Accordingly we dismiss ground no. 3 of the department’s appeal.
6. In the final result appeal filed by the department stands dismissed.
(Order pronounced in the open court on 30th May, 2018).
