Ram Garhia Co-operative Bank Ltd Vs ACIT (ITAT Delhi)
ITAT Delhi held that there is no liability to deduct TDS on interest on savings bank account and interest of compulsory deposit account as per the provisions contained u/s 194A of the Act. Accordingly, disallowance u/s 40(a)(ia) unsustainable.
Facts-
The assessee is a co-operative society carrying on the business of providing credit and deposits facilities. AO passed the assessment order after disallowing various expenditures. CIT(A) confirmed disallowance on account of non deduction of the tax on interest paid on various depositions invoking provisions of Section 40(a)(ia) of the Act. Further the CIT(A) has also confirmed the addition of Rs. 52,209,14/- on account of interest on Non Performing Asset and also confirmed the disallowance of an amount of Rs. 19,20,41/- on account of amortization of premium on government securities.
Being aggrieved, the present appeal is preferred by the assessee.
Conclusion-
Disallowance invoking provisions of section 40(a)(ia) – Held that it is not in dispute that, there is no liability to deduct TDS on interest on savings bank account and interest of compulsory deposit account as per the provisions contained u/s 194A of the Act.
Disallowance of interest on non-performing asset – Held that we are of the opinion that the assessee who is into banking activities has to follow RBI Guidelines and we do not find any error with the assessee in offering the interest on NPA for taxation in the assessment year relevant to such financial year of recovery. The Ld. A.O/CIT(A) have committed an error in disallowing Rs. 52,20,914/- on account of interest on non performing assets.
Disallowance of amortization of premium on government securities – As per the RBI Guidelines dated 16/10/2000, the investment portfolio of the bank is required to be classified under three categories viz. Held to Maturity (HTM), held for Trading (HFT) and Available for Sales (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of the bank, the depreciation/appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. Therefore, by considering the facts and circumstances of the case, in our opinion, the disallowance on account of democratization of premium of government securities is deserves to be deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee for assessment year 2013-14 against the orders of the ld. Commissioner of Income Tax (Appeals)–XXV, New Delhi, dated 20.09.2018.
2. The assessee has raised the following grounds of appeal:-
“1. That the AO erred in facts and law in disallowing the amount of Rs.63602481/- on account of non deduction of tax on interest paid on deposits by various invoking provisions of Section 40(a)(ia) of the Act. The break-up of is as under:-
