Case Law Details
CIT Vs Davangere District Central Co-Operative Bank Limited (Karnataka High Court)
The issue under consideration is whether Tribunal is right in deleting the interest accrued on non performing assets from the computation of taxable income for the assessment year under consideration despite the assessee maintaining mercantile system of accounting?
High Court states that in the course of assessment proceedings, it was noticed that assessee had debited provision for non performing asset but in the income computation sheet the same has not been added. The assessee was given an opportunity to explain why non performing asset provision has not added back to the total income, in the income computation sheet and again deduction 7.5% under Section 36(1)(viia) has not been claimed. The assessee thereupon submitted that a provision has been made as per the norms of the Reserve Bank of India and the details of non performing assets as well as provisions made were provided. The Commissioner of Income Tax (Appeals) held that deduction for provision for bad and doubtful debt is allowed under Section 36(1)(viia) of the Act in the light of the decision of the Supreme Court in UCO Bank Ltd. supra. The tribunal in its order dated 10.10.2014 inter alia has held that though the assessee has used the nomenclature as provision for non performing assets but in pith and substance, the provision has been created for bad and doubtful debts and in doing so the assessee has followed the guidelines framed by Reserve Bank of India. The tribunal has therefore, affirmed the finding recorded by the Commissioner of Income Tax (Appeals). This court in Canfin Homes Ltd. supra after taking note of Section 145 of the Act has held that once a particular asset is shown as non performing asset then the assumption that it is not yielding any revenue. When an asset is not yielding any revenue, the question of showing that revenue and paying tax would not arise. The contentions, which are sought to be raised by learned counsel for the revenue do not arise for consideration in the context of substantial question of law, which has been framed by this court, The concurrent findings have been recorded by the Commissioner of Income Tax (Appeals) as well as tribunal in this regard, which cannot be termed as perverse. In view of preceding analysis, the substantial question of law is answered against the revenue and in favour of the assessee.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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