Case Law Details
Belur Urban Co-operative Bank Ltd. Vs ITO (ITAT Bangalore)
Introduction: The recent order by the Income Tax Appellate Tribunal (ITAT) Bangalore in the case of Belur Urban Co-operative Bank Ltd. vs ITO addresses a crucial aspect of interest income on Non-Performing Assets (NPAs). The ITAT directed readjudication, emphasizing the need for a thorough examination by the Assessing Officer (AO). This article delves into the details of the ITAT Bangalore order, shedding light on the intricacies of the case and its implications.
Detailed Analysis: Belur Urban Co-operative Bank, a registered co-operative society, contested the Assessment Year 2017-18 order that determined a total income of Rs. 31,17,724/-. The dispute revolved around the addition of Rs. 36,60,891/- on account of the difference in interest income on accrual basis. The AO, during the assessment proceedings, reconciled interest income and expenses, leading to the addition.
The appeal before the First Appellate Authority (CIT(A)) argued that the interest receivable was not accounted for, aligning with Rule 22 of the Karnataka Co-operative Societies Rules, 1960. The CIT(A), however, distinguished the case law cited by the assessee and asserted that interest, though not credited, is recoverable due to state government assurance. The CIT(A) ruled that the hybrid accounting system cannot be allowed, and interest income must be assessed on an accrual basis.
In response, the assessee filed an appeal before the ITAT, challenging the addition on several grounds, including the sustainability of the interest receivable on Non-Performing Assets (NPAs). The ITAT acknowledged the mistake in the submission before lower authorities regarding the state government’s role as a guarantor for interest reimbursement.
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