Trichirapalli District Central Co-Operative Bank Limited Vs ACIT (ITAT Chennai)
Summary: The Chennai Bench of the Income Tax Appellate Tribunal considered a batch of appeals filed by Trichirapalli District Central Co-Operative Bank Limited and the Revenue against orders of the Commissioner of Income Tax (Appeals)-1, Tiruchirapalli, for Assessment Years 2008-09, 2010-11, 2011-12, 2012-13 and 2013-14. The issues included taxation of overdue interest on non-performing assets (NPAs), NPA reserve release, the enhancement power of the CIT(A), penalty under Section 271(1)(c), and deduction under Section 36(1)(viia) of the Income-tax Act, 1961.
For AY 2010-11, the Tribunal held that overdue interest on NPAs could not be taxed on accrual basis, following the decision of the jurisdictional Madras High Court in the assessee’s own case. The Tribunal noted the judicial position concerning RBI prudential norms and the recognition of real income, including the Supreme Court decision in CIT Vs. Vasisth Chay Vyapar Ltd. The Revenue’s grounds concerning overdue interest were accordingly dismissed.
On NPA reserve release, the assessee submitted that it had transferred excess provisions to the Profit & Loss Account and that the reversal could not be taxed under Section 41(1), particularly since the earlier provisions were not claimed as deductions in the relevant years. The Tribunal held that the reversal could not be brought to tax under Section 41(1), observing that the deduction under Section 36(1)(viia) is subject to a notional statutory computation and that the provision does not fit within loss, expenditure or trading liability contemplated by Section 41(1). The addition was therefore deleted.
