Case Law Details
Advocate Akhilesh Kumar Sah
Kanaka Mahalakshmi Cooperative Bank case: Provision made on notional basis and not on account of accrued liability not eligible for deduction.
Recently, in the Kanaka Mahalakshmi Cooperative Bank Ltd. vs. ACIT & vice-versa [ITA Nos. 299 & 300/VIZ/2017 and ITA Nos. 326 & 327/VIZ/2017, (A.Y.: 2012-13 & 2013-14), decided on 5.9.2018], there were cross appeals by the assessee and the Revenue for the AYs 2012-13 & 2013 & 14. In ITA No. 299/VIZ/2007, one of the ground related to the addition of Rs. 26,10,443/- on account of interest on reverse fund.
Facts to this issue in brief were that during the course of assessment proceedings, the Assessing Officer(AO) had noted that the assessee had claimed Rs. 26,10,443/- in the profit & loss account as interest on reserve fund under the category ‘provisions and other expenditure’. The AO called upon the assessee to show-cause as to why the interest on reserve fund should not be treated as appropriation of profit and added to the total income. The assessee submitted before the AO that the amount of Rs. 26,10,443/- was claimed as an expenditure at par with the interest payable to the deposit holders as it belong to the members of the society. The AO did not accept the explanation of the assessee and made the addition of Rs. 26,10,443/- by making the following observations:-
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