ACIT Vs. THE LAXMI CO-OPERATIVE BANK LTD.

JUDGEMENT

(1.) THE above 2 appeals filed by the Revenue are directed against the common order dated 25 -11 -2013 of the CIT(A) -III, Pune relating to Assessment Years 2009 -10 & 2010 -11 respectively. Since identical grounds have been taken by the Revenue in both these appeals, therefore, these were heard together and are being disposed of by this common order.

(2.) FACTS of the case, in brief, are that the assessee is a co -operative society engaged in banking business. It filed its return of income on 29 -09 -2009 declaring total income of Rs. 1,71,70,230/ -. During the course of assessment proceedings, the Assessing Officer noted from the balance sheet that an amount of Rs. 12,92,93,013/ - is shown as interest receivable on NPA account on the assets side and a contra entry "NPA interest reserve account" is shown on liability side. On being asked by the Assessing Officer, it was submitted that the interest accrued on NPA was not credited to the P&L Account but directly taken to the balance sheet. On being further asked by the Assessing Officer as to why such interest accrued on NPAs should not be treated as income of the assessee since it has been following mercantile system of accounting, the assessee submitted that interest on sticky advances or NPAs is to be treated as income in the year of actual receipt. For the above proposition, the assessee relied on various decisions, RBI instructions and the CBDT Circular dated 09 -10 -1984. The relevant details of interest on NPA accrued and collected were furnished before the Assessing Officer, the details of which are as under:

(3.) AGGRIEVED with such order of the CIT(A) the Revenue is in appeal before us with the following grounds: