The Income Tax Appellate Tribunal correctly ruled that interest on non-performing assets is not taxable until received, aligning with the real income principle, despite conflicting guidelines from the NHB.

1. Leave granted. Having gone through the impugned judgment in the aforesaid appeals, we are of the view that the consideration of the question has been given a full and meaningful reasoning and we agree with the same. As a result, all the aforesaid appeals are dismissed.

2. However, in Civil Appeal No. 998 of 2013 and SLPs (C) Nos. 28678-82 of 2017, the learned counsel appearing for the appellant states that there is an error apparent in the judgment as the facts are similar to the facts of all other cases whereas the High Court has segregated his case and stated that his facts are different. We record the statement and permit the appellant to file a review petition before the High Court. However, if such a review petition is filed within a period of four weeks from today, the same shall be disposed of on merits.

3. Order of High Court (Merged)
(S. C. Dharmadhikari; A. K. Menon, JJ.) dated 17/03/2015
Order of the Bombay High court
Per curiam
We have heard Mr Suresh Kumar, learned counsel appearing on behalf of the Revenue. The Revenue has challenged the order dated 17-10-2012 of the Income Tax Appellate Tribunal for Assessment Year 2008-2009.

4. The assessee before the Tribunal is a cooperative bank. It is functioning under the Maharashtra Cooperative Societies Act, 1960 and carries on banking business in terms of a licence issued in its favour by Reserve Bank of India. The Bank was aggrieved and dissatisfied with the exercise undertaken by the assessing officer. He made certain disallowances on the loss of shifting classified securities amounting Rs 2,22,25,310.

5. The assessing officer's order was challenged before the Commissioner of Income Tax (Appeals) and the Bank relied upon the Circular issued by Reserve Bank of India dated 28-3-2005. This permitted the Bank to shift securities from one category to another only once in a year and further mandated that on such shifting the relative investment would be recorded at the market value on the date of shifting. Reserve Bank of India also directed that any loss occasioned shall be fully written off in five years.

6. In the present case, while so shifting the securities, the loss was recorded that was because of the likely value on the date of shifting. The Commissioner of Income Tax (Appeals) accepted the Bank's claim vide his order which was passed on 29-7-2011. The Commissioner in Para 5 of his order found that die assessing officer sought an explanation and the Bank indicated in the explanation that there were certain securities which were purchased at the ruling price which was higher than their face value. The premium so paid indicates the difference between the purchase price and the face value of the security which are required to be held until maturity under the Reserve Bank of India directives. On the date of maturity, the Bank is entitled to receive an amount equal to only face value. Thus, the face value to be received at the time of maturity date is certain and, therefore, the premium needs to be spread over the life of the security.

7. This explanation given by the Bank was not accepted by the assessing officer. The Commissioner referred to the RBI policy and guidelines. He also perused the order of the assessing officer. Reserve Bank of India by the guidelines dated 16-10-2008 which are referred to permitted write - off of losses arising from shifting of securities from one category to another in respect of investment in government securities. It is in these circumstances that the addition made by the assessing officer was deleted. As far as disallowance of Rs 70,63,042 being a proportionate write - off, of the premium paid on securities held on maturity, the Bank submitted that it purchased certain securities at a price higher than the maturity value. The excess amount of premium is to be written off on proportionate basis from year to year. A sum of Rs 70,63,042 represents such proportionate expenditure written off in the year under consideration. Even this argument h