According to a report by Banglore Mirror, the Karnataka High Court has dispelled the ambiguity on whether the interest co-operative banks give to members above Rs 10,000 and their Non-Performing Assets (NPAs) could be taxed.
The Shri Siddeshwar Co-operative Bank in Bijapur , Karnataka had approached the court after the income tax authorities ordered it to pay tax for NPAs, gratuity paid to employees and interest above Rs 10,000 paid to members.
The court ruled a co-operative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June 2015.
The HC noted that payment already made towards gratuity could be deducted for income tax. Whether interest receivable from non-performing assets, bad and doubtful debts though the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted?”
The court said: “It is evident that mere nomenclature adopted with reference to the bad loans and advances receivable, would refer to all non-performing assets of any nature, of whatever category it was placed as a non-performing asset and therefore, the decision of this court in Canfin Homes would squarely apply.”