Calcutta, July 6: Punjab National Bank (PNB) may find it difficult to maintain its capital adequacy ratio (CAR) at the stated 10.31 if the income tax authorities win their claim for around Rs 656 crore.The bank's statutory auditors have qualified the bank's claim of a CAR of 10.31, by referring to PNB's admission about the income tax liability. In a note on significant accounting poilicies, PNB has opined that the income tax liability is not maintainable.In the note the bank says: "No provision has been made in respect of (i) disputed Income Tax demands of Rs 460.42 crore (previous year Rs 368.44 crore) as in the bank's view, duly supported by tax consultant's opinion and decisions on bank's own appeals on the same issues, additions/disallowances made by the Assessing Officer are not sustainable".The note also says: "disputed interest tax demands up to and including financial year 94-95 of Rs 195.34 crore (previous year Rs 195.34 crore) as in bank's view duly supported by legal opinion and CBDT notification dt. 11.9.95, exempting Bank's income from interest on securities from interest tax liability from FY 95-96, the additions for financial years upto 94-95 also are sustainable. Appeals/references in this respect are pending". The bank, which published its detailed results on June 16, has shown a profit of Rs 408.14 crore for the financial year to March 31, 2000, up from Rs 372.12 crore in the previous year.While the entire amount including interest has been paid, the bank has refused to acknowledge the liability and so is yet to make any provision.According to the balance sheet and profit & loss statement published in a business daily in mid-June, the bank has disclosed that: "The entire disputed income tax/Interest tax demands amounting to Rs 655.76 crore stand paid/adjusted and included under the head `Other Assets' - Schedule 11".Other assets of Rs 875.62 crore at schedule 11 include the disputed income tax and interest tax of Rs 655.76 crore that has been paid or adjusted by the bank.Schedule 17 that specifies the bank's accounting policies states that it has not made any provision in respect of the disputed Rs 460.42 crore income tax demand and another Rs 195.34 crore interest tax demand for fiscal 1994-95. Both the demands, according to the bank, are not sustainable and appeals are pending.Of the total interest earned by the bank, Rs 16.86 crore of interest on income/interest tax refunds has been adjusted by the income tax department against the disputed tax liability.While the bank's net non-performing asset to net advances went down marginally to 8.52 per cent in fiscal 1999-2000 against 8.96 per cent in the previous year, gross NPA went up to Rs 3126.77 crore from Rs 2832.19 crore in fiscal 1998-99.The bank added another Rs 574.46 crore to its opening net NPA kitty of Rs 1694.61 crore during fiscal 1999-2000.However, during the last fiscal to March 31, 2000, reduction in net NPA level was Rs 352.12 crore. Following the fresh addition of Rs 574.46 crore and reduction of Rs 352.12 crore, its net closing NPA balance at the end of fiscal 1999-2000 was Rs 1916.95 crore.PNB for the first time started lending in sensitive sectors like capital markets and real estate. It has advanced Rs 34.19 crore in the capital markets and another Rs 214.31 crore in the real estate segment.The bank has disclosed that registration formalities for its properties worth its Rs 131.16 crore is still pending. It says: "Premises include properties Rs 131.16 crore (Net of Depreciation, cost Rs 81.64 crore revalued at Rs 146.45 crore) in respect of which registration formalities are pending".In respect of the merger with it of the erstwhile Hindustan Commercial Bank Ltd, PNB has made a Rs 1.95 crore provision and has shown Rs 10.15 crore as contingent liabilities that have been incorporated in the accounts. Hindustan Commercial Bank td was merged with PNB on December 18, 1986, but the merger scheme is yet to be reviewed by the Reserve Bank of India.
