M/s Jila Sahakari Kendriya Bank Mydt., Ujjain V. The DCIT 1(1), Ujjain

CO 51/IND/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8704 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S DESH
• Assessee Lawyers: R A VERMA
• Keywords: Bad and doubtful debts
• Section: 143(3); 37(1); 37; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAABJ0014F I.T.A.NO. 135 /IND/201 3 A.Y. : 2009-10 DY. CIT, 1(1), UJJAIN VS. M/S. JILA SAHKARI KENDRIYA BANK MYDT., 3, BHARATPURI ADMINISTRATIVE AREA, DEWAS ROAD, UJJAIN APPELLANT RESPONDENT C.O.NO.51/IND/2013 (ARISING OUT OF I.T.A.NO. 135/IND/2013 ) A.Y. : 2009-10 M/S. JILA SAHKARI KENDRIYA BANK MYDT., 3, BHARATPURI ADMINISTRATIVE AREA, DEWAS ROAD, UJJAIN VS. DY. CIT, 1(1), UJJAIN CROSS OBJECTOR RESPONDENT APPELLANT BY : SHRI R.A. VERMA, SR. DR RESPONDENT BY : SHRI S.S.DESHPANDE, C.A. -: 2: - 2 DATE OF HEARING : 30 . 0 5 .201 3 DATE OF PRONOUNCEMENT : 28 . 0 6 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT( A) DATED 26.12.2010 FOR THE ASSESSMENT YEAR 2009-10 IN THE M ATTER OF ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 . 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 28,10,000/- MADE BY THE ASSESSING OFFICER BEING ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, BY IGNORING THE PROVISIONS OF SECTION 37 AS THESE ARE NOT ASCERTAINED LIABILITIES . 3. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS :- 1. THAT LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 6.00 LACS BEING THE PROVISION -: 3: - 3 FOR THE BONUS TO THE EMPLOYEES. THE ADDITION MAY PLEASE BE DELETED OR IN THE ALTERNATIVE THE ASSESSING OFFICER MAY PLEASE BE DIRECTED TO ALLOW THE SAME IN THE YEAR OF PAYMENT. 2. THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF PROVISION FOR BAD AND DOUBTFUL DEBTS AT RS. 78.79 LACS AS PER SECTION 36(1)(VIIA). 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE DERIVES INCOME FROM BANKING BUSINESS. THE MAIN SOUR CE OF INCOME OF THE ASSESSEE IS GIVING CREDIT FACILITIES TO ITS MEMBERS AND ACCEPTING DEPOSITS FROM ITS MEMBERS THROUGH BRANCHES. THE RETURN DECLARING AN INCOME OF RS. 3,41,76,300/- WAS FILED ON 30-09-2009. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. ASSESSMENT U/S 143(3) WAS COMPLETED BY THE A.O. VIDE ORDER DATED 21-12-2011 BY MAKING ADDITION FOR PROVISION ON ACCOUNT OF BAD AND DOUBTFUL DEBTS UNDER THE HEAD FRAUD AND GAVAN AT RS . 28,10,000/-, ADDITION RELATED TO BONUS PAYABLE RS. -: 4: - 4 6,00,000/-, ADDITION RELATED TO PROVISION ON STANDA RD ASSETS AT RS. 5,00,000/- AND ADDITION ON ACCOUNT OF CREDITS FOUNDS IN SUSPENSE ACCOUNT AT RS. 11,92,1 0 0/-. TOTAL ADDITION OF RS. 45,62,100/- WAS MADE AND INCO ME ASSESSED AT RS. 3,92,78,400/- VIDE ORDER DATED 21-1 2- 2011. AGAINST THE ORDER, APPELLANT HAS PREFERRED TH E APPEAL. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS. 28.10 LAKHS BY OBSERVING AS UNDER : - 3.2.5 IN THE CASE OF THE APPELLANT LIABILITY ON ACCOUNT OF LOSS OF 'FRAUD AND GAVAN', CRYSTALLIZED DURING THE YEAR. APPELLANT HAS FILED SUIT AGAINST T HE FRAUDSTERS AND TAKEN REGULAR FOLLOW UP FOR RECOVERY OF SUM. SINCE, RECOVERABLE AMOUNT BELONGS TO VERY LONG PERIOD SUCH AS 1985-86, 1987-88, 1991-92 ETC. THERE ARE REMOTE CHANCES OF RECOVERY OF SUCH AMOUNTS FROM THE FRAUDSTERS, THEREFORE APPELLANT HAS WRITTEN OFF THE ACCOUNTS, AS PER THE INSTRUCTIO N OF THE NABARD. THE LOSS INCURRED TO THE APPELLANT -: 5: - 5 DURING THE NORMAL COURSE OF BUSINESS AND LIABILITY ON ACCOUNT OF LOSS CRYSTALLIZED DURING THE YEAR, THEREFORE ADDITION MADE BY THE A.O. AT RS. 28,10,000/- IS NOT SUSTAINABLE AND IT IS HEREBY DELETED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT T HE ASSESSEE HAS CLAIMED THE AMOUNT OF FRAUD AND GAVAN UNDER THE HEAD PROVISION FOR BAD AN D DOUBTFUL DEBTS. THE EXPENSES, WHICH WERE OCCURRED DURING THE NORMAL COURSE OF THE BUSINESS OF BANKING CARRIE D OUT BY THE ASSESSEE IS ALLOWABLE U/S 37(1) ALSO. THOUGH, T HERE IS NO PROVISION FOR ALLOWING DEDUCTION OF A TRADING LOSS ON ACCOUNT OF EMBEZZLEMENT, SECTION 37 PROVIDES FOR ANY EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS AND THERE HAS TO BE NEXUS BETWEEN BUSINESS OPERATION AND THE LOSS. HENC E, DEDUCTION IS ALLOWABLE AS PER THE PROVISION OF SECT ION 37(1) IF, THERE IS DIRECT AND PROXIMATE CONNECTION BETWEEN TH E LOSS AND THE BUSINESS OPERATION OF THE ASSESSEE. -: 6: - 6 7. IN VIEW OF THE FINDING RECORDED BY THE LD.CIT(A) AT PARA 3.2.5, WE CONFIRM THE ACTION OF THE CIT(A) FOR ALLO WING LOSS ON ACCOUNT OF FRAUD AND GAVAN OCCURRED IN THE COURSE O F ITS BANKING BUSINESS AND WHICH WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. 8. THE LD. CIT(A) HAS CONFIRMED THE ACTION OF ASSESSIN G OFFICER FOR PROVISION OF BONUS OF RS. 6 LAKHS ON TH E PLEA THAT PAYMENT WAS NOT MADE BEFORE THE DUE DATE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUN D FROM RECORD THAT THE ASSESSEE HAS MADE PROVISION OF RS. 6,00,000/- DURING THE FINANCIAL YEAR 2008-09 ON ACC OUNT OF BONUS PAYABLE. THE ASSESSEE HAS PAID A SUM OF RS . 4,85,330/- OUT OF PROVISION FOR BONUS ON 16-11-2009. THE ASSESSEE IS REQUIRED TO MAKE THE PAYMENT OF BONUS ON OR BEFORE THE DUE DATE FOR FILING OF THE RETURN OF INC OME AS PER THE PROVISO OF SECTION 43B. IN THE CASE OF THE ASSE SSEE DUE DATE IS 30-09-2009. ASSESSEE FAILED TO MAKE THE PAY MENT BEFORE THE DUE DATE OF FILING OF RETURN, THEREFORE, ASSESSING OFFICER HAS ADDED BACK A SUM OF RS. 6,00,000/- ON ACCOUNT -: 7: - 7 NON-PAYMENT OF BONUS IN THE TAXABLE INCOME OF THE ASSESSEE. 10. AS THE BONUS WAS NOT ACTUALLY PAID, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE SAME. WE D IRECT THE ASSESSING OFFICER TO ALLOW THE BONUS IN THE YEAR OF ACTUAL PAYMENT. WE DIRECT ACCORDINGLY. 11. THE CIT(A) HAS DISALLOWED PROVISION FOR BAD AND DOUBTFUL DEBTS AT RS. 78.79 LAKHS. HOWEVER, SHE HAS DELETED ADDITION OF RS. 28.10 LAKHS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. THE RELEVANT OBSERVATION OF THE CIT(A) WAS AS UNDER :- DURING THE APPELLATE PROCEEDING, APPELLANT HAS FIL ED THE WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER :- 'THAT AS PER SECTION 36(L)(VIIA) PROVISION FOR BAD AND DOUBTFUL DEBTS IS ALLOWABLE IN CASE OF SCHEDULE/NON - SCHEDULED/CO-OPERATIVE BANKS. AS PER EXPLANATION (V I) GIVEN WITH THE SECTION - CO-OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY CO-OPERATIV E AGRICULTURAL AND RURAL DEVELOPMENT BANK SHALL HAVE THE MEANING RESPECTIVELY ASSIGNED TO THEM IN THE EXPLAN ATION TO SUB-SECTION (4) OF SECTION 80P. AS PER EXPLANATION (A) TO BOP - 'CO-OPERATIVE BANK' AND -: 8: - 8 'PRIMARY AGRICULTURAL CREDIT SOCIETY' SHALL HAVE TH E MEANING RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949). AS PER PART V OF THE BANKING REGULATION ACT 1949(10 OF 1949) SECTION 56 IN SEC. 5, --------------------------------- ------- (CCI) 'COOPERATIVE BANK' MEANS STATE CO-OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO- OPERATIVE BANK. THUS FROM THE ABOVE EXPLANATION IT IS CLEAR THAT JI LA SAHAKARI KENDRIYA BANK MYDT, UJJAIN IS A CENTRAL CO - OPERATIVE BANK AND ELIGIBLE JAR DEDUCTION U/S 36(L) (VIIA). IT IS ALREADY STATED THAT JILA SAHAKARI KENDRIYA BANK MYDT. UJJAIN IS ELIGIBLE FOR PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 71.10 LACS WHILE THE SUM OF RS. 29.42 IS BEING CLAIMED AFTER DISALLOWING THE SUM OF RS. 5.00 LACS ON ACCOUNT OF PROVISION ON STANDARD ASSET S. THUS, WE HAVE ALREADY DISALLOWED THE PROVISION ON ACCOUNT OF STANDARD ASSETS AND OFFERED OUR INCOME F OR TAX HENCE THERE IS NO QUESTION OF DOUBLE ADDITION. THE ASSESSEE PRAY YOUR HONOUR THAT DUE TO MISCONCEPTION THE ADDITION IS DONE BY THE ADDITIONA L COMMISSIONER OF INCOME TAX AND REQUIRES DELETION OF THE SAME IN APPEAL. WE ARE ENCLOSING THE COPIES OF RELEVANT SECTION FROM THE B ARE ACT FOR THE DEFINITION OF CO-OPERATIVE BANK FOR YOUR KIND CONSIDERATION . ' -: 9: - 9 3.4.1 I HAVE CONSIDERED THE FINDINGS OF THE A.O. AND WRITTEN SUBMISSIONS OF THE APPELLANT CAREFULLY. THE APPELLANT HAS MADE THE PROVISION FOR STANDARD ASSETS AT RS. 5,00,000/- AND CLAIMED IT U/S 36(1)(VIIA) UNDER THE HEAD PROVISION FOR BAD AN D DOUBTFUL DEBTS. DURING THE COURSE OF APPELLATE PROCEEDING APPELLANT HAS TAKEN A PLEA THAT IT IS ELIGIBLE FOR BAD AND DOUBTFUL DEBTS OF RS.71.10 LACS WHILE THE SUM OF RS. 29.42 LACS IS BEING CLAIMED, AFTER DISALLOWING THE SUM OF RS. 5,00,000/- ON ACCOUNT OF PROVISION ON STANDARD ASSETS. THE CONTENTION OF THE APPELLANT IS NOT CORRECT. H IS OBSERVED THAT IN COMPUTATION OF INCOME APPELLANT FI RST ADDED THE PROVISION FOR STANDARD ASSETS AMOUNTING T O RS. 5,00,000/- AND LATER ON THE DEDUCTION IT CLAIME D AMOUNT OF RS. 29.42 LACS OF FOLLOWING THREE ITEMS : - PROVISION FOR BAD AND DOUBTFUL DEBTS RS. 22,29,000/- PROVISION FOR OVER DUE INTEREST RS. 2,13,000/ - PROVISION FOR STANDARD ASSETS RS. 5,00,000/- TOTAL RS. 29,42,000/- -: 10: - 10 THUS, CONTENTION OF THE APPELLANT THAT IT HAS NOT INCLUDED THE PROVISION FOR STANDARD ASSETS AT RS. 5,00,000/- CLAIMED AS PROVISION FOR BAD DEBTS U/S 36(1)(VIIA) IS NOT CORRECT. APPELLANT HAS GIVEN CALCULATION AS PER PROVISIONS OF SECTION 36(1)(VIIA ) AND AS PER THE CALCULATION AMOUNT WORKS OUT TO RS. 78.7 9 LACS. THE APPELLANT CONTENDED THAT IT HAS CLAIMED ONLY RS. 29.42 LACS, AS PER SECTION 36(1)(VIIA), WHEREAS IT IS ENTITLED TO THE HIGHER AMOUNT. THE CL AIM WHICH WAS MADE BY THE APPELLANT IN THE RETURN IS ALLOWABLE AS PER THE LAW AND IT COULD NOT BE INCREASED ANY FURTHER CALCULATION MADE BY THE APPELLANT ON LATER DATE. IT IS ADMITTED BY THE APPELLANT THAT NO PROVISION IS ALLOWABLE ON STANDAR D ASSETS, HENCE ADDITION MADE BY THE A.O. ON ACCOUNT OF PROVISION OF STANDARD ASSETS AT RS. 5,00,000/- IS HEREBY CONFIRMED. -: 11: - 11 12. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED WITH RESPECT TO GROUND TAKEN IN THE CROSS O BJECTION FOR ALLOWING CLAIM OF BAD DEBTS RS. 78.79 LAKHS U/S 36( 1)(VIIA). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE HAS MADE PROVISIONS F OR BAD AND DOUBTFUL DEBTS AT RS. 57,52,0009/- WHICH ALSO INCLU DES PROVISIONS OF FRAUD AND GAVAN AT RS. 28.10 LAKHS AN D PROVISION OF STANDARD ASSETS AT RS. 5 LAKHS. AS PER THE ASSES SEE IT IS ELIGIBLE FOR CLAIMING PROVISION ON BAD AND DOUBTFUL DEBTS AT RS. 78.80 LAKHS U/S 36(1)(VIIA) OF THE INCOME-TAX ACT, 1961, AS AGAINST CLAIM OF RS. 57.52 LAKHS. THE ASSESSEES EL IGIBILITY FOR CLAIM OF DEDUCTION U/S 36(1)(VIIA) HAS BEEN DECIDED BY COORDINATE BENCH, WHEREIN IT WAS HELD THAT CLAIM OF DEDUCTION U/S 36(1)(VIIA) IS TO BE ALLOWED ONLY WITH RESPECT TO THE AMOUNT OF CLAIM MADE IN THE BOOKS OF ACCOUNT. MERE CLAIM O F DEDUCTION IN THE COMPUTATION OF INCOME IS NOT SUFFI CIENT, EVEN IF ELIGIBILITY IS WORKED OUT. FROM THE RECORD, IT I S NOT CLEAR AS TO WHETHER THE ASSESSEE HAS ACTUALLY MADE PROVISION BY PASSING ENTRY IN ITS BOOKS OF ACCOUNT FOR RS. 78.79 LAKHS. IN THE INTEREST OF JUSTICE AND FAIR PLAY, THE MATTER IS RE STORED BACK TO -: 12: - 12 THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO F IND OUT THE AMOUNT ACTUALLY WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND ASSESSING OFFICER IS TO FURTHER RECOMPU TE THE ASSESSEES ELIGIBILITY IN TERMS OF CLAUSE (A) OF SU B SECTION (VIIIA) OF SECTION 36. WE DIRECT ACCORDINGLY. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED, WHEREAS CROSS OBJECTION FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES IN TERMS INDICATED HEREINABOVE . THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :28 TH JUNE, 2013. CPU* 262728