Jila Sahkari Kendriya Bank Maryadit, V. ACIT, SATNA

CO 9/JAB/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1034 (ITAT-JABALPUR)
• Duration Of Justice: 6 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2012
• Court: TRIBUNAL
• Keywords: Additional evidence; Bad and doubtful debts
• Section: 40(a)(ia); 80P

Judgement Text

JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 1 PAGE 1 OF 17 IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAATJ5020F I.T.A.NO. 68/JAB/2012 A.Y. : 2008-09 ACIT, SATNA VS. JILA SAHKARI KENDRIYA BANK MARYADIT, COLLEGE ROAD, PANNA (M.P.) APPELLANT RESPONDENT C.O. NO. 09/JAB/2012 (ARISING OUT OF I.T.A.NO. 68/JAB/2012) A.Y. : 2008-09 JILA SAHKARI KENDRIYA BANK MARYADIT, COLLEGE ROAD, PANNA (M.P.) VS. ACIT, SATNA CROSS OBJECTOR RESPONDENT I.T.A.NO. 70/JAB/2012 A.Y. : 2008-09 JILA SAHKARI KENDRIYA BANK MARYADIT, COLLEGE ROAD, PANNA (M.P.) VS. ACIT, SATNA APPELLANT RESPONDENT DEPARTMENT B Y : SHRI ABHISHEK SHUKLA, SR. DR ASSESSEE BY : SHRI K.N.G. PILLAI & SHRI V. RAJAN, ADVOCATES JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 2 PAGE 2 OF 17 DATE OF HEARING : 19 .09 .2013 DATE OF PRONOUNCEMENT : 2 4 . 10 .2013 O R D E R PER R. C. SHARMA, A.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND A SSESSEE AGAINST THE ORDER OF CIT(A) DATED 27.3.2012 FOR THE ASSESSMENT YEAR 2008-09 IN THE MATTER OF ORDER PASSED U/S 143( 3) OF THE INCOME-TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - (1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 1,40,76,682/- MADE B Y THE ASSESSEE OFFICER BY WAY OF DISALLOWANCE UNDER SECTI ON. 36(1) OF THE INCOME-TAX ACT, 1961. (2) THAT THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONSIDERING THE AMOUNTS TRANSFERRED TO RESERVE AT R S. 14,68,17,216/- AGAINST THE PROVISIONS OF RS. 1,40,76,682/- AS MORE THAN TWICE OF THE AMOUNT OF P AID UP SHARE CAPITAL, WHEREAS THE APPELLANT FULFILLED T HE JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 3 PAGE 3 OF 17 CONDITIONS AS LAID DOWN IN SECTION 36(1)(VIII) ENTI TLING FOR DEDUCTION IN ACCORDANCE WITH THE SAID PROVISIONS. (3) THAT, IN ANY CASE, THE DISALLOWANCES OF THE PROVISIONS AS PER THE DIRECTIVES OF THE APEX BANK A ND RBI GUIDELINES IS UNJUSTIFIED AND UNWARRANTED ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE. 3. FOLLOWING GROUNDS TAKEN BY THE REVENUE :- 1. IN DELETING THE ADDITION OF RS. 1,80,00,000/- ON ACCOUNT OF DOUBTFUL DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. 2. IN DELETING THE ADDITION OF RS. 49,15,674/- ON A CCOUNT OF ADDITION MADE U/S 40(A)(IA) OF THE I. T. ACT. 4. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COOPERATIVE BANK HAVING ITS HEAD OFFICE AT PANNA, ENGAGED IN RU RAL BANKING BUSINESS INCLUDING ADVANCING AGRICULTURAL LOANS THR OUGH ITS TEN BRANCHES LOCATED AT DIFFERENT TAHSIL AND OTHER PLAC ES OF PANNA DISTRICT. THE ASSESSING OFFICER COMPLETED THE ASSES SMENT BY MAKING VARIOUS ADDITIONS AND DISALLOWANCES. CLAIM O F DEDUCTION JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 4 PAGE 4 OF 17 U/S 80P WAS DECLINED ON THE GROUND THAT THE ASSESSE E IS A BANKING INSTITUTION AND NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY IN VIEW OF THE AMENDMENT BROUGHT IN BY FINANCE ACT, 2006. IN THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEE BANK HAS DEBITED A SUM OF RS. 1,8 0,00,000/- TOWARDS PROVISION FOR OVERDUE INTEREST, WHICH COULD NOT BE SUBSTANTIATED AND ESTABLISHED AND IT REPRESENTED DO UBTFUL DEBT S WHEN WRITTEN OFF IN THE BOOKS AND, THUS, INADMISSIB LE EXPENDITURE U/S 36(1)(VII)/36(II) OF THE INCOME-TAX ACT, 1961,. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED ASSE SSEES CLAIM OF DEDUCTION AFTER HAVING FOLLOWING OBSERVATI ONS :- DECISION I CONSIDERED THE SUBMISSION MADE BY THE LD. AR CAREFULLY, THE RELEVANT PROVISIONS AS IT STANDS W.E.F 01-04-2007 ARE AS UNDER:- SECTION 36 (VIIA) IN RESPECT OF ANY PROVISION FOR B AD AND DOUBTFUL DEBTS MADE BY A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCHEDULED BANK [OR A CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 5 PAGE 5 OF 17 CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK] AND AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT.] OF THE TOTA L INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND AN AMOUNT NOT EXCEEDING [ TEN PERCENT] OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER;. THE ENTITLEMENTS OF DEDUCTION U/S 80P(II) (A)(I) HAS BEEN WITHDRAWN IN RESPECT OF CO-OPERATIVE BANKS W.E.F. 01-04.2007. SINCE THE PROFIT OF THE CO - OPERATIVE BANKS HAVE BECOME TAXABLE AFTER WITHDRAWAL OF 80P DEDUCTION, THE FINANCE ACT, 2007 HAS AMENDED SUBMISSION-CLUES (A) OF CLAUSE (VIIA) OF SUB-SECTION (1) OF SECTION 36 TO ALLOW DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS TO A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 6 PAGE 6 OF 17 THIS IS AS PER PARA 20.3 OF CIRCULAR NO. 3 DATED 12 - 03-2008 OF THE BOARD. THEREFORE, IN VIEW OF THE AMENDMENT BROUGHT ABOUT THE SECTION 36(1) (VIIA) BY FINANCE ACT, 2006 W.E.F. 01-04-2007 READ WITH THE CAPTIONED CIRCULAR, THE APPELLANT IS ENTITLED F OR DEDUCTION NOT EXCEEDING SEVEN AND ONE HALF PERCENT OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A. THEREFORE, CLAIM OF THE APPELLANT TO THIS EXTENT IS FOUND TO BE JUSTIFIED AND THE A.O. I S DIRECTED TO WORK OUT THE DEDUCTION ADMISSIBLE TO THE APPELLANT UNDER CLAUSE (VIIA) OF SUB-SECTION (1 ) OF SECTION 36 NOT EXCEEDING SEVEN AND ONE-HALF PERCENT OF THE TOTAL INCOME AND THAT MAY BE ARRIVED AT AFTER GIVING EFFECT TO THIS APPELLATE ORDER BEFO RE MAKING ANY DEDUCTION UNDER THIS CLAUSE. (B) THE LD. AR SUBMITTED THAT LOANS AND ADVANCES OF CURRENT YEAR AS PER THE STATEMENT OF ACCOUNT AS ON 31-03-2008 ARE AT RS. 1880.28 LAKHS AS AGAINST RS. 1989.94 LAKHS AS ON 31-03- JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 7 PAGE 7 OF 17 2007. THE APPELLANT SUBMITS THAT THE AGGREGATE OF LOANS AND ADVANCES AS ON 31-03-2008 IS AT ERRS. 6907.49 LAKH AS AGAINST WHICH THE PROVISION FOR DOUBTFUL ASSETS WERE ACTUALLY REQUIRED TO BE MADE AT RS. 364.44 LAKHS. SIMILAR LOANS AND ADVANCES OUTSTANDING AS ON 31-03-2007 WERE AT RS. 5723.59 LAKHS AND THE PROVISION FOR DOUBTFUL ASSETS WERE REQUIRED TO BE MADE AT RS. 379.83 LAKHS. IT IS CONTENDED THAT EVEN IF IT IS TAKEN THA T THE DIFFERENCE (6907.44-5723.59-1183.90) BETWEEN THE LOANS AND ADVANCES OF 31.03.2007 AND 31.03.2008 WHICH COMES TO RS. 1183.90 LAKHS IS THE AGGREGATE AVERAGE OF THE LOANS AND ADVANCES, THEN THE APPELLANT BANK IS ENTITLED FOR ADDITIONAL 10% DEDUCTION AT RS. 118.39 LAKHS. THUS, THE APPELLANT BANK WOULD BE ENTITLED FOR DEDUCTION U/S 36(1)(VIIA) AT RS. 1,49,60807/-( RS. 1,49,60,807/- (RS. 31,12,807+ 1,18,39,000). I CONSIDERED THE SUBMISSION MADE BY THE LD. AR CAREFULLY. THE APPELLANT BANK HAS HEAD OFFICE AT PANNA, BESIDES BRANCHES AT AJAYGARH, DEVENDRA JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 8 PAGE 8 OF 17 NAGAR, GUNAUR, AMANGANJ, PAWAL, SHAHNAGAR, SIMNARIA, RAIPUS. THE LD. AR HAS CLAIMED ADMISSIBLE DEDUCTION ON THIS COUNT AT 10% OF AVERAGE ADVANCE OF RS. 1183.90 LAKHS I.E. RS. 118.39 LAKHS. AS PER THE PROVISION LAID DOWN IN SECTION 36(1)(VIIA), AN AMOUNT NOT EXCEEDING 10% OF AVERAGE AGGREGATE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE MANNER PRESCRIBED IN RULE 6ABA IS ADMISSIBLE TO THE APPELLANT BANK. THE DEFINITION OF THE RURAL BRANCH AS WELL AS A CO-OPERATIVE BANK HAS BEEN GIVEN IN EXPLANATION TO SECTION 36(1)(VIIA) AND EXPLANATION TO SUBMISSION-SECTION (4) OF SECTION 80P. THE A.O. IS DIRECTED TO ALLOW 10% OF THE AGGREGATE AVERAGE ADVANCE MADE BY THE BRANCHES AFTER PROPER VERIFICATION OF RECORDS AS WELL AS VERIFICATION OF THE BRANCHES WITH RESPECT TO WHETHER SUCH BRANCHES ARE COMING UNDER THE PURVIEW OF THE DEFINITION OF THE RURAL BRANCH OR NOT. THE GROUND OF APPEAL IS PARTLY ALLOWED SUBJECT TO VERIFICATION BY THE A.O. AS DISCUSSED ABOVE. JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 9 PAGE 9 OF 17 6. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESS EE BEING A CO-OPERATIVE BANK CLAIMED DEDUCTION OF RS. 1,80,00, 000/- ON ACCOUNT OF PROVISION OF OVERDUE INTEREST. IT WAS IN THE NATURE OF PROVISION FOR BAD DEBTS, WHICH IS ALLOWABLE TO ASSE SSEE U/S 36(1)(VII) READ WITH SECTION 36(2). AFTER RECORDING DETAILED FINDING AT PAGES 3 & 4 OF HIS APPELLATE ORDER, THE LD. CIT( A) HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION AT 10 % OF AVERA GE ADVANCES AS PER PROVISIONS OF SECTION 36(1)(VIIA) GIVEN BY RURA L BRANCHES OF ASSESSEE BANK. THE LD. CIT(A) ALSO FOUND THAT SUCH RURAL BRANCHES HAVE BEEN DEFINED IN EXPLANATION 2 TO SECT ION 36(1)(VII)(A), ACCORDINGLY, HE DIRECTED THE ASSESSI NG OFFICER TO ALLOW 10 % OF AGGREGATE AVERAGE ADVANCE MADE BY RUR AL BRANCHES AFTER PROPER VERIFICATION OF RECORDS AS WELL AS VER IFICATION OF BRANCHES WITH RESPECT TO WHETHER SUCH BRANCHES ARE COMING UNDER THE PURVIEW OF DEFINITION OF RURAL BRANCHES OR NOT. WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION SO ISSUED B Y CIT(A). HOWEVER, BEFORE ALLOWING CLAIM OF DEDUCTION, ASSESS ING OFFICER IS DIRECTED TO VERIFY THAT AMOUNT OF OVERDUE INTEREST OF RS. 1,80,00,000/- HAVE ALREADY BEEN ACCOUNTED FOR AS IN COME OF JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 10 PAGE 10 OF 17 ASSESSEE IN THIS YEAR OR ANY EARLIER YEARS. IF ASSE SSEE HAD NOT CREDITED THIS AMOUNT TO PROFIT AND LOSS ACCOUNT IN ANY OF THE EARLIER YEARS, NO DEDUCTION IS TO BE GRANTED. WE DI RECT ACCORDINGLY. 7. THE ASSESSING OFFICER HAS ALSO MADE DISALLOWANCE OF RS. 49,15,674/- U/S 40(A)(IA) ON THE GROUND THAT THE AS SESSEE HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT FORM NO.15- G/15-H OBTAINED FROM CUSTOMERS WERE NOT FURNISHED TO COMPE TENT AUTHORITIES I.E. CIT(A) AS PER PROVISIONS OF SECTIO N 194A READ WITH RULE 29C. ACCORDINGLY, THE ASSESSING OFFICER MADE A D HOC DISALLOWANCE OF 20% INTEREST OF RS. 2,45,78,372/- O N FIXED DEPOSIT DEBITED TO PROFIT AND LOSS ACCOUNT. 8. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATION S :- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE A.O. HAS DISALLOWED 20% OF INTEREST ON FDR ON ESTIMATE BASIS BY INVOKING PROVISION U/S 40(A)(IA) OF THE ACT BASICAL LY FOR THE FAILURE OF THE APPELLANT BANK TO PRODUCE DETAIL S OF INTEREST PAID TO CUSTOMERS WHERE THE PROVISIONS OF DEDUCTION OF TAX AT SOURCE IS APPLICABLE. HOWEVER, THE JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 11 PAGE 11 OF 17 SUBMISSION MADE IN THE APPEAL IN RESPECT OF DISALLOWANCE MADE U/S 40(A)(IA) WAS REFERRED TO THE A.O. ALONGWITH FROM NO. 15G/15H OBTAINED FROM THE CUSTOMERS. THE A.O. VERIFIED THE SAME AND NOTICED T HAT THE INTEREST ON FDR IS RS. 1,03,08,032/- OUT OF THE TOTAL INTEREST OF RS. 2,45,78,372/- DEBITED TO THE P&L A/ C. THE BALANCE AMOUNT OF INTEREST WAS PAID IN RESPECT OF SAVINGS BANKS ACCOUNTS OF THE 10 BRANCHES OF THE BA NK. ON FURTHER VERIFICATION OF INTEREST ON FDR, HE NOTI CED THAT INTEREST ON FDR EACH PAYMENT BEING MORE THAN R S. 10,000/- IS RS. 3,93,906/- ON WHICH THE APPELLANT W AS REQUIRED TO DEDUCT TAX AT SOURCE AS PER PROVISION U /S 194A OF THE ACT. FURTHER, HE NOTICED THAT THE APPEL LANT BANK VIOLATED THE PROVISION OF RULE 29C WITH RESPEC T TO THE DECLARATIONS OBTAINED FROM CUSTOMERS IN FROM 15 G AND 15H BY NOT DELIVERING OR CAUSED TO BE DELIVERED THE SAME TO THE CHIEF COMMISSIONER OR COMMISSIONER ON O R BEFORE 7 TH DAY OF THE MONTH NEXT FOLLOWING THE MONTH IN WHICH THE DECLARATION WERE FURNISHED TO THE BANK. T HE OMISSION IS NEITHER A VENIAL NOR A TECHNICAL BREACH OF LAW AS PLEADED BY THE LD. AR. HE WAS REQUIRED TO JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 12 PAGE 12 OF 17 COMMENT ON REMAND REPORT OF THE A.O. THE FINDING OF THE A.O. HAS, HOWEVER, NOT BEEN REFUND WITH COGENT EVIDENCE BY THE LD. AR. ON THE OTHER HAND, ADDITION MADE BY THE A.O. ON THIS COUNT ON ESTIMATE BASIS IS NOT MAINTAINABLE. ACCORDINGLY, RELYING ON THE REPORT OF THE A.O., THE ADDITION ON THIS ACCOUNT IS RESTRICTED TO RS.3,93,906/-, BUT NOT TO RS.2,15,154/- AS PLEADED BY THE LD. AR IN HIS ALTERNATIVE CONTENTION DISCUSSED ABOVE FOR CLEAR VIOLATION OF PROVISION U/S 194A, SECTION 40(A)(IA) OF THE I.T. ACT 1961 AND RULE 29C OF THE I.T. RULES 1962. THE APPELLANT GETS A RELIEF OF RS.45,21,768/-. 9. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECORDS PERUSED. THE ASSESSING OFFICER HAS MADE DISALLOWANC E U/S 40(A)(IA) ON THE PLEA THAT THE ASSESSEE BANK HAS NO T DEDUCTED TAX ON THE INTEREST PAID ON FDRS. THE LD. CIT(A) FORWAR DED THE ADDITIONAL EVIDENCE FILED BEFORE HIM IN THE FORM OF FORM NO.15G/15H OBTAINED FROM THE CUSTOMERS TO THE ASSES SING OFFICER FOR HIS VERIFICATION. THE LD. CIT(A) FOUND THAT INTEREST ON FDR WAS RS. 1,03,08,032/- OUT OF TOTAL INTEREST OF RS. JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 13 PAGE 13 OF 17 2,45,78,372/-. IT WAS FURTHER FOUND THAT INTEREST O N FDR ON PAYMENT BEING MORE THAN RS. 10,000/- WAS RS. 3,93,9 06/- ON WHICH ASSESSEE BANK WAS REQUIRED TO DEDUCT TAX AT S OURCE AS PER PROVISIONS OF SECTION 194A. ACCORDINGLY, HE RESTRIC TED DISALLOWANCE TO THE EXTENT OF RS. 3,93,906/- OUT OF DISALLOWANCE OF RS. 49,15,674/- MADE BY THE ASSESSING OFFICER. D ETAILED FINDING RECORDED BY THE LD.CIT(A) AT PAGES 5 & 6 HA S NOT BEEN CONTROVERTED BY BRINGING ANY POSITIVE MATERIAL ON R ECORD. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) FOR DELETING DISALLOWANCE OF RS. 45,21,768/-. 10. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSION. CLAUSE (VIII) OF SUB- SECTION (1) OF SECTION 36 AS SUBSTITUTED W.E.F. 01- 04- 2008, READS AS UNDER: - '(VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED A ND MAINTAINED BY A SPECIFIED ENTITY, AN AMOUNT NOT EXCEEDING TWENTY PERCENT OF THE PROFITS DERIVED FRO M ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' (BEFORE MAKING ANY JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 14 PAGE 14 OF 17 DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUCH RESERV E ACCOUNT: PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS CARRIED TO SUCH RESERVE ACCOUNT FROM TIME TO TIME E XCEEDS TWICE THE AMOUNT OF THE PAID UP SHARE CAPITAL AND O F THE GENERAL RESERVES OF THE SPECIFIED ENTITY, NO ALLOWA NCE UNDER THIS CAUSE SHALL BE MADE IN RESPECT OF SUCH EXCESS. EXPLANATION. - IN THIS CLAUSE, (A) 'SPECIFIED ENTITY' MEANS,- _ I. A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT, 1956 (1 OF 1956); II. A FINANCIAL CORPORATION WHICH IS A PUBLIC SECTION COMPANY. III. A BANKING COMPANY; IV. A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK; V. A HOUSING FINANCE COMPANY; AND VI. ANY OTHER FINANCIAL CORPORATION INCLUDING A PU BLIC COMPANY; JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 15 PAGE 15 OF 17 (B) 'ELIGIBLE BUSINESS' MEANS,- I. IN RESPECT OF THE SPECIFIED ENTITY REFERRED TO IN SUB- CLAUSE (I) OR SUB-CLAUSE (II) OR SUB-CLAUSE (III) OR SUB-CLAUSE (IV) OF CLAU SE (A), THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR - (A) INDUSTRIAL OR AGRICULTURAL DEVELOPMENT; (B) DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDI A; OR DEVELOPMENT OF HOUSING IN INDIA;' (C) DEVELOPMENT OF HOUSING IN INDIA; THE SUBSTITUTED 'CLAUSE (VIII) IS APPLICABLE FOR AN D FROM ASSESSMENT YEAR 2008-09. FROM A PLAIN READING OF TH E CLAUSE AND THE PROVISO AND EXPLANATION THERE UNDER, IT IS CLEAR THAT THE ASSESSEE BEING A CO-OPERATIVE BANK O THER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K IS A 'SPECIFIED ENTITY' AND THE BANK BEING ENGAGED IN LONG TERM FINANCE FOR AGRICULTURAL DEVELOPMENT AS WELL, IT IS ENGAGED IN 'ELIGIBLE BUSINESS'. HOWEVER, FROM THE FINANCIAL STATEMENT OF THE YEAR UNDER CONSIDERATION , IT IS SEEN THAT THE AGGREGATE OF THE AMOUNTS CARRIED TO T HE RESERVE ACCOUNT FROM TIME TO TIME HAD A CLOSING BAL ANCE OF RS. 11,54,40,264/- IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. THE CLOSING BALANCE IS RS. 14,68,17,216/- BY THE END OF THE YEAR UNDER JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 16 PAGE 16 OF 17 CONSIDERATION AGAINST PROVISION OF RS. 1,40,76,682/ - AS PER THE DIRECTION OF THE APEX BANK AND AS PER MANAGERIAL CONTRIBUTION ACT. THAT APART, THE PAID U P SHARE CAPITAL IS RS. 5,21,53,103/- AGAINST SUCH RES ERVE OF RS. 14,68,17,216/-. THE RESERVE ACCOUNT EXCEEDS TWICE THE AMOUNT OF PAID UP SHARE CAPITAL AND HENCE , NO ALLOWANCE UNDER THIS CLAUSE SHALL BE MADE AS PER PROVISO TO THE SECTION AS DISCUSSED ABOVE. THE GROU ND OF APPEAL IS DISMISSED. 11. WITH REGARD TO ADDITION OF RS. 1,40,76,682/- IN RES PECT OF VARIOUS PROVISIONS MADE IN THE BOOKS OF ACCOUNTS, W E FOUND THAT THESE PROVISIONS WERE NOT MADE AS PER CLAUSE (VIII) OF SUB SECTION (1) OF SECTION 36 AS SUBSTITUTED W.E.F. 1.4.2008. A FTER CONSIDERING THE RELEVANT PROVISIONS OF LAW AS APPLICABLE FOR TH E ASSESSMENT YEAR 2008-09 UNDER CONSIDERATION, THE LD. CIT(A) FO UND THAT THE ASSESSEE BEING A COOPERATIVE BANK RATHER THAN PRIMA RY COOPERATIVE CREDIT SOCIETY OR A PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK IS SPECIFIED ENTITY AN D THE BANK BEING ENGAGED IN LONG TERM FINANCES FOR AGRICULTURA L DEVELOPMENT AS WELL, IT IS ENGAGED IN ELIGIBLE BUSINESS. AFTER CONSIDERING THE AMOUNT CARRIED TO THE RESERVE ACCOUNT FROM TIME TO TIME IN EARLIER YEARS, THE LD. CIT(A) FOUND THAT THE ASSESS EE HAD PAID UP SHARE CAPITAL OF RS. 5,21,53,103/- AND RESERVE OF R S. JILA SAHKARI KENDRIYA BANK MARYADIT, PANNA. I.T.A.NOS. 68, &70/ JAB/2012 AND C.O. NO.09/JAB/201 2 17 PAGE 17 OF 17 14,68,17,216/- THE RESERVE ACCOUNT EXCEEDS TWICE TH E AMOUNT OF PAID UP SHARE CAPITAL. ACCORDINGLY, THE ASSESSEE WA S HELD TO BE NOT ELIGIBLE FOR ANY AMOUNT UNDER THIS CLAUSE AS PE R PROVISO TO SECTION 36(1)(VIII). ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE FOR PROVISIONS OF RS. 1,40,76,682/-. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 12. THE ASSESSING OFFICER HAS ALSO DISALLOWED AND MADE AN ADDITION OF RS. 1,40,76,682/- BY WAY OF DISALLOWANC E OF VARIOUS PROVISIONS ON THE PLEA THAT INSPITE OF SPECIFIC OPP ORTUNITY, THE ASSESSEE COULD NOT PRODUCE REQUISITE EVIDENCE TO PR OVE THAT PROVISIONS WERE, IN FACT, ALLOWABLE AS BUSINESS EXP ENDITURE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS A LLOWED IN PART FOR STATISTICAL PURPOSES WHEREAS APPEAL FILED BY ASSESSEE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISM ISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH OCTOBER, 2013. CPU* 14232410