M/s. Sri. Visweswaraya Co-op Bank Ltd, Bangalore V. ITO, Bangalore

ITA 1122/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60723 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Keywords: Bad and doubtful debts

Judgement Text

ITA.1122/BANG/2010 PA GE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI. GEORGE GEORGE K. JUDICIAL MEMBER I.T.A NO.1122/BANG/2010 (ASSESSMENT YEAR : 2007-08) M/S. SIR M. VISWESWARAYA COOPERATIVE BANK LTD., NO.109, SHANKARMUTT ROAD, BANGALORE 560 004 .. APPELLANT PAN : AAAAS3586N V. JOINT COMMISSIONER OF INCOME-TAX, RANGE-3, BANGALORE .. RESPONDENT APPELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : SHRI. B. SARAVANAN, JCIT DATE OF HEARING : 01.05.2012 DATE OF PRONOUNCEMENT : .05.2012 O R D E R PER N. BARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE, M/S. SIR M. VISWESWARAYA CO-OP BANK LTD., BANGALORE, FOR THE AS SESSMENT YEAR 2007-08 AGAINST THE APPELLATE ORDER OF THE COMMISSI ONER OF INCOME- TAX (APPEALS)-I, BANGALORE, DATED.28.03.2010. 02. THE ASSESSEE HAS BROUGHT THREE ISSUES BEFORE US FOR ADJUDICATION, VIZ., (I) ADDITION OF RS.26,40,237/- BEING AMORTIZA TION OF PREMIUM ON ITA.1122/BANG/2010 PA GE - 2 INVESTMENT IN GOVERNMENT SECURITIES ; (II) DISALLOW ANCE OF CLAIM OF BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.6,52,319/- ; AND (III) CONFIRMATION OF INTEREST U/S.234B AND 234C OF THE A CT. 03. LET US FIRST TAKE UP THE ISSUE RELATING TO AMOR TIZATION OF PREMIUM ON INVESTMENT IN GOVERNMENT SECURITIES. RELEVANT G ROUNDS READ AS UNDER : ' I) THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HA VE APPRECIATED THAT THE APPELLANT HAS TO INVEST SURPLU S FUND IN GOVERNMENT SECURITIES AS PER RBI GUIDELINES AND THE PREMIUM PAID WHILE INVESTING IN GOVERNMENT SECURITI ES THAT ARE BOUGHT IN OPEN MARKET WOULD HAVE TO BE AMORTIZE D TILL THE MATURITY DATE OF THE SECURITY AND THUS THE PREMIUM WAS WRITTEN OFF WAS LIABLE TO BE ALLOWED AS DEPRECIATIO N OF VALUE OF SECURITIES ; II) THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPR ECIATED THAT THE CLASSIFICATION OF SECURITIES FOR RBI PURPO SES WOULD NOT TAKE AWAY THE BENEFIT WHICH THE APPELLANT WAS E NTITLED TO AND HE OUGHT TO HAVE APPRECIATED THAT THE CASE LAW REFERRED WERE DISTINGUISHABLE AND ACCORDINGLY HE OUGHT TO HA VE ALLOWED THE DEDUCTION AS CLAIMED IN FULL.' 04. THE BRIEF FACTS PERTAINING TO THIS ISSUE ARE TH AT WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE IT ACT, FOR THE ASSESS MENT YEAR 2007-08, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.26,40,237/- UNDER AMORTIZATION OF PREMIUM ON INV ESTMENTS AND THE ASSESSEE HAD NO EXPLANATION FOR THE CLAIM. HENCE, HE DISALLOWED THE ITA.1122/BANG/2010 PA GE - 3 SAME. WHILE DISALLOWING THE SAME, THE ASSESSING OF FICER FOLLOWED THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF TN POWER FINANCE AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD., V. JCIT (2006) 280 ITR 491. AGGRIEVED, THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 05. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS MADE BEFORE HIM AND FOL LOWING THE DECISION OF THE MADRAS HIGH COURT CITED SUPRA, CAME TO THE CONCLUSION THAT THE HON'BLE MADRAS HIGH COURT HAS THAT MERELY BECAUSE THE RBI HAD DIRECTED THE ASSESSEE TO PROVIDE FOR NON-PERFOR MING ASSETS, THAT DIRECTION CANNOT OVERRIDE THE MANDATORY PROVISIONS OF THE INCOME-TAX ACT CONTAINED IN SECTION 36(1)(VIIA) WHICH STIPULAT E FOR DEDUCTION NOT EXCEEDING 5 PER CENT OF THE TOTAL INCOME ONLY IN RE SPECT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS WHICH ARE PRED OMINANTLY REVENUE IN NATURE OR TRADE RELATED AND NOT FOR PROVISION FO R NON-PERFORMING ASSETS WHICH ARE OF PREDOMINANTLY CAPITAL NATURE. THUS, HE WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTIO N OF AMORTIZATION OF PREMIUM ON INVESTMENTS U/S.36(1)(VII). AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US WITH THIS ISSUE. 06. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD FAILED TO SEE THE REASON ITA.1122/BANG/2010 PA GE - 4 THAT A ISSUE SIMILAR TO THAT OF THE PRESENT ONE HAD BEEN ALLOWED BY VARIOUS BENCHES OF THE HON'BLE TRIBUNALS, NAMELY : CATHOLIC SYRIAN BANK LTD., V. ACIT COCHIN (2010) 38 SOT 553 ; KHANAPUR COOP.BANK LTD., V. ITO IN ITA.141/PNJ/2011 (PANAJI) ; CORPORATION BANK V. ACIT, M'LORE IN ITA.112/BANG/20 08 (BANG) THE LEARNED COUNSEL ALSO PLACED RELIANCE ON BOARD'S INSTRUCTIONS NO.17 OF 2008(VII) AND PLEADED THAT THE CLAIM OF TH E ASSESSEE BE ALLOWED AS THE ASSESSEE HAD THE POWERS TO DEBIT IN ITS P&L ACCOUNT A SUM OF RS.29,02 LAKHS OF AMORTIZATION OF PREMIUM. 07. PER CONTRA, THE LEARNED DR WAS UNABLE TO CONTRO VERT TO THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . 08. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RELEVANT FACTS AND MATERIALS ON RECORD. WE HAV E ALSO CONSIDERED THE FINDINGS OF THE VARIOUS BENCHES OF THE TRIBUNAL , AS UNDER : (I) CATHOLIC SYRIAN BANK LTD V. ACIT (2010) 38 SO T 553 (COCH) : AN IDENTICAL ISSUE TO THAT OF THE SUBJECT MATTER UN DER CONSIDERATION HAD ARISEN BEFORE THE COCHIN BENCH. AFTER ANALYZIN G THE ISSUE IN DEPTH, THE BENCH HAS OBSERVED THAT WITH REGARD TO A MORTIZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES, IT WA S CLARIFIED THAT THIS WAS MADE AS PER THE PRUDENTIAL NORMS OF THE RB I. FOLLOWING THE TRIBUNAL DECISION IN THE ASSESSEE'S OWN CASE AND CO NSIDERING THAT THE ITA.1122/BANG/2010 PA GE - 5 ASSESSEE BANK IS FOLLOWING CONSISTENT AND REGULAR M ETHOD OF ACCOUNTING SYSTEM, THERE IS NO JUSTIFICATION IN INT ERFERING WITH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) O N THIS ISSUE OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. UNITED COMMERCIAL BANK V. CIT (1999) 156 CTR (SC) 380 ; ( 1999) 240 ITR 355 (SC) AND SOUTH INDIAN BANK LTD., (ITA NO.126/CO CH/2004, DATED.___ SEPT, 2005 FOLLOWED.' (II) THE KHANAPUR CO-OP BANK LTD V. ITO ITA NO.14 1/PNJ/2011, DATED.8.9.2011 : THE HON'BLE BENCH OF PANAJI TRIBUNAL HAD RECORDED ITS FINDINGS THAT '6. LIKEWISE, THE PREMIUM AMORTIZED AT RS.1,78 ,098/- IS CLAIMED TO BE IN RESPECT OF SECURITIES HELD UNDER THE CATEG ORY 'HELD TO MATURITY'. THE ASSESSING OFFICER HAS TAKEN THEM AS LONG TERM I NVESTMENTS. IN OTHER WORDS, HE HAS ACCEPTED THE ASSESSEE'S CLAIM T HAT THE SECURITIES ARE 'HELD TO MATURITY'. THAT BEING SO AND HAVING R EGARD TO THE CBDT INSTRUCTION NO.17 OF 2008 DATED.26.11.2008 AS REPRO DUCED HEREIN ABOVE, THE PREMIUM PAID ON SUCH GOVERNMENT SECURIT IES IS REQUIRED TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY .' (III) IN THE CASE OF CORPORATION BANK V. ACIT, M'LO RE IN ITA.112/BANG/2008 (BANG), FOR THE ASSESSMENT YEAR 2 004-05, THE EARLIER BENCH HAD ALSO HELD A SIMILAR VIEW. ITA.1122/BANG/2010 PA GE - 6 IN THE LIGHT OF THE ABOVE DISCUSSION AND THE CASE L AWS DISCUSSED SUPRA, TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND M ATERIALS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CL AIM THIS DEDUCTION AND HENCE WE ALLOW THE GROUNDS OF THE ASSESSEE RELA TING TO THIS ISSUE. 09. NOW TURNING TO THE SECOND ISSUE RELATING TO DIS ALLOWANCE OF THE CLAIM OF BAD DEBT, THE RELEVANT GROUND READS AS UND ER : 'THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) O UGHT TO HAVE APPRECIATED THAT THE PROVISION FOR BAD AND DOU BTFUL DEBTS WAS ALLOWABLE AND OUGHT NOT TO HAVE MADE ANY DISALL OWANCE MUCH LESS THE AMOUNT OF RS.6,52,319/-.' 10. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED EXCESS AMOUNT OF RS.6,52,319/ (DIFFERENCE OF AMOUNT PAID AS PER P&L ACCOUNT OF RS .36,00,000 DEDUCTIONS CLAIMED UNDER PROVISION FOR BAD AND DOUB TFUL DEBTS OF RS.42,52,319/-). HENCE, HE DISALLOWED RS.6,52,319/ - KEEPING IN VIEW OF THE DECISION IN THE CASE OF STATE BANK OF PATIAL A V. CIT (2005) 272 ITR 54 (P&H). AGGRIEVED THE ASSESSEE MOVED THE MA TTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 11. AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BEFORE HIM IN THE LIGHT OF SECTION 36(1)(VIIA) OF THE IT ACT, THE FIRST APPELLATE AUTHORITY WAS OF THE VIEW THAT THE DEDUCTION ALLOWABLE U/S.36(1)(VIIA) IS IN RESPECT OF PROVISIONS MADE. ACCORDING TO HIM, ITA.1122/BANG/2010 PA GE - 7 MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBTS EQ UAL TO THE AMOUNT MENTIONED IN THE SECTION IS A MUST FOR CLAIMING SUC H DEDUCTION. HE NOTICED THAT AN AMOUNT OF RS.36 LAKHS IS DEBITED TO THE P&L ACCOUNT UNDER THE HEAD 'PROVISION FOR BAD AND DOUBTFUL DEBT S' AND HOWEVER, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.42,52,319- WHILE COMPUTING THE TAXABLE INCOME. THUS, HE FOUND THAT IN THE BOO KS OF ACCOUNT, PROVISIONS WERE MADE ONLY FOR RS.36 LAKHS. HENCE, R ELYING ON THE DECISION OF THE P&H HIGH COURT CITED SUPRA, HE WAS OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN RESTRICTING THE PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.36 LAKHS AND DISALLOWED THE BALANCE OF RS.6,52,319/-. THUS THE ASSESSEE FAILED BEFORE THE FIRST APPELLATE AUTHORITY. AGGRIEVED, THIS ISSUE IS BROU GHT BEFORE US FOR ADJUDICATION WITH THE GROUND EXTRACTED ELSEWHERE IN THIS ORDER. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER, C ONCEDED THAT THIS ISSUE IS AGAINST THE ASSESSEE. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. AFTER CONSIDERING THE FACTS AND MATERIALS IN TH E LIGHT OF THE SUBMISSIONS MADE BEFORE US, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHO HAS ELABORATELY DISCUSSED AND FOLLOWED THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN DISMISSING THE CLAIM OF THE ASSESSEE. THU S, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. ITA.1122/BANG/2010 PA GE - 8 14. THE REMAINING ISSUE RELATES TO THE INTEREST U/S .234B AND 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN NATURE AND WE DI RECT THE ASSESSING OFFICER TO GIVE CONSEQUENTIAL EFFECT WHILE GIVING E FFECT TO OUR ORDER. 15. IN THE RESULT THE ASSESSEE'S APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.05.2012. SD/- SD/- (GEORGE GEORGE K) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT