THE BULDHANA DISTRICT CENTRAL COOP. BANK LTD, Buldhana V. D.C.I.T. Akola, Akola

ITA 127/NAG/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9658 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 15-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K B LOHIYA; SHAILESH AGRAWAL
• Keywords: Depreciation; Bad and doubtful debts; Unabsorbed depreciation
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SH. G.D.AGRAWAL, HONBLE PRESIDENT AND SH. MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.127 & 128/NAG/2015 (ASSESSMENT YEAR: 2010 -11) THE BULDHANA DISTRICT CENTRAL COOP. BANK LTD., SAHKAR BHAWAN, BHONDER CHOWK, BULDHANA PAN-AAAAT9375N VS DCIT, AKOLA, AYAKAR BHAVAN, ALSI PLOT SQUARE, AKOLA, AKOLA (APPELLANT) (RESPONDENT) ITA NO.135/NAG/2015 (ASSESSMENT YEAR: 2010-11) ACIT, AKOLA CIRCLE, AYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA VS THE BULDHANA DISTRICT CENTRAL COOP. BANK LTD., SAHKAR BHAWAN, BHONDER CHOWK, BULDHANA PAN-AAAAT9375N (APPELLANT) (RESPONDENT) APPELLANT BY SH. K.B.LOHIYA, ADV. & SH. SHAILESH AGRAWAL, CA RESPONDENT BY SH. GITESH KUMAR, SR. DR DATE OF HEARING 06.03.2018 DATE OF PRONOUNCEMENT 06.03.2018 O R D E R PER BENCH ITA NO.127/NAG/2015 THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER NO.CIT(A)-I/311/2013-14 OF LD.CIT(A)-1, NAGPUR DATE D 27.01.2015 REJECTING THE CLAIM OF DEDUCTION IN RESPECT OF REVE RSAL OF NPA INTEREST CREDITED TO THE P&L A/C. FOR THIS, THE ASSESSEE HA S RAISED THE FOLLOWING GROUND:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN REJECTING THE CLAIM OF DEDUCTION IN THE COMPUTATION OF INCOME IN RESPECT OF REVERSAL OF NPA INTEREST CREDITED TO PRO FIT & LOSS ACCOUNT. ITA NO.127, 128 & 135/NAG/2015 2 | PA GE 2. BRIEFLY STATED FACTS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS MADE CLAIM OF DEDUCTION OF RS.10.15,60,904/- BECAUSE THE SAME HAS BEEN REVERSE D FOR THE REASON THAT GOVERNMENT OF INDIA AND GOVERNMENT OF MAHARASHTRA H AS NOT GIVEN THE AMOUNT TO THE ASSESSEE. BUT ACCORDING TO THE AO, T HE REVERSAL OF THIS INCOME HAS BEEN SUBSEQUENTLY MADE IN FY 2010-11 AND IN VIEW OF THIS, THERE IS NO NEED TO CLAIM THIS DEDUCTION IN THE REL EVANT FY 2009-10 RELEVANT TO THIS A.Y. 2010-11. ACCORDING TO AO, TH IS WILL LEAD TO DOUBLE DEDUCTION. ACCORDINGLY, HE DISALLOWED THE CLAIM OF DEDUCTION. 3. AGGRIEVED THE ASSESSEE PREFERRED THE APPEAL BEFO RE LD.CIT(A). LD.CIT(A) REJECTED THE CLAIM OF DEDUCTION IN THE CO MPUTATION OF INCOME IN RESPECT OF REVERSAL OF NPA INTEREST CREDITED TO THE P&L A/C. AGGRIEVED, NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNA L. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT REVERSAL OF DOUBTFUL CLAIM MADE WITH THE GOVERNMENT FOR SUBVENTION OF INTERESTS, TH E ASSESSEE HAS CREDITED A SUM OF RS.17,16,80,205/- IN THE P&L A/C ON ESTIMA TE BASIS. THE ASSESSEE ENCLOSED THE DETAILS OF THE SAME IN ITS PA PER BOOK AT PAGE 26, WHICH ARE EXTRACTED HEREUNDER FOR READY REFERENCE:- SR. PARTICULARS AMOUNT RS. 1. KHARIF SEASON 2009-10 INTEREST @1.75% SUBVENTION RECEIVABLE UPTO 31.03.2010 14592900/- 2. KHARIF SEASON 2009-10 INTEREST @ 3% SUBVENTION RECEIVABLE UPTO 31.03.2010 25016401/- 3. KHARIF SEASON 2009-10 - 4% PUNJABRAO DESHMUKH SCHEME & INTEREST SUBVENTION UP TO 31.03.2010 ON RS.60.00 CRORES 24000000/- 4. CENTRAL GOVERNMENT AGRICULTURAL LOAN WAIVER & LO AN REPAYMENT RELIEF SCHEME 2008, AMOUNT RECEIVABLE FRO M CENTRAL GOVERNMENT RS.5849.08 LACS AND INTEREST RECEIVABLE FOR THE PERIOD 01.11.2008 TO 31.03.2010 98070904/- ITA NO.127, 128 & 135/NAG/2015 3 | PA GE FOR 17 MONTHS @12% 5. RECEIVABLE FROM GOVERNMENT OF MAHARASHT.7ESPECT OF KHARIF SEASON 2009-10 INTEREST SUBVENTION @1% ON TH E LOAN 10000000/- TOTAL 171680205/- 5. THESE CLAIMS ARE ON ACCOUNT OF SUBVENTION OF INT ERESTS FOR KHARIF SEASON FOR THE YEAR 2009-10 AND PROBABLY WAIVER OF LOAN AND PAYMENT SCHEME, 2008. BEFORE US, IT WAS EXPLAINED BY THE A SSESSEE THAT OUT OF THE TOTAL CREDIT OF RS.17,16,80,205/-, THE ASSESSEE CLA IMED DEDUCTION OF RS.10,15,60,904/- BECAUSE THE SAID AMOUNT HAS BEEN INCLUDED IN THE INCOME WRONGLY BY THE ASSESSEE AND THIS CAME TO HI S KNOWLEDGE WHEN THIS WAS POINTED OUT BY THE STATUTORY AUDITOR IN HIS AUD IT REPORT AND, THEREFORE, THE SAME WAS CLAIMED IN THE COMPUTATION OF INCOME SUBMITTED ALONGWITH THE RETURN OF INCOME. LD. COUNSEL FOR TH E ASSESSEE DREW OUR ATTENTION TO PAGE 34 OF THE ASSESSEES PAPER BOOK W HEREIN AUDITORS REPORT DATED 06.09.2010, THE ESTIMATE IS GIVEN AS UNDER:- 1. CONTINGENT BOOKING OF INTEREST RECEIVABLE ON ESTIMATED BASIS: IN THE CASE OF INTEREST EARNED ON ADVANCES AND DIS COUNT THE BANK HAS INCLUDED RS. 1716.80 LAKH INTEREST UNDER THE HE AD 'GOVT AGRO RURAL DEBT RELIEF'. THIS AMOUNT INCLUDES INTEREST S UBVENTION DUE FROM STATE ALSO. AS PER BANK, IT HAS RECEIVED AMOUNT OF RS. 443.81 LAKH BEFORE 31/03/2011 AND NOW BALANCE AMOUNT OF RS. 141 1.66 LAKHS PERTAINS TO THE AMOUNT OF INTEREST, WHICH HAS BEEN BOOKED BY THEM ON ESTIMATED BASIS TOWARDS AMOUNT OF AGRI DEBT RELIEF AND INTEREST SUBVENTION RECEIVED BY THEM LATE FROM CENTRAL AND S TATE GOVERNMENT, THE AMOUNT OF 1015.61 IS REVERSED AND DEBITED TO PR OFIT AND LOSS ACCOUNT OF THE AUDIT PERIOD. OUT OF TOTAL OUTSTANDING OF RS 1716.80 LAKHS AND BA LANCE AMOUNT OF RS 257.38 LAKHS STILL RECEIVABLE FROM STATE AND CEN TRAL GOVERNMENT, ITA NO.127, 128 & 135/NAG/2015 4 | PA GE OUT OF RS WHICH RS 14.87 LAKHS IS RECEIVED IN THE M ONTH OF JUNE - 2011. 6. IT WAS EXPLAINED THAT THE CREDIT WAS MADE ON TH E BASIS THAT THE ASSESSEE MAY RECEIVE THE SAME FROM STATE GOVERNMENT AND CENTRAL GOVERNMENT AS PER THE SCHEME OF 2008 BUT ACTUALLY A S AGAINST DEMAND OF RS.9,80,70,904/-, THE ASSESSEE RECEIVED ONLY A SUM OF RS.2,05,10,000/- FROM THE CENTRAL GOVERNMENT AND BALANCE DEMAND OF R S.7,75,60,904/- WAS REJECTED. SIMILARLY, A DEMAND OF 4% IN RESPECT OF PUNJABRAO DESHMUKH INTEREST WAIVER SUBVENTION SCHEME WAS ALSO REJECTED FOR AN AMOUNT OF RS.2.40 CRORES. THEREFORE, THE TOTAL COME S TO RS.10,15,60,904/- AND THIS AMOUNT WAS REVERSED AND DEBITED TO THE P&L A/C FOR THE RELEVANT A.Y. 2011-12 AND IN THE COMPUTATION OF INCOME, SAME HAS BEEN ADDED BECAUSE THE CLAIM HAS ALREADY BEEN MADE IN THE RETU RN OF INCOME FOR A.Y. 2010-11. IT WAS EXPLAINED THAT THIS CLAIM WAS MADE IN A.Y. 2010-11 BECAUSE IT WAS SUBSEQUENTLY POINTED OUT BY THE STAT UTORY AUDITOR IN HIS AUDIT REPORT. IT WAS EXPLAINED THAT THERE IS NO CL AIM OF DOUBLE DEDUCTION FOR THIS, HE SUBMITTED THE FOLLOWING DETAILS AS UND ER:- 1. KHARIF SEASON 2009-10-4% PUNJABRAO DESHMUKH SCHEME & INTEREST SUBVENTION UP TO 31.03.2010 ON RS.60.00 CR ORES THIS AMOUNT IS RECEIVABLE BY THE TALUKA SOCIETIES & THEREFORE REVERSED. 24000000 2. CENTRAL GOVERNMENT AGRICULTURAL LOAN WAIVER & LO AN REPAYMENT RELIEF SCHEME 2008, AMOUNT RECEIVABLE FRO M CENTRAL GOVERNMENT RS.5849.08 LACS FOR THE PERIOD 01.11.2008 TO 31.03.2010 FOR 17 MONTHS @12%. THIS I NTEREST IS RECEIVABLE AT THE TREASURY RATE AT RS.20510000/- (98070904 - 20510000) 77560904 TOTAL 101560904 ASSESSEE IS SUBMITTING HEREWITH DETAILS OF INTEREST OF RS.171680205/- FOR THE F.Y.2010-11. PARTICULARS AMOUNT RS. TOTAL AMOUNT OF INTEREST SHOWN AS RECEIVABLE 17,16, 80,205 AMOUNT RECEIVED ON 30.04.2010 1,00,00,000 AMOUNT RECEIVED ON 04.08.2010 39,90,000 AMOUNT RECEIVED ON 13.08.2010 1,65,20,000 ITA NO.127, 128 & 135/NAG/2015 5 | PA GE 22.11.2010 AMOUNT REVERSED AS ABOVE 10,15,60,904 AMOUNT RECEIVED ON 31.03.2011 1,38,70,338 BALANCE 2,57,38,963 7. IN VIEW OF THE ABOVE DETAILS, WE ARE CONVINCED T HAT THE ASSESSEES CLAIM IS A BONAFIDE AND THE AMOUNT WHICH HAS BEEN R EVERSED AND DEBITED TO THE P&L A/C FOR A.Y. 211-12 HAS ALREADY BEEN ADD ED IN THE COMPUTATION OF INCOME BECAUSE THE ASSESSEE HAS ALREADY CLAIMED THE SAME IN THE COMPUTATION OF INCOME FOR A.Y. 2010-11 I.E. YEAR UN DER CONSIDERATION. IN VIEW OF THESE FACTS, WE ALLOW THE CLAIM OF THE ASSE SSEE AND THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 8. THE NEXT ISSUE IN THIS APPEAL IS AGAINST THE ORD ER OF LD.CIT(A) IN NOT ALLOWING THE BROUGHT FORWARD LOSS FOR A.Y. 2008-09 TO RS.5,01,70,769/-. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT ALLOWING THE BROUGHT FORWARD LOSS OF A.Y. 2008- 09 AT RS.50170769/- THOUGH IT WAS CLAIMED IN THE RETURNS OF INCOME FOR A.Y.2008-09, 2009-10 AND 2010-11. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE CARRIED FORWARD OF LOSSES IS NOT E MANATING FROM THE RETURN OF INCOME FILED FOR A.Y.2008-09. 9. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FILE D COPY OF THE ORDER OF LD.CIT(A)-1, NAGPUR FOR THE A.Y. 2009-10 IN ASSESSE ES OWN CASE WHEREIN LD.CIT(A) HAS DIRECTED THE AO TO GIVE EFFECT TO THE ORDER VIDE PARA 9.2 AS UNDER:- 9.2 IT IS QUITE MANIFEST FROM THE ABOVE FINDING OF THE LD. AO THAT THE APPELLANT BANK IN ITS RETURN OF INCOME FILED FOR A. Y. 2008-09 HAS CLAIMED CURRENT YEAR'S LOSS OF RS.5,01,70,770/- (IN CLUDING THE UNABSORBED DEPRECIATION OF RS.21,51,907/-). THE RET URN FILED BY THE APPELLANT FOR A.Y. 2008-09 WAS WELL WITHIN TIME AND THE RETURNED LOSS ITA NO.127, 128 & 135/NAG/2015 6 | PA GE WAS ACCEPTED U/S. 143(1) THE I.T. ACT, 1961. THEREF ORE, THE APPELLANT BANK IS ELIGIBLE FOR CARRY FORWARD OF ASSESSED LOSS RS.5,01,70,770/- AS PER THE RETURN OF INCOME FILED. IN THE SUBSEQUEN T ASSESSMENT YEAR A. Y. 2009-10 UNDER APPEAL ALSO THE APPELLANT HAS I NCLUDED ITS CLAIM OF LOSS OF RS.5,01,70,770/- PERTAINING TO A.Y. 2008 -09 IN ITS RETURN OF INCOME FILED IN TIME. THEREFORE, APPARENTLY THE CLA IM OF THE APPELLANT BANK AS REGARDS TO THE BROUGHT FORWARD LOSS OF RS.5 ,01,70,770/- IS FOUND TO BE GENUINE. THE AO IS DIRECTED TO GIVE EFF ECT ACCORDINGLY. THIS GROUND IS ALLOWED. 10. FURTHER LD. COUNSEL FOR THE ASSESSEE DREW OUR A TTENTION TO THE ORDER GIVEN EFFECT LD.CIT(A) U/S 250 OF THE ACT BY AO VID E ORDER DATED 04.05.2016 WHEREBY THE BUSINESS LOSS AND UNABSORBED DEPRECIATION FOR A.Y. 2008-09 HAS BEEN DETERMINED AT RS.5,01,70,770/ -. THE RELEVANT READS AS UNDER:- AS PER CIT(A)S DECISION ON ADDITION GROUND RAISED BY ASSESSEE BANK, THE BANK IS ELIGIBLE FOR CARRY FORWARD OF LOSS FOR A.Y. 2008-09 OF RS.5,01,70,770/-. THEREFORE, BUSINESS LOSS AND UNA BSORBED DEPRECIATION ALLOWED TO BE CARRIED FORWARD IN THIS CASE IS AS UNDER:- A.Y. BUSINESS LOSS UNABSORBED DEPRECIATION TOTAL LO SS 2008-09 4,80,18,862 21,15,907 5,01,70,770 2009-10 1,95,23,607 19,03,367 2,14,26,974 11. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSES SEE ONLY STATED THAT THE APPROPRIATE DIRECTIONS CAN BE GIVEN TO THE AO. ON THE OTHER HAND, LD.SR.DR CONCEDED THE POSITION. AFTER HEARING RIVA L CONTENTIONS, WE DIRECT THE AO TO VERIFY THE CLAIM OF THE ASSESSEE AND ACCO RDINGLY ALLOW THE SAME. LD.CIT(A) HAS ALREADY EXAMINED THIS ISSUE IN A.Y. 2 009-10. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE O F THE ASSESSEES APPEAL IS ALLOWED. ITA NO.128/NAG/2015 ITA NO.127, 128 & 135/NAG/2015 7 | PA GE 12. NOW, COMING TO ASSESSEES APPEAL IN ITA NO.128/ NAG/2015 WHICH IS AGAINST THE ORDER OF LD.CIT(A) REJECTING THE RECTIF ICATION APPLICATION OF THE ASSESSEE U/S 154 OF THE ACT. AT THE OUTSET, LD. CO UNSEL FOR THE ASSESSEE STATED THAT THE ISSUE OF BROUGHT FORWARD LOSS HAS A LREADY BEEN ADJUDICATED IN ITA NO.127/NAG/2015 WHILE ADJUDICATING THE CLAIM OF APPEAL ORDER PASSED U/S 143(3) OF THE ACT. HENCE, THIS APPEAL H AS BECAME INFRUCTUOUS. ACCORDINGLY, THE SAME IS DISMISSED. ITA NO.135/NAG/2015 13. THE FIRST ISSUE IN THIS APPEAL OF THE REVENUE I S AS REGARDS TO THE ORDER OF LD.CIT(A) HOLDING THE ASSESSEE A NON-SCHED ULED COOPERATIVE BANK ELIGIBLE FOR DEDUCTION U/S 36(1)(VIIA) OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(APPEALS) HAS ERRED IN HOLDING THAT THE A SSESSEE, A NON- SCHEDULED CO-OPERATIVE BANK, IS ALSO ELIGIBLE FOR D EDUCTION OF RS. 14,40,90,700/- U/S. 36(1) (VIIA) OF THE I.T. ACT, 1 961. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(APPEALS) HAS ERRED IN HOLDING THAT THE A SSESSEE, A NON SCHEDULE CO-OPERATIVE BANK, IS ALSO ELIGIBLE FOR DE DUCTION NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY ITS R URAL BRANCHES U/S. 36(1 )(VIIA) OF THE I.T. ACT DISREGARDING THE FACT THAT SUCH DEDUCTION IS ALLOWABLE UNDER RULE 6ABA OF THE I.T. RULES ONLY TO A SCHEDULED BANK. 14. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS DEBITED PROVISION FOR BAD DEBT AMOUNTING TO RS.24,68,91,000/-. ACCORDING TO THE AO, THERE IS NO POSITIVE INCOME OF THE ASSESSEE AND HENCE HE IS NOT ENTITLED FOR A DEDUCTION @ 7.5% OF GROSS TOTAL INCOME BEFORE ALLOWING THE DE DUCTION U/S 36(1)(VIIA) OF THE ACT. THE AO NOTED THAT THE ASSESSEE HAS CLA IMED DEDUCTION OF ITA NO.127, 128 & 135/NAG/2015 8 | PA GE RS.14,40,90,700/- @ 10% OF AVERAGE ADVANCE MADE BY THE RURAL BRANCH OF THE BANK. ACCORDING TO THE AO, THE ASSESSEE IS A N ON-SCHEDULED BANK AND HENCE DEDUCTION U/S 36(1)(VIIA) OF THE ACT IS T O BE ALLOWED IN TERMS OF RULE 6ABA OF THE INCOME TAX RULES. ACCORDING TO TH E AO, THE LOSS CLAIMED BY THE ASSESSEE HAS BEEN CONVERTED INTO INCOME AND HE ALLOWED DEDUCTION U/S 36(1)(VIIA) OF THE ACT @ 7.5% OF THE TOTAL INCO ME AND ACCORDINGLY ALLOWED ONLY RS.41,42,952/- AS AGAINST THE CLAIM MA DE BY THE ASSESSEE AT RS.14,40,90,700/-. AGGRIEVED, THE ASSESSEE PREFERRE D APPEAL BEFORE LD.CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE @ 1 0% INSTEAD OF 7.5% BY OBSERVING IN PARA 13 AND 13.1 AS UNDER:- 13.0. CONSIDERING THE FACTS OF THE PRESENT CASE, I T WOULD BE NECESSARY TO COMPUTE THE INCOME THAT IS TO BE BROUG HT TO TAX BEING SUBVENTION OF INTEREST RECEIVABLE FROM THE GOVT. DE PARTMENTS. THE AR OF THE APPELLANT WAS ASKED TO EXPLAIN AND GIVE JUST IFICATION FOR THE CLAIM MADE BY THE APPELLANT FOR BAD DEBTS OF RS. L,44,90,700/-. THE AO HAS ELABORATELY DISCUSSED THIS ISSUE IN PARA 4 O F HIS ASSESSMENT ORDER AND STATED THAT ON VERIFICATION, THE ASSESSEE 'S CLAIM IS NOT FOUND TO BE IN ORDER IN AS MUCH AS THE ASSESSEE IS A NON- SCHEDULED BANK. THE DEDUCTION U/S 36(1) (VIIA) IS TO BE ALLOWED AS PRESCRIBED IN THE RULE 6ABA WHICH READS AS UNDER: '6ABA. FOR THE PURPOSES OF CLAUSE (VIIA) OF SUB-SEC TION (1) OF SECTION 36, THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF A SCHEDULED BANK SHALL BE COMPUTED IN T HE FOLLOWING MANNER, NAMELY:- (A) THE AMOUNTS OF ADVANCES MADE BY EACH MONTH RUR AL BRANCH AS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONTH COMPRISED IN THE PREVIOUS YEAR SHALL BE AGGREGATED SEPARATELY; (B) THE SUM SO ARRIVED AT IN THE CASE OF EACH SUCH BRANCH SHALL BE DIVIDED BY THE NUMBER OF MONTHS FOR WHICH THE ITA NO.127, 128 & 135/NAG/2015 9 | PA GE OUTSTANDI8NG ADVANCES HAVE BEEN TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A); (C) THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESP ECT OF EACH OF THE RURAL BRANCHES SHALL BE THE AGGREGATE ADVANC ES MADE BY THE RURAL BRANCHES OF THE SCHEDULED BANK. EXPLANATION: IN THIS RULE, 'RURAL BRANCH' AND 'SCHE DULED BANK' SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE EXPLANATI ON TO CLAUSE (VIIA) OF SUB-SECTION (1) OF SECTION 36 44). FROM THE ABOVE PROVISIONS OF RULE 6ABA, IT IS EVIDE NT THAT THE DEDUCTION IN RESPECT OF 10% OF THE AVERAGE ADVANCE OF DEFINED RURAL BANKS IS ADMISSIBLE TO A SCHEDULED BANK ONLY. NO RU LES HAVE BEEN PRESCRIBED FOR ALLOWING SUCH DEDUCTION TO ANY OTHER BANKS OTHER THAN THE SCHEDULED BANK. HENCE, ASSESSEE'S CLAIM IN THIS REGARD IS HEREBY DISALLOWED AS NOT TENABLE IN LAW. THUS, THE AO CONCLUDED THAT SINCE THE LOSS CLAIMED BY ASSESSEE HAS BEEN CONVERTED INTO INCOME BY THIS ASSESSMENT O RDER, THE DEDUCTION U/S 36(I) (VIIA) @ 7.5% OF THE TOTAL INCO ME IS LIABLE TO BE GIVEN TO THE ASSESSEE AND IS BEING GIVEN ACCORDINGL Y OF AN AMOUNT OF RS.41,42,952/-. THE AR OF THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS CONTENDED THAT DEDUCTION SHOULD BE ALLOWED @ 10% INSTEAD OF 7.5% AS IN THE CASE OF SCHEDULED BANKS. 13.1. THE AR OF THE APPELLANT CONTENDED THAT CO-OPE RATIVE BANKS ARE ALSO ENTITLED FOR DEDUCTION @ 10% OF AVERAGE RURAL ADVANCES AND THE OMISSION OF NOT HAVING MENTIONED THE WORD 'CO-OPERA TIVE BANK' IN RULE 6ABA CANNOT TAKE AWAY THE BENEFIT PROVIDED IN THE INCOME TAX ACT. IN VIEW THEREOF, THE CLAIM OF THE ASSESSEE IS ALLOWED @ 10% AS AGAINST 7.5% ALLOWED BY THE AO. HENCE, BOTH THE GRO UNDS ARE ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRI BUNAL. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE FACTS OF THE CASE THAT THE CLAIM FOR ITA NO.127, 128 & 135/NAG/2015 10 | PA GE DEDUCTION WAS MADE UNDER SECTION 36(1)(VIIA) OF THE ACT, WHICH READS AS UNDER: '(VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOU BTFUL DEBTS MADE BY- (A) A SCHEDULED BANK [NOT BEING [* * *] A BANK INCORPOR ATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA) OR A NON-SCHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY A GRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN A ND ONE- HALF PER CENT} OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERA GE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER: FURTHER EXPLANATION FOR THE PURPOSES OF THIS CLAUS E : (I) 'NON SCHEDULED BANK:' MEANS A BANKING COMPANY A S DEFINED IN CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATIO N ACT, 1949 (10 OF 1949) WHICH IS NOT SCHEDULED BANK. (II) 'RURAL BRANCH' MEANS A BRANCH OF A SCHEDULED B ANK [OR A NON SCHEDULED BANK} SITUATED IN A PLACE WHICH HAS A POP ULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST P RECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBL ISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. A BARE READING OF THE ABOVE CLEARLY SHOWS THAT FOR AN ALLOWANCE TO BE GIVEN UNDER THIS SECTION, THERE HAS TO BE A PROVISI ON FOR BAD AND DOUBTFUL DEBTS. RULE 6ABA HAS PROVIDED FOR THE MANN ER IN WHICH DEDUCTION HAS TO BE CALCULATED AND NOTHING MORE THA N THAT. BASIC ALLOWANCE OF DEDUCTION IS AS PER SECTION 36(1)(VIIA ) AS HELD BY THE COORDINATE BENCHES OF THE TRIBUNAL. EVEN THE CBDT I NSTRUCTION NO.17/2008 DT . 26.11.2008 HAS CLARIFIED THIS ISSUE FURTHER. SUB CLAUSE (B) & ( C) OF CLAUSE (III) OF ABOVE CIRCULAR HAD CLARIFIED THE ISSUE AS UNDER: - '(B] THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTF UL DEBTS SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PROVISIO N ACTUALLY ITA NO.127, 128 & 135/NAG/2015 11 | PA GE CREATED IN THE BOOKS OF THE ASSESSEE IN THE RELEVAN T YEAR OR THE AMOUNT CALCULATED AS PER PROVISIONS OF SEC. 36(I)(V IIA), WHICHEVER IS LESS (C) FOR WORKING OUT THE AGGREGATE AVERAGE ADVANCES BY RURAL BRANCHES) THE ASSESSING OFFICER SHOULD VERIFY WHETH ER THE BRANCH (ES) IN QUESTION ACTUALLY QUALIFY TO BE CATE GORIZED AS (RURAL BRANCHES) AS PER THE DEFINITION IN EXPLANATI ON (IA) BELOW SEC. 36(I)(VIIA). THE AGGREGATE AVERAGE ADVANCES OF SUCH RURAL BRANCHES SHOULD THEREAFTER BE COMPUTED IN ACCORDANC E WITH RULE 6ABA OF IT RULES) 1962. FROM A BARE READING OF THE ABOVE, THE INTENTION OF THE LAW IS VERY CLEAR THAT BANKS HAVING RURAL BRANCHES AND ONE WHO MADE P ROVISION IN THE BOOKS SHOULD BE ALLOWED THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS. IT IS ONLY THE MANNER OF COMPUTATIO N OR LIMIT UP TO WHICH DEDUCTION WILL BE ALLOWED IS ONLY GIVEN IN RU LE 6ABA. IT IS NOT THE CASE THAT RULE 6ABA SHOULD BE INTERPRETED FOR A LLOWING PROVISION, INSTEAD OF IT IS ONLY SECTION WHICH DETERMINES THE ALLOWABILITY OF THE CLAIM AND TO THIS CBDT INSTRUCTION IS VERY CLEAR FU RTHER CLARIFYING THE ABOVE PROPOSITION. ALL THE COOPERATIVE BANKS ARE NO N SCHEDULED BANKS EXCEPT THE COOPERATIVE BANKS WHICH HAVE BEEN NOTIFI ED BY THE RBI AS SCHEDULED BANK. 16. IN THE PRESENT CASE BEFORE US, ASSESSEE HAS MAD E A PROVISION AT RS. 246891000/- IN P&L A/C UNDER THE HEAD PROVISION FOR BAD AND DOUBTFUL DEBTS. MOREOVER THERE IS NO DISPUTE WITH RELATION T O AMOUNT OF CLAIM AND THE MANNER OF COMPUTATION. AO IN HIS ORDER HAS NOT DISPUTED THE QUANTUM OF AMOUNT CLAIMED AS DEDUCTION. ASSESSEE HAS CLAIME D RS. 144090700/- WHICH IS MUCH LESSER THAN ACTUAL PROVISION MADE. TH EREFORE AS PER CBDT CIRCULAR INSTRUCTIONS AND JUDICIAL PRONOUNCEMENTS T HERE SHOULD NOT BE ANY REASON TO DISALLOW THE CLAIM OF THE ASSESSEE. ASSES SEE ALSO DREW OUR ATTENTION TO ONE MORE ITEM NO. 17.3 OF THE CBDT CIR CULAR NO. 421, DT. 12TH JUNE, 1985, WHICH READS AS UNDER: ITA NO.127, 128 & 135/NAG/2015 12 | PA GE 'HAVING REGARD TO THE INCREASING SOCIAL COMMITMENTS OF BANKS, SECTION 36(1)(VIIA) HAS BEEN AMENDED TO PROVIDE THA T IN RESPECT OF ANY PROVISION, FOR BAD AND DOUBTFUL DEBTS MADE BY A SCH EDULED BANK [NOT BEING A BANK APPROVED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF SECTION 36(1)(VIIA) OR A BANK INCORPORATED BY OR UN DER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCHEDULED BANK, AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE TOTAL INCOME (COMPUTE D BEFORE MAKING ANY DEDUCTION UNDER THE PROPOSED NEW PROVISION) OR TWO PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCH ES OF SUCH BANKS, WHICHEVER IS HIGHER, SHALL BE ALLOWED AS A D EDUCTION IN COMPUTING THE TAXABLE PROFITS'. 17. THIS FURTHER CLARIFY THE INTENTION OF GOVERNMEN T THAT DUE TO HARDSHIPS IN GRANTING RURAL ADVANCES BY BANKS, GOVE RNMENT AS AN INCENTIVE WANTS TO ALLOW THE DEDUCTION TO SCHEDULED AS WELL AS NON SCHEDULED BANKS. WE FIND FROM THE FACTS OF THE CASE THAT THE AREA OF OPERATION OF THE ASSESSEE BANK IS RESTRICTED TO BUL DHANA DISTRICT, HAVING 106 BRANCHES IN RURAL AREAS. THE LOANS AND ADVANCES ARE GIVEN TO FARMERS RESIDING IN RURAL AREAS. AS PER PROVISION IN 36(1)( VIIA) ASSESSEE IS ENTITLED FOR DEDUCTION @ 10% OF THE AVERAGE RURAL ADVANCES A ND THIS MANNER IS PRESCRIBED IN RULE 6ABA AS UNDER:- ' FOR THE PURPOSES OF CLAUSE (VIIA ) OF SUBSECTION 1 OF SECTION 36, THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES O F A SCHEDULED BANK SHALL BE COMPUTED IN THE FOLLOWING MANNER NAME LY, A) THE AMOUNT OF ADVANCES MADE BY EACH RURAL BRANCH AS OUTSTANDING AT THE END OF LAST DAY OF EACH MONTH CO MPRISED IN THE PREVIOUS YEAR SHALL BE AGGREGATED SEPARATELY, B) THE SUM SO ARRIVED AT IN THE CASE OF SUCH BRANCH SHALL BE DIVIDED BY THE NUMBER OF MONTHS FOR WHICH OUTSTANDI NG ADVANCES HAVE TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A); ITA NO.127, 128 & 135/NAG/2015 13 | PA GE C) THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESPE CT OF EACH OF THE RURAL BRANCHES SHALL BE THE AGGREGATE AVERAGE ADVAN CES MADE BY THE RURAL BRANCHES OF THE SCHEDULED BANK.' EXPLANATION: IN THIS RULE 'RURAL BRANCH' AND 'SCHED ULED BANK' SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN THE EXP LANATION TO CLAUSE (VII A) OF SUBSECTION (1) OF SECTION 36. WE OBSERVE THAT IN THIS RULE A REFERENCE IS MADE TO RURAL BRANCHES OF A SCHEDULED BANK WHEREAS, IN THE DEFINI TION OF THE RURAL BRANCH AS GIVEN IN SECTION 36(1)(VIIA) REFERRED TO 'RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON SCHEDULED BANK' . ACCORDINGLY WE ARE OF THE VIEW THAT THE DEDUCTION IS GIVEN BY SECT ION 36(1)(VIIA) AND IT CANNOT BE TAKEN AWAY BY THE RULE FOR COMPUTATION DE DUCTION OF AVERAGE ADVANCES GIVEN BY RURAL BRANCH. HENCE, WE A LLOW THE CLAIM OF ASSESSEE AND THIS ISSUE OF REVENUES APPEAL IS DISM ISSED. 18. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AS REGARDS TO THE ORDER OF LD.CIT(A) DELETING THE DISALLOWANCE MADE B Y THE AO ON ACCOUNT OF REVERSAL OF CONTINGENT INCOME. FOR THIS, THE REVEN UE HAS RAISED THE FOLLOWING GROUND:- (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ORDER OF THE LD.CIT(APPEALS) IS PERVERSE IN AS MUCH AS THE LD. CIT(APPEALS) HAS DELETED THE DISALLOWANCE OF RS. 10 ,15,60,904/- MADE BY THE A.O. ON ACCOUNT OF REVERSAL OF CONTINGE NT INCOME MADE BY THE ASSESSEE, WITHOUT ANY DISCUSSION AND ANY FINDIN G BEING GIVEN FOR SUCH DELETION. 19. AT THE OUTSET, IT IS STATED THAT THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY US IN ITA NO.127/NAG/2015 VIDE PARA NO.7, HENCE WE NEED NOT TO REPEAT THE SAME AGAIN AND OUR DECISION IN TH AT APPEAL WILL APPLY HERE ALSO. THIS ISSUE OF REVENUES APPEAL IS ACCOR DINGLY DISMISSED. ITA NO.127, 128 & 135/NAG/2015 14 | PA GE 20. IN THE RESULT, TWO APPEALS FILED BY THE ASSESSE E ARE ALLOWED AND THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH MARCH, 2018. SD/- SD/- (G.D.AGRAWAL) (MAHAVIR SINGH) HONBLE PRESIDENT JUDICIAL MEMBER DATED:06 TH MARCH, 2018 *AMIT KUMAR* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), NAGPUR 4. THE CIT, NAGPUR 5. THE DR, BENCH, ITAT, NAGPUR BY OR DER ASSISTANT REGISTRAR ITAT, NAGPUR BENCH, NAGPUR