The Nashik Road Deolali Vyapari Sahakari Bank Ltd, Nashik V. Assistant Commissioner of Income tax,

ITA 160/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6289 (ITAT-PUNE)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.160/PUN/2017 / ASSESSMENT YEAR : 2013-14 THE NASHIK ROAD DEOLALI VYAPARI SAHAKARI BANK LTD., 16, KALPRAUKSHA, ASHA NAGAR, NASHIK ROAD, NASHIK-422 101 PAN : AAAAT4688C .... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI PANKAJ GARG / DATE OF HEARING : 23.01.2019 / DATE OF PRONOUNCEMENT : 24.01.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM TH E ORDER OF LD. CIT(APPEAL)-1, NASHIK DATED 24.11.2016 FOR THE ASSESSMENT YEAR 2013-14 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW LOWER AUTHORITIES HAVE ERRED IN DISALLOWING A CLAIM OF PR OVISION FOR BAD AND DOUBTFUL DEBTS OF RS.61,53,089/-MADE U/S.36(1)(VII) (A) BY DISREGARDING THE FACT THAT THE ENTRIES FOR PROVISION ARE ALREADY PASSED IN THE BOOKS OF 2 ITA NO. 160/PUN/2017 A.Y.2013-14 ACCOUNTS, YOUR APPELLANT IS ENTITLED FOR THE DEDUCT ION ON THE ENTIRE PROVISIONS AS CLAIMED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW LOWER AUTHORITIES HAVE ERRED IN MAKING AN ADDITION OF RS. 31,60,959/- BEING DIVIDEND RECEIVED FROM MUTUAL FUND BY DENYING THE E XEMPTION AND FURTHER ERRED IN TREATING THIS AMOUNT AS PROFIT ON SALE/REDEMPTION OF MUTUAL FUND AS BUSINESS INCOME. THE APPELLANT CRAVES FOR TO LEAVE, ADD, ALTER, MODI FY, DELETE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING, IN THE INTEREST OF NATURAL JUSTICE. 2. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE SUB MITTED THAT HE IS NOT PRESSING GROUND NO.2. TAKING THE SAID SUBMISSION ON RE CORD, WE DISMISS GROUND NO.2 IN GROUNDS OF APPEAL AS NOT PRESSED . 3. WITH REGARD TO GROUND NO.1, THE BRIEF FACTS ARE THAT T HE ASSESSEE HAS CLAIMED A PROVISION OF RS.61,53,089/- IN RESPECT OF PROVISION C REATED FOR BAD AND DOUBTFUL DEBTS U/S.36(1)(VIIA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) . IT WAS NOTICED THAT THE ASS ESSEE HAD DEBITED NOTHING I.E. NIL TO THE PROFIT & LOSS ACCOUNT IN RESPECT OF SUCH PRO VISION. AS THE CLAIM IN PROFIT & LOSS ACCOUNT WAS LESS THAN WHAT THE ASSESSE E HAD CLAIMED IN THE RETURN OF INCOME, THE LD. AR WAS ASKED TO EXPLAIN VIDE HE ARING DATED 01.02.2016, WHY THE EXCESS CLAIM OF PROVISION SHOULD NOT BE DISALLOWED. IN RESPONSE, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS D EBITED PROVISION IN RESPECT OF STANDARD ASSETS AMOUNTING TO RS.20,00,000/-. T HE CLAIM OF THE ASSESSEE IS THAT THIS PROVISION TOO IS PART OF THE PROVISIO N FOR BAD AND DOUBTFUL DEBTS AND THE SAME SHOULD BE ALLOWED U/S.36(1)(VIIA) O F THE ACT. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE A SSESSING OFFICER AND HE DISALLOWED THE ENTIRE AMOUNT OF RS.61,53,089/- IN RESPECT OF PROVISION CREATED FOR BAD AND DOUBTFUL DEBTS U/S. 36(1)(VIIA) OF THE ACT. 3 ITA NO. 160/PUN/2017 A.Y.2013-14 4. DURING FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APPEAL) U PHELD THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE REASONS REC ORDED IN HIS ORDER WHICH IS ON RECORD. 5. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE AP PRISED THE BENCH THAT THE ISSUE WITH REGARD TO THE PROVISION CREATED FOR BAD AND DOUBTFUL DEBTS AND THE ALLOWABILITY THEREOF U/S. 36(1)(VIIA) OF THE ACT IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH O F THE TRIBUNAL, PUNE IN ASSESSEES OWN CASE IN ITA NO.2647/PUN/2016 FOR THE ASSESSMENT YEAR 2012-13. IN THAT CASE, THERE WAS ALSO PROVISION AGAINST S TANDARD ASSETS FOR A SUM OF RS.20 LAKHS. THE CO-ORDINATE BENCH OF THE TRIBUNAL, PUNE OBSERVED THAT THE ASSESSEE DID NOT MAKE A PROVISION OF RS.20 LA KHS IN ITS BOOKS OF ACCOUNT, EVEN THOUGH IT WAS CHARACTERIZED AS HAVING BEE N MADE FOR STANDARD ASSETS, FOR WHICH NO SEPARATE DEDUCTION WAS CLAIMED. IN V IEW OF THE MATTER, REVENUE AUTHORITIES WERE DIRECTED TO GRANT DEDUCTION BE ING A SUM OF PROVISION CREATED IN THE BOOKS OF ACCOUNT FOR A SUM OF R S.20 LAKHS, AS AGAINST THE DEDUCTION CLAIMED IN THE COMPUTATION OF INCOME AT RS.44,94,267/-. THE APPEAL OF THE ASSESSEE WAS, THUS, PARTLY ALLOWE D. 6. THE LD. D.R, ON THE OTHER HAND, HAS PLACED RELIANCE ON THE ORDER S OF THE AUTHORITIES BELOW. 7. WE HAVE PERUSED THE CASE RECORD AND CONSIDERED TH E JUDICIAL PRONOUNCEMENT PLACED BEFORE US. IN THE CO-ORDINATE BEN CH DECISION IN ITA NO.2647/PUN/2016 FOR ASSESSMENT YEAR 2012-13, THE ASSE SSEE HAD CLAIMED DEDUCTION AS PER BOOKS OF ACCOUNT AT RS.44,94,267/- WHICH WAS DISALLOWED BY THE REVENUE AUTHORITIES WITH RESPECT TO SECTION 36(1)(V IIA) OF THE ACT. THE TRIBUNAL THEREIN DEALT WITH THE SAME ISSUE WHICH IS AS UNDER: 4 ITA NO. 160/PUN/2017 A.Y.2013-14 3. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.44,94,267/- CLAIMED BY THE ASSESSEE U/S.36(1)(VI IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE ACT). THEREAFTER, THE TRIBUNAL HAS HELD AS UNDER: 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH T HE RELEVANT MATERIAL ON RECORD. SECTION 36(1)(VIIA) PROVIDES F OR GRANTING DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE, INTER ALIA, BY A CO-OPERATIVE BANK AT THE GIVEN PERCENTAGE. SECTION 36(2)(V) PROVIDES THAT WHERE PROVISIONS OF SECTION 36(1)(VIIA) APPLY, NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS THE ASSESSEE HAS DEBITED THE AMOUNT OF SUCH DEBT OR PART OF DEBT IN THAT PREVIOUS YEAR TO THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. IT BECOMES APPARE NT FROM THE MANDATE OF SECTION 36(2)(V) THAT THE MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBTS IS SINE QUA NON FOR CLAIMING DEDUCTION U/S.36( 1)(VIIA) OF THE ACT. PAGES 14 TO 16 OF THE PAPER BOOK ARE A COPY OF ASS ESSEES PROFIT AND LOSS ACCOUNT, WHICH SHOWS THAT THE ASSESSEE MADE A `PROVISION AGAINST STANDARD ASSETS FOR A SUM OF RS.20 LAKHS. IN THE COMPUTATION OF TOTAL INCOME, WHOSE COPY HAS BEEN PLACED AT PAGE 8 OF THE PAPER BOOK, THE ASSESSEE SUO MOTU ADDED BACK THE AMOUNT OF SUCH PRO VISION FOR THE PURPOSES OF COMPUTATION OF TOTAL INCOME. IT, THEREF ORE, BECOMES APPARENT THAT THE ASSESSEE DID MAKE A PROVISION OF RS.20 LAK HS IN ITS BOOKS OF ACCOUNT, EVEN THOUGH IT WAS CHARACTERIZED AS HAVING BEEN MADE FOR STANDARD ASSETS, FOR WHICH NO SEPARATE DEDUCTION WAS CLAIMED. THE STATUTE REQUIRES CREATION OF PROVISION AS A MANDATO RY PRE-CONDITION FOR CLAIMING DEDUCTION U/S.36(1)(VIIA). MERELY BECAUSE A DIFFERENT NOMENCLATURE WAS GIVEN TO THE PROVISION OF RS.20 LA KHS, FOR WHICH NO SEPARATE DEDUCTION WAS CLAIMED, THE SAME DOES NOT S HED THE CHARACTER OF A PROVISION RELATING TO THE DEBTS OF THE ASSESSE E BANK MEANT FOR THE PURPOSE OF SECTION 36(1)(VIIA). IN OUR CONSIDERED O PINION, THE ASSESSEE CANNOT BE DEBARRED FROM CLAIMING DEDUCTION U/S.36(1) (VIIA) TO THE EXTENT OF SUCH PROVISION MADE IN THE BOOKS OF ACCOUNT TO T HE TUNE OF RS.20 LAKHS. WE, THEREFORE, DIRECT TO GRANT DEDUCTION, B EING A SUM OF PROVISION CREATED IN THE BOOKS OF ACCOUNT FOR A SUM OF RS.20. 00 LAKHS, AS AGAINST THE DEDUCTION CLAIMED IN THE COMPUTATION OF INCOME AT RS.44,94,267/-. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 8. IT IS EVIDENT FROM THE AFORESAID DECISION THAT EVEN THO UGH THE PROVISION OF RS.20 LAKHS WAS MADE BY THE ASSESSEE WHICH WAS CHAR ACTERIZED AS HAVING BEEN MADE FOR STANDARD ASSETS, FOR WHICH NO SEPARATE DEDUCTION WAS CLAIMED BY THE ASSESSEE. THEREFORE, VIEW TAKEN BY THE TRIBUNAL TO ALLOW DEDUCTION TO THE EXTENT OF RS.20 LAKHS U/S.36(1)(VIIA) OF THE ACT AS AGAINS T DEDUCTION CLAIMED AT RS.44,94,267/- IN THE COMPUTATION OF INCOME. 5 ITA NO. 160/PUN/2017 A.Y.2013-14 IN THE PRESENT YEAR ALSO, IT IS NOT DISPUTED THAT THE A SSESSEE HAS MADE PROVISION OF RS.20 LAKHS ON STANDARD ASSETS AND THERE IS NO SEPARATE DEDUCTION CLAIMED ON THIS HEAD BY THE ASSESSEE. THEREFOR E, RESPECTFULLY FOLLOWING THE DECISION OF OUR CO-ORDINATE BENCH, PUNE IN ASSE SSEES OWN CASE, WE SET ASIDE THE ORDER OF LD. CIT(APPEAL) AND DIRECT THE A SSESSING OFFICER TO ALLOW DEDUCTION TO THE EXTENT OF RS.20 LAKHS U/S.36(1)(VIIA) OF THE ACT AS AGAINST THE DEDUCTION CLAIMED AT RS.61,53,089/- IN THE CO MPUTATION OF INCOME BY THE ASSESSEE. HENCE, GROUND NO.1 RAISED IN APPE AL BY THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 24 TH DAY OF JANUARY, 2019. SD/- SD/- R.S. SYAL PARTHA SARAT HI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 24 TH JANUARY, 2019. SB !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEAL)-1, NASHIK. 4. THE PR. CIT-1, NASHIK. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 6 ITA NO. 160/PUN/2017 A.Y.2013-14 DATE 1 DRAFT DICTATED ON 23 .01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER