The Aurangabad Dist. Central Co-op. Bank Ltd., Aurangabad V. ACIT, Circle-1, Aurangabad

ITA 1643/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84963 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Keywords: Bad and doubtful debts; Capital expenditure
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1643/PN/2013 (A.Y: 2009-10) THE AURANGABAD DISTRICT CENTRAL CO-OPERATIVE BANK LTD., DR. RAJENDRA PRASAD ROAD, AURANGABAD PAN: AAAAA0981D APPELLANT VS. ACIT, AURANGABAD RESPONDENT ASSESSEE BY : SHRI NIKHIL P ATHAK DEPARTMENT BY : SMT. M.S. VERMA DATE OF HEARING: 25.08.2014 DATE OF ORDER : 27.08.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL), AURANGABAD DATED 05.07.2013 FOR A.Y. 2009-10 ON THE FOLLOWING GROUND S. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD ERRED IN FACTS AND ON LAW IN CONFIRMING THE DISALLOWANCE FOR DEDUCTION CLAIMED BY THE APPELLANT U/S 36(1)(VIIA) OF THE INCOME TAX ACT,1961, SAME MAY BE ALLOWED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD ERRED IN FACTS AND ON LAW IN CONFIRMING THE ADDITION MADE IN RESPECT OF UNCLAIMED DEMAND DRAFTS WHICH WERE TRANSFERRED TO RESERVE FUND. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD ERRED IN FACTS AND ON LAW IN CONFIRMING THE ADDITION MADE IN RESPECT OF TRANSFER OF SUNDRY CRED ITORS AMOUNT TO RESERVES. 4. SUCH OTHER ORDERS BE PASSED AS MAY BE DEEMED FIT AN D PROPER. 2 ITA NO.1643/PN/13 AURANGABAD DIST. CENTRAL CO-OP. BANK LTD. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER VAR Y AND / OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEA L 2. THE ASSESSEE IS A CO-OPERATIVE BANK, REGISTERED U/S.9(1) OF MAHARASHTRA CO-OP. SOCIETIES ACT, 1960. THE ASSESS EE HAS FILED RETURN OF INCOME DECLARING LOSS AT (-) RS.27,98,56, 449/-. THE ASSESSING OFFICER HAS ASSESSED THE LOSS OF THE ASSE SSEE AT (-) RS.5,91,62,075/- BY MAKING ADDITION OF RS.22,06,94, 424/-. THE DETAILS OF THE ADDITION ARE AS UNDER: PARTICULARS OF ADDITION PARA OF THE ASST. ORDER AMOUNT OF ADDITION RS. DISALLOWANCE OF DEDUCTION U/S 36(1)(VIIA)(A) (4) 21 ,75,46,207 ADDITION ON A/C OF UNCLAIMED DEMAND DRAFTS TRANSFERRED TO GENERAL RESERVE FUND (5) 20,00,983 INTEREST RECEIVED ON AGRICULTURAL CREDIT STABILIZATION FUND CREDITED TO RESPECTIVE FUND ACCOUNT (6) 6,48,213 ADDITION ON A/C OF UNCLAIMED SUNDRY CREDITORS TRANSFERRED TO RESERVE U/S 41(1) OF THE ACT (7) 4,99,016 2.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME WITH REGARD TO DISALLOWANCE OF DEDUCTION OF RS.21,75,46,207/- U/S. 36(1)(VIIA)(A) OF THE ACT, THE CIT(A) HAS DECIDED THE ISSUE AGAINS T THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF TH E ASSESSEE, INTER ALIA, SUBMITTED THAT THE CIT(A) ERRED IN FACT S AND ON LAW IN CONFIRMING THE DISALLOWANCE FOR DEDUCTION CLAIMED B Y THE ASSESSEE U/S 36(1)(VIIA) OF THE ACT AND SAME SHOULD BE ALLOWED. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 2.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT IN ORDER TO CLAIM DEDUCTION FO R BAD AND DOUBTFUL DEBTS U/S.36(1)(VIIA) OF THE ACT, THE PROV ISION IN RESPECT OF THE SAME IS REQUIRED TO BE MADE. THIS PROPOSITI ON OF LAW IS ALSO SUPPORTED BY THE DECISION IN THE CASE OF STATE BANK OF PATIALA VS. CIT & ANR (2005) 272 ITR 54 (P&H), WHER EIN, IT WAS 3 ITA NO.1643/PN/13 AURANGABAD DIST. CENTRAL CO-OP. BANK LTD. HELD THAT MAKING A PROVISION FOR BAD AND DOUBTFUL D EBTS EQUAL TO THE AMOUNT MENTIONED IN SECTION 36(1)(VIIA) IS A CO NDITION PRECEDENT FOR ALLOWING DEDUCTION; ASSESSEE CLAIMING DEDUCTION FOR BAD DEBT UNDER UN-AMENDED SECTION 36(1)(VIIA) BUT A FTER AMENDMENT ENHANCING THE DEDUCTION IN THE RETURN BY MAKING-UP THE SHORTFALL IN THE PROVISION IN THE BALANCE SHEET OF SUBSEQUENT YEAR, THE CLAIM TO THE EXTENT OF ENHANCEMENT IS NOT ALLOWABLE. SO, IN ORDER TO CLAIM DEDUCTION U/S 36(1)(VIIA) OF THE ACT, THE PROVISION HAS TO BE MADE IN THE YEAR IN WHICH THE D EDUCTION HAS BEEN CLAIMED; THE PROVISION MADE IN THE SUBSEQUENT YEAR IS OF NO RELEVANCE. IT IS UNDISPUTED THAT THE ASSESSEE HAS MADE PROVISION FOR BAD AND DOUBTFUL DEBTS ONLY TO THE EXTENT OF RS.14,67,16,000/- IN THE YEAR UNDER APPEAL. IN VIE W OF THE ABOVE FACTS AND CLEAR WORDED PROVISION OF SECTION 36(1)(V IIA) OF THE ACT, THE CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUST IFIED IN MAKING DISALLOWANCE OF INTEREST AMOUNTING TO RS.21,75,46,2 07/- CLAIMED BY THE ASSESSEE U/S.36(1)(VIIA) OF THE ACT. THIS R EASONED FACTUAL AND LEGAL FINDING OF CIT(A), WHEREBY HE HAS UPHELD THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.21,75,46,2 07/- CLAIMED BY THE ASSESSEE U/S. 36(1)(VIIA) OF THE ACT, NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. THE NEXT ISSUE IS WITH REGARD TO ADDITION OF UNC LAIMED DEMAND DRAFT OF RS.20,00,983/- ADDED BY THE ASSESSI NG OFFICER TO THE LOSS RETURNED. THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS FORFEITED AN AMOUNT OF RS.20,00,983/- ON ACCOUNT OF UNCLAIMED DEMAND DRAFTS AND THE SAME HAS BEEN CR EDITED TO RESERVE FUND ACCOUNT IN THE BALANCE SHEET. THE ASS ESSING OFFICER HAS ALSO OBSERVED THAT THE SAID UNCLAIMED DEMAND DR AFTS HAS BEEN FORFEITED AND CREDITED TO RESERVE FUND BY THE ASSESSEE BANK. THE ASSESSING OFFICER HAS HELD THAT THE FORFEITURE OF DEMAND DRAFTS IS DIRECTLY ARISING OUT OF BUSINESS ACTIVITY AND HENCE THE SAID INCOME IS LIABLE TO TAX U/S.28 OF THE ACT. 4 ITA NO.1643/PN/13 AURANGABAD DIST. CENTRAL CO-OP. BANK LTD. 3.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS CONFIRMED THE ADDITION OF RS.20,00,983/- MADE BY TH E ASSESSING OFFICER. THE SAME HAS BEEN OPPOSED BEFORE US ON BE HALF OF THE ASSESSEE, INTER ALIA, SUBMITTED THAT THE CIT(A) ERR ED IN FACTS AND ON LAW IN CONFIRMING THE ADDITION MADE IN RESPECT O F UNCLAIMED DEMAND DRAFTS WHICH WERE TRANSFERRED TO RESERVE FUN D. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 3.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THERE ARE UNCLAIMED DEMAND DRA FTS OF RS.20,00,983/- WITH THE BANK WHICH HAS BEEN TRANSFE RRED BY THE BANK TO THE RESERVE FUND AFTER SPECIFIED PERIOD. T HE ASSESSING OFFICER HAS ADDED THE SAME U/S 28 OF THE ACT AS INC OME EARNED BY THE ASSESSEE IN THE COURSE OF BUSINESS ACTIVITY. THE ASSESSEE HAS TRANSFERRED THE SAID UNCLAIMED DEMAND DRAFTS TO RESERVE ACCOUNT AFTER EXPIRY OF SPECIFIED PERIOD NOTING THA T THERE IS REMOTE POSSIBILITY OF CLAIMING THE ENCASHMENT OF TH E SAID UNCLAIMED DEMAND DRAFTS. THEREFORE, THE FORFEITED AMOUNT OF UNCLAIMED DEMAND DRAFTS WAS FOUND TO INCOME OF THE ASSESSEE. FURTHER, IN CASE IF THERE IS ANY CLAIM IN RESPECT O F THE UNCLAIMED DEMAND DRAFTS AND THE AMOUNT IS TO BE REFUNDED IN S UBSEQUENT YEARS, THE SAME SHALL BE ALLOWED AS EXPENDITURE IN THE SAID SUBSEQUENT YEAR. ACCORDINGLY, THE ADDITION OF RS.2 0,00,983/- WAS CONFIRMED BY THE CIT(A) WITH A DIRECTION TO THE ASSESSING OFFICER THAT IN CASE THERE IS ANY CLAIM IN RESPECT OF UNCLAIMED DEMAND DRAFTS IN THE SUBSEQUENT YEAR AND THE AMOUNT OF UNCLAIMED DEMAND DRAFTS HAS TO BE REFUNDED, THEN TH E AMOUNT SO REFUNDED IS TO BE ALLOWED AS EXPENDITURE IN THE SUBSEQUENT YEAR. THIS REASONED FINDING OF CIT(A) WHEREBY, HE HAVING CONFIRMED THE ADDITION IN QUESTION HAS RIGHTLY DIRE CTED THE 5 ITA NO.1643/PN/13 AURANGABAD DIST. CENTRAL CO-OP. BANK LTD. ASSESSING OFFICER THAT IN CASE THERE IS ANY CLAIM I N RESPECT OF UNCLAIMED DEMAND DRAFTS IN THE SUBSEQUENT YEAR AND THE AMOUNT OF UNCLAIMED DEMAND DRAFTS HAS TO BE REFUNDE D, THEN THE AMOUNT SO REFUNDED IS TO BE ALLOWED AS EXPENDITURE IN THE SUBSEQUENT YEAR, NEEDS NO INTERFERENCE FROM OUR SID E. WE UPHOLD THE SAME. 4. THE LAST ISSUE IS WITH REGARD TO ADDITION OF RS. 4,99,016/- ON ACCOUNT OF SUNDRY CREDITORS WRITTEN BACK BY THE ASS ESSEE BANK BY TRANSFERRING THE SAME TO RESERVE ACCOUNT. THE ASSE SSING OFFICER HAS MADE THIS ADDITION IN PARA 7 OF THE ASSESSMENT ORDER STATING AS UNDER 'ON EXAMINATION OF BALANCE SHEET IT IS SEEN THAT TH E ASSESSEE HAS TRANSFERRED UNCLAIMED SUNDRY CREDITORS AT RS.4,99,016/- TO STATUTORY RESERVE AND SAME HAS NOT BEEN OFFERED FOR TAXATION UNDER SECTION 41 OF THE ACT. T HE WRITING OFF OF THE SUNDRY CREDITORS IS NOTHING BUT INCOME O F ASSESSEE IN THE YEAR THE SAME IS WRITE OFF. HENCE THE SAME I S TREATED AS THE INCOME OF THE ASSESSEE AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE.' 4.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS CONFIRMED THE ADDITION IN QUESTION. THE SAME HAS B EEN OPPOSED BEFORE US ON BEHALF OF THE ASSESSEE, INTER ALIA, SU BMITTED THAT THE CIT(A) ERRED IN FACTS AND ON LAW IN CONFIRMING THE ADDITION MADE IN RESPECT OF TRANSFER OF SUNDRY CREDITORS AMOUNT T O RESERVES. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTA TIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 4.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE AUTHORITIES BELOW HAVE OBS ERVED THAT IT IS NOT THE CASE OF ASSESSEE THAT THE SUNDRY CREDITORS WERE NOT TOWARDS EXPENDITURE CLAIMED BY THE ASSESSEE IN EARL IER YEARS OR IMPUGNED CREDITORS WRITTEN OFF WERE TOWARDS CAPITAL EXPENDITURE. 6 ITA NO.1643/PN/13 AURANGABAD DIST. CENTRAL CO-OP. BANK LTD. AS PER SECTION 41(1)(A) AND PARTICULARLY EXPLANATIO N-1, IT IS OBVIOUS THAT THE REMISSION OR CESSATION OF LIABILIT Y INCLUDES THE LIABILITY CEASED BY UNILATERAL ACT OF THE ASSESSEE OF WRITING OFF OF SUCH LIABILITY IN ITS BOOKS OF ACCOUNTS. IN THE CA SE BEFORE US, THE ASSESSEE BANK HAS TRANSFERRED THE LIABILITY ON ACCO UNT OF SUNDRY CREDITORS TO RESERVE FUND. THEREFORE, PROVISIONS O F EXPLANATION-1 ARE APPLICABLE TO THE FACTS OF THE ASSESSEE CASE. THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION OF RS.4,99 ,016/- U/S.41(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIA BILITY TOWARDS SUNDRY CREDITORS. ACCORDINGLY, THE ADDITION WAS RI GHTLY CONFIRMED BY THE CIT(A). THIS REASONED FINDING OF CIT(A) WHE REBY HE HAS CONFIRMED THE ADDITION OF RS.4,99,016/- U/S.41(1) O F THE ACT MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATI ON OF LIABILITY TOWARDS SUNDRY CREDITORS, NEEDS NO INTERFERENCE FRO M OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF AUGUST, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH AUGUST, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE