Asstt. CIT,Akola Cir.1, Akola V. The Akola UrbanCo. op Bank Ltd., Akola

ITA 167/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1794 (ITAT-NAGPUR)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) . . , . / , . . BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER /AND SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 167/NAG/2012 / ASSESSMENT YEAR 2008-09 ASST. COMMISSIONER OF INCOME TAX, AKOLA CIRCLE, 1 ST FLOOR, AYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA. VS. THE AKOLA URBAN CO-OP. BANK LTD., JAN KALYAN, 58-59, TOSHNIWAL LAYOUT, NEAR GOVT. MILK SCHEME, MURTIZAPUR ROAD, AKOLA. PAN: AAAAT 4082 A ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY : SHRI PRAKASH MANE, ASSESSEE BY : NONE ! '#$ / DATE OF HEARING : 31-01-2013 %& ! '#$ / DATE OF PRONOUNCEMENT : 08-02-2013 '( / O R D E R PER RAJENDRA, AM THE FOLLOWING ARE THE GROUNDS OF APPEAL FILED BY TH E ASSESSING OFFICER (AO) AGAINST ORDER DT. 10-02-2012 OF CIT(A)-I , NAGPUR. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THERE WAS NO RECOGNITION OF I NCOME ON THE BASIS OF CREDIT ENTRY MADE IN THE BOOKS OF ACCOUNTS IN RESPECT OF T HE INCOME TO THE EXTENT OF RS. 70 LAKHS AND THIS WAS FOR THE REASON THAT INCOME TO THAT EXTENT WAS REDUCED BY DEBITING THE SAID AMOUNT TO THE OVERDUE INTEREST RE SERVE (STANDARD ASSETS) ACCOUNT AND HENCE THE AMOUNT IS NOT EXIGIBLE TO TAX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE PROVISIONS OF S.43D W HICH STIPULATE THAT INCOME BY WAY OF INTEREST IS TAXABLE ON THE BASIS OF THE CRED IT IN THE BOOKS OF ACCOUNTS OR ACTUAL RECEIPT WHICHEVER IS EARLIER. ITA NO. 167/NAG/2012 THE AKOLA URBAN CO-OP. BANK LTD., 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD ALREADY CREDITED RS. 82.57 LAKHS IN RESPECT OF ACCRUED INTEREST ON NPA AND RS. 70 LAKHS WAS ONLY A GENERAL PROVISION AND HENCE AS PER THE PROVISION OF SEC. 43 D, THE ENTIRE INTEREST INCOME OF RS. 82.75 LAKHS IS CHARGEABLE TO TAX. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF RULE 6EA AR E APPLICABLE AND THE OVERDUE INTEREST TO THE EXTENT OF RS. 22.29 LAKHS ON THE BA D AND DOUBTFUL DEBTS OUTSTANDING FOR SIX MONTHS OR MORE IS LIABLE TO BE EXCLUDED FROM THE INCOME CREDITED. 5. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. 2. ASSESSEE CO-OPERATIVE BANK FILED ITS ORIGINAL RETUR N OF INCOME ON 30-09-2008 DECLARING TOTAL INCOME OF RS. 13,04,46,060/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1961 (ACT) ON 09-10-2009. LATE R ON ASSESSEE REVISED ITS RETURN ON 31-03-2010 DECLARING TOTAL INCOME OF RS. 12,60,1 4,920/-. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ORDER U/S. 143(3) OF THE A CT ON 31-12-2010 DETERMINING THE TOTAL INCOME AT RS. 13.30 CRORES. 3. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE ASSESSEE BANK HAD DEBITED THE PROVISION FOR OVERDUE INTEREST RESERVE (STANDARD ASSETS) OF RS. 70,00,000/- TO THE P&L A/C AND THE SAME HAD NOT BEE N ADDED BACK IN THE COMPUTATION OF INCOME. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THIS PROVISION OF RS. 70 LAKHS SHOULD NOT BE ADDED IN THE COMPUTATION OF INC OME. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT CONTENTIO N FILED BY THE ASSESSEE WAS NOT ACCEPTABLE, THAT PROVISION FOR OVERDUE INTEREST RES ERVE (STANDARD ASSETS) CLAIMED AT RS. 70 LAKHS WAS NOT ALLOWABLE, THAT IT WAS A MERE PROVISION AND NOT A LIABILITY, THAT PROVISION MIGHT HAVE BEEN VALIDLY MADE FOR PREPARIN G ACCOUNTS ON ANY OTHER SPECIFIED OBJECTIVE IN THE SAID ACT, THAT FOR COMPUTING THE A SSESSABLE INCOME OF THE ASSESSEE, SAID PROVISION WAS NOT PERMISSIBLE UNDER THE INCOME TAX ACT. AS A RESULT, CLAIM MADE BY THE ASSESSEE WAS DISALLOWED BY THE AO. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-B ANK AND THE REMAND REPORT OF THE AO, HE HELD THAT SECTION 36(1)(VIIA) ALLOWED A BANK TO CLAIM A PROVISION OF AN AMOUNT TOWARDS BAD AND DOUBTFUL DEBTS BASED ON CERTAIN CRI TERIA, THAT SECTION 43D ALSO ALLOWED THE ASSESSEE TO OFFER CERTAIN INCOME ON BAD AND DOUBTFUL DEBTS OF CERTAIN CATEGORIES WHEN IT WAS ACTUALLY RECEIVED, THAT TWO SECTIONS WERE NOT MUTUALLY EXCLUSIVE, THAT THE ASSESSEE HAD MADE A PROVISION F OR UNREALIZED INTEREST ON NPAS WHICH HAD BEEN WRONGLY CLASSIFIED AS STANDARD ASSET S, THAT AO HAD ALSO IN THE REMAND REPORT ACCEPTED THAT THE PROVISIONS OF SECTION 43D WERE APPLICABLE IN THE APPELLANTS CASE AS APPELLANT WAS A MULTI-STATE SCHEDULED BANK. REFERRING TO PROVISIONS OF SECTION 43D OF THE ACT AND RULE 6E RELEVANT FOR DECIDING TH E ISSUE OF DOUBT DEBTS/INTEREST ACCRUAL, FAA FURTHER HELD THAT THE PRIMARY REQUIREM ENTS WERE LAID DOWN BY RULE 6E, THAT ONLY THOSE ACCOUNTS OF BORROWERS; IN WHICH OUT STANDING WAS DUE FOR A PERIOD OF SIX MONTHS AND MORE; WERE TO BE CONSIDERED FOR REC OGNISING BAD AND DOUBTFUL DEBTS, THAT APPELLANT HAD CLASSIFIED INTEREST ON BAD DEBTS WHICH WERE OUTSTANDING ABOVE 3 MONTHS AND BELOW 6 MONTHS TO THE EXTENT OF 47.71 LA KHS AS INTEREST OVER DUE. FAA HELD THAT TREATMENT GIVEN BY THE ASSESSEE-BANK TO T HE INTEREST ON OUTSTANDING BAD BEDTS ITA NO. 167/NAG/2012 THE AKOLA URBAN CO-OP. BANK LTD., 3 AMOUNTING TO RS. 47.71 LAKHS WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF RULE 6E OF THE RULES. REFERRING TO THE DECISION OF GIC HOU SING FINANCE LTD., [45 SOT 318 (MUM)] FAA HELD THAT THE RULE 6E WHICH HAD SPECIFI ED THAT ONLY DEBTS WHICH WERE OUTSTANDING FOR 6 MONTHS OR MORE SHOULD BE TAKEN IN TO ACCOUNT FOR THE PURPOSE OF RECKONING INTEREST WHICH IS OVERDUE, THAT AN AMOUNT OF RS. 47.71 LAKHS WHICH RELATED TO OVERDUE INTEREST ON BAD DEBTS THE AGE OF WHICH W AS BETWEEN 3 MONTHS TO 6 MONTHS THEREFORE HAVE TO BE EXCLUDED THIS PURPOSE. RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF SOUTHERN TECHNOLOGIES VS. JCIT (320 ITR 577) FAA HE LD THAT THE RESERVE BANK GUIDELINES WOULD NOT HAVE PRECEDENCE OVER THEIR PRO VISION OF INCOME TAX ACT, THAT IT WAS ONLY DEBTS WHICH WERE OUTSTANDING FOR SIX MONTH S OR MORE THAT WERE REQUIRED TO BE CONSIDERED FOR THIS PURPOSE. FINALLY HE HELD TH AT RS. 22.29 LAKHS WAS LIABLE TO BE EXCLUDED AS INCOME ON BAD AND DOUBTFUL DEBTS AS PER THE PROVISIONS OF SECTION 43D AS AGAINST THE AMOUNT OF RS. 70 LAKHS CLAIMED BY THE A PPELLANT, THAT THE BALANCE AMOUNT DID NOT PERTAIN TO DEBTS THAT WERE OUTSTANDING FOR SIX MONTHS OR MORE. 5. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE (AR) SUPPORTED THE ORDER OF THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE RIVAL SIDE, WE ARE OF THE OP INION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY FACTUAL OR LEGAL INFIRMITY. AFTER CONSIDERING THE PROVISIONS OF SECTION 43D R.W.R. 6E AND AFTER ANALYSING THE RATIOS OF DEC ISIONS DELIVERED BY THE HONBLE SUPREME COURT, IN THE CASES OF UCO BANK [237 ITR 88 9 (SC)] AND SOUTHERN TECHNOLOGIES (SUPRA), FAA HAS PARTLY ALLOWED THE AP PEAL FILED BY THE ASSESSEE-BANK. OUT OF THE TOTAL CLAIM OF RS. 70 LAKHS, FAA HAS HEL D THAT BAD AND DOUBTFUL DEBTS AMOUNTING TO RS. 22.29 LAKHS WERE ALLOWABLE, SINCE SAME WERE SIX MONTHS OLD. UPHOLDING THE ORDER OF THE FAA, WE REJECT THE GROUN DS OF APPEAL FILED BY THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. ) *+ , -# / '01 ! * 23 ! ' 45. ORDER PRONOUNCED BY E-BENCH AT MUMBAI ON THIS 8 TH DAY OF FEBRUARY, 2013 *7 0+' - 789 / 8 FEBRUARY, 2013 & '( %&:' ; . SD/- SD/- ( . . / R.K. GUPTA ) ( / RAJENDRA ) '+ / JUDICIAL MEMBER $ '+ / ACCOUNTANT MEMBER *7 MUMBAI, ;' DATE: 8 TH FEBRUARY, 2013 TNMM ITA NO. 167/NAG/2012 THE AKOLA URBAN CO-OP. BANK LTD., 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE :' ' //TRUE COPY// BY ORDER, ASST. REGISTRAR, ITAT