Northern Railway Primary, Lucknow V. Asstt. Commissioner of Income tax , Lucknow

ITA 20/LKW/2012

• Counselvise Citation: 2023714 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Principle of natural justice; Rule of consistency; Bad and doubtful debts
• Section: 234B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO.20/LKW/2012 ASSESSMENT YEAR:2008-09 NORTHERN RAILWAY PRIMARY COOPERATIVE BANK LTD. 19A, VIDHAN SABHA MARG LUCKNOW V. ACIT RANGE II LUCKNOW PAN:AAALN0029L (APPELLANT) (RESPONDENT) A PP ELLANT B Y : SHRI. K. R. RASTO G I, C.A. RESPONDENT BY: SHRI. K. M. DIXIT, CIT (DR) DATE OF HEARING: 30.05.2013 DATE OF PRONOU NCEMENT: 07.08.2013 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY TH E ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) ON THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, LUCKNOW (HEREINAFTER CA LLED CIT (APPEALS)) HAS ERRED ON FACTS & IN LAW IN MAKING DISALLOWANCE RS.64497.00, OUT OF BUILDING MAINTENANCE EXPENSES REPRESENTI NG 1/3 OF RS.193491.00, INCURRED BY APPELLANT BECAUSE OF THE FOLLOWI NG CIRCUMSTANCES OF THE PRESENT CASE:- :-2-: A) BECAUSE A PORTION OF BUILDING LET OUT ONLY IS SITUATED AT LUCKNOW NOT AT MORADABAD AND LET OUT PORTION IS 30% ONLY. B) BECAUSE REPAIR & MAINTENANC E EXPENSES RELATING TO LUCKNOW BUILDING ARE RS.173877.00 AND PR OPORTIONATE EXPENSES WITH REFERENCE TO LET OUT PORTION OF THE SAME @ 30% COMES TO RS.52163.00 AND NOT RS.64997.00 AS DI SALLOWED BY LEARNED A.O. AND CONFIRMED BY CIT. C) BECAUSE BUILDING REPAIR & MAIN TENANCE RELATING TO OTHER BUILDING (OTHER THAN LET OUT PORTION) IS RS.121714.00 (RS.173877.00 - 52163.00) WHICH IS AN ALLOWABLE BUSINESS EXPENDITURE. D) BECAUSE THE OBSERVATION OF LEAR NED CIT (APPEALS) IS NOT CORRECT THAT DOUBLE DEDUCTION HAS BEEN ALLOWED TO THE APPELLANT IN THE PRESENT CASE. 2. THE LEARNED CIT (APPEALS) HA S ERRED ON FACTS & IN LAW IN CONFIRMING DISALLOWANCE OF RS . 11868000.00 CLAIMED AS BAD DEBTS IN RESPECT OF AMOUNT INVESTED WI TH CITY COOPERATIVE BANK ON THE BASIS OF DISALLOWANCE MADE IN A.Y 2006-07/2007-08, IN THE PRESENT CASE, ALLEGING THAT NO RESERVE WAS TO BE CREATED, TO INCREASE THE PROFIT IN THE PRESENT CASE. 3. THE LEARNED CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW NOT PASSING ORDER RELATING TO ADJU STMENT OF RS.977268. 00 REPRESENTING ADVANCE TAX PAID BY THE APPELLANT ON 30 TH OCTOBER, 2007 AGAINST THE ASSESSED INCOME, RESULTING IN EXCESS INTEREST CHARGED U/S 234B & 234C OF I. T. ACT, 19 61 IN THE PRESENT CASE. 4. THE LEARNED CIT- (APPEALS) DI D NOT ALLOW PROPER OR SUFFICIENT OPPORTUNITY IN MAKING COMPLIANCE OF THE REASONS RELIED UPON BY HIM IN PASSING THE ORDER, WHICH IS CO NTRARY TO PRINCIPLES OF NATURAL JUSTICE & FAIR PLAY. :-3-: 2. APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF ` 64,497 OUT OF BUILDING MAINTENANCE EXPENSES HAVING OBSERVED THAT THE ASSESSEE HAS LET OUT APPROXIMATELY 1/3 OF ITS PREMISES AT LUCKNOW AND MORADABAD. IT WAS ADMI TTED THAT THE INCOME FROM HOUSE PROPERTY WAS COMPUTED AND DEDUCTION UNDER SECTION 24 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SH ORT THE ACT') @ 30% WAS CLAIMED. BESIDES, BUILDING MAINTENANCE EXPE NSES WERE ALSO CLAIMED WHICH WAS DISALLOWED BY THE ASSESS ING OFFICER HAVING OBSERVED THAT IT AMOUNTED TO DOUBLE DEDUCTION INASMUCH AS PART OF THE EXPE NSES WERE CLAIMED IN COMPUTATION OF INCOME FROM HOUSE PROPERTY. 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER IS WITHOUT ANY BASIS, ARBITRARY & EXCESSIV E AND DESERVES TO BE DELETED. THE LD. CIT(A) RE-EXAMINED THE ISSUE AN D CONFIRMED THE DISALLOWANCE HAVING OBSERVED THAT THE ENTIRE AMOUNT OF ` 1,73,877 CLAIMED AS BUILDING MAINTENANCE EXPENSES IN RESPECT OF BUILDING AT LUCKNOW NEEDS TO BE DISALLOWED AND NOT JUST ` 64,497 SINCE THE CLAIM OF DEDUCTION FOR MAINTENANCE OF LUCKNOW BUILDING ALRE ADY STANDS ALLOWE D UNDER SECTION 24 OF THE ACT. 4. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT BUILDING MAINTENANCE EXPE NSES AS CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. 5. THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT THE INCOME FROM HOUSE PROPERTY IS TO BE COMPUTED AS PER PROVISIONS OF SECTIONS 22 AND 24 OF THE ACT. ACCORDING TO SECTION 24 OF THE ACT, CERTAIN DEDUCTIONS ARE TO BE ALLOWED WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. AS PER CLAUSE (A) OF SECTION 24 OF THE ACT, A SUM EQUAL TO THIRTY PERCENT OF THE ANNUAL VALUE IS TO BE DEDUCTED WHILE COMPUT ING THE INCOME FROM HOUSE PROPERTY. THERE IS NOTHING IN THE PROVISIONS OF SECTION 24 OF THE ACT WHICH ENTAIL THE :-4-: ASSESSEE TO CLAIM MAINTENANCE EXPENS ES WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. THEREFOR E, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER DESERVES TO BE UPHELD. 6. HAVING GIVEN A THOUGHTFUL CONSIDER ATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE ASSESSEE BANK LET OUT APPROXIMATELY 1/3 OF ITS PREMISES AT LUCKNOW AND MORADABAD AND RENTAL INCOME DERIVED THEREFROM IS BEING COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND DEDUCTION UNDER SE CTION 24 OF THE ACT WAS CLAIMED @ 30%. BESIDES, THE ASSESS EE HAS DEBITED A SUM OF ` 1,93,491 UNDER THE HEAD BUILDING MAINTENANCE EXPENS ES FOR MAINTENANCE OF LUCKNOW BUILDING. THE ASSESSING OFFICER, HOWEVER, RESTRICTED THE DISALLOWANCE TO 1/3 OF THE EXPENSES CLAIMED. BUT WHILE CONFIRMING THE DISALLOWANCE, THE LD. CIT(A) HAS OBSERVED THAT THE ENTIRE EXPENSES CLAIMED AT ` 1,73,877 AS BUILDING MAINTENANCE EXPENSES NEED S TO BE DISALLOWED AND NOT JUST ` 64,497. THOUGH THE LD. CIT(A) HAS OB SERVED THAT THE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE ARE TO BE DI SALLOWED WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY, BUT HE HAS RESTRICTED THE DISALLOWANCE UPTO ` 64,496. THIS FINDING OF THE LD. CIT(A) ARE NO T QUESTIONED BY THE REVENUE, BUT THE ADDITIONS SUSTAINED BY THE LD. CIT(A) IS CHALLENGED BY TH E ASSESSEE BEFORE US. THEREFORE, THE ISSUE OPEN BEFORE US FOR EXAMINATION IS WHETHER THE ASSESSEE IS ENTITLED TO CLAIM MAINTENANCE EXPENSES AGAINST RENTAL INCOME WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY AS PER PROVISIONS OF THE ACT? IN THIS REGARD, WE HAVE EXAMIN ED THE PROVISIONS OF SECTIONS 22, 23 AND 24 OF THE ACT AND WE FI ND THAT AS PER SECTION 22 OF THE ACT, THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUI LDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PU RPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHIC H ARE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. MEANING THEREB Y THE ANNUAL VALUE OF THE PROPERTY CONSISTING OF :-5-: ANY BUILDING OR LAND PERTAI NING THERETO OF WHICH THE ASSESSEE IS THE OWNER AND USED BY THE ASSESSEE FOR HIMS ELF AND NOT FOR ANY BUSINESS OR PROFESSION, SHALL BE CHAR GEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ANNUAL VALUE OF THE PR OPERTY IS TO BE DETERMINED AS PER PROVISIONS OF SECTION 23 OF THE ACT. SECTION 24 OF THE ACT ALLOWS STANDARD DEDUCTION WHILE COMPUTING THE INCOME FR OM HOUSE PROPERTY . FOR THE SAKE OF REFERENCE, WE REPRODUCE THE SECTIO NS 22, 23 AND 24 OF THE ACT AS UNDER:- 22. INCOME FROM HOUSE PROPERTY.- -THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OT HER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 23. ANNUAL VALUE HOW DETERMINED. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROP ERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MI GHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR ; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE ; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RE CEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY AN Y LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTE D (IRRESPECTIVE OF THE PR EVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO :-6-: THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION.FOR THE PURPOSES OF CLAU SE (B) OR CLAUSE (C) OF THIS SUB- SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SU CH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WH ICH THE OWNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH (A) IS IN THE OCCUPATION OF THE OW NER FOR THE PURPOS ES OF HIS OWN RESIDENCE ; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINE SS OR PROFESSION CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHE R PLACE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALU E OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TA KEN TO BE NIL. (3) THE PROVISIONS OF SUB-SE CTION (2) SHALL NOT APPLY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURI NG THE WHOLE OR ANY PART OF THE PREVIOUS YEAR ; OR (B) ANY OTHER BENEFIT THEREFRO M IS DERIVED BY THE OWNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION (2) CONSISTS OF MORE THAN ONE HOUSE (A) THE PROVISIONS OF THAT SUB-SECTIO N SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESS EE MAY, AT HIS OPTION, SPECIFY IN THIS BEHALF ; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER TH AN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EX ERCISED AN OPTION UNDER CLAUSE (A), SHALL BE DETERMINED UNDER SUB-SECTION :-7-: (1) AS IF SUCH HOUSE OR HOUSES HAD BEEN LET. 24. DEDUCTIONS FROM INCOME FR OM HOUSE PROPERTY.INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY SHALL BE COMPUTED AFTER MAKING THE FOLL OWING DEDUCTIONS, NAMELY : (A) A SUM EQUAL TO THIRTY PER CENT. OF THE ANNUAL VALUE ; (B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORRO WED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL : PROVIDED THAT IN RESPECT OF PROPERTY REFERRED TO IN SUB-SECTION (2) OF SECTION 23, THE AMOUNT OF DEDUCTION SHALL NOT EX CEED THIRTY THOUSAND RUPEES : PROVIDED FURTHER THAT WHERE THE PR OPERTY REFERRED TO IN THE FIRST PROVISO IS ACQUIRED OR CONSTRUCTED WI TH CAPITAL BORROWED ON OR AFTER THE 1ST DAY OF APRIL, 1999 AND SUCH ACQUISITION OR CONSTRUCTION IS COMPLETED **WITHIN THREE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH CAPITAL WAS BORROWED, THE AM OUNT OF DEDUCTION UNDER THIS CLAUSE SHALL NOT EXCEED ONE LAKH FIFTY THOUSAND RUPEES. EXPLANATION.WHERE THE PROPERTY HA S BEEN ACQUIRED OR CONSTRUCTED WITH BORROWED CAPITAL, THE INTEREST , IF ANY, PAYABLE ON SUCH CAPITAL BORROWED FOR THE PERIOD PRIOR TO THE PREVIOUS YEAR IN WHICH THE PROPERTY HAS BEEN ACQUI RED OR CONSTRUCTED, AS REDUCED BY ANY PART THEREOF ALLOWED AS DEDUCTION UNDER ANY OTHER PROVISION OF THIS ACT, SHALL BE DEDUCTED UNDER THIS CLAUSE IN EQUAL INSTALMENTS FOR THE SAID PREVIOUS YEAR AND FOR EACH OF THE FOUR IMMEDIATELY SUCCEEDING PREVIOUS YEARS. **PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THE SECOND PROVISO UNLESS THE ASSESSEE FURNISHES A CERTIFICATE, FROM THE PERSON TO WHOM ANY INTEREST IS PAYABLE ON THE CAPITAL BORROWED, SPECIFYING THE AMOUNT OF INTEREST PAYABLE BY THE ASSESSEE FOR THE PURPOSE OF SUCH ACQUISITION OR CONSTRUCTION OF TH E PROPERTY, OR, CONVERSION OF THE WHOLE OR ANY PART OF THE CAPITAL BO RROWED WHICH REMAINS TO BE REPAID AS A NEW LOAN. :-8-: **EXPLANATION.FOR THE PURPOSES OF TH IS PROVISO, THE EXPRESSION NEW LOAN MEANS THE WHOLE OR ANY PART OF A LOAN TAKEN BY THE ASSESSEE SUBSEQUENT TO THE CAPITAL BORROWED , FOR THE PURPOSE OF REPAYMENT OF SUCH CAPITAL. 7. IN THE INSTANT CASE, ADMITTEDLY 1/ 3 PORTION OF THE PROPERTIES AT LUCKNOW AND MORADABAD WERE LET OUT, THEREFORE, THE INCOME FROM HOUSE PROPERTY IS TO BE COMPUTED WITH RESPEC T TO THE SAID 1/3 PROPERTY LET OUT TO DIFFERENT TENANTS AND WHILE ALLOWING STA NDARD DEDUCTION AS PER CLAUSE (A) OF SECTION 24 OF THE ACT, 30% OF THE ANNUAL VALUE IS RE QUIRED TO BE DEDUCTED. BESIDES, NO OTHER MAINTENANCE EXPENS ES ARE ALLOWED TO BE DEDUCTED AS THERE IS NO SPECIFIC PROVISION IN THIS REGARD IN THE ACT. ADMITTEDLY ASSESSEE HAS CLAIMED TOTAL MAINTENANCE EXPENS ES UNDER THE HEAD BUILDING AND MAINTENANCE, MEANING THEREBY ONLY 1/3 OF ITS EXPENSES WERE INCURRED TO MAINTAIN THE PROPERTY LET OUT TO DIFFERENT TENANTS. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALL OWED 1/3 OF MAINTENANCE EXPENSES CLAIMED BY THE ASSESSEE WHILE COMPUTING DE DUCTION UNDER SECTION 24 OF THE ACT. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT PLACE ANY RELEVANT MATERIAL ON RECORD, ACCORD ING TO WHICH THE ASSESSEE CAN CLAIM MAINTENANCE EXPENSES BESIDES STAN DARD DEDUCTIONS ENVISAGED UNDER SECTION 24 OF THE ACT WHILE COMPUTING TH E INCOME FROM HOUSE PROPERTY. IN THE LIGHT OF THESE FACTS, WE DO NOT FIND ANY FORCE IN THE OBSERVATIONS OF THE LD. CIT(A) THAT THE ENTIRE EXPENDITU RES NEED TO BE DISALLOWED WHILE CONFIRMING THE DISALLOWANCE OF ` 64,497. SINCE WE DO NOT FIND ANY ERROR IN THE AFORESAID DISALLOWANCE, WE CONFIRM THE ORDER OF THE LD. CIT(A) IN THIS REGARD. 8. APROPOS GROUND NO.2, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF ` 1,17,60,000 DEBITED UNDER THE HEAD INVESTMENT DEPRECIATION RESERVE AND MADE ADDITION OF THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. :-9-: 9. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE BANK HAS DEBITED ` 1,17,60,000 UNDER THE HEAD INVEST MENT DEPRECIATION RESERVE THIS YEAR ALSO. RELYING UPON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF THE SAME AFTER HAVING OBSERVED THAT THE BAD DEBTS IN BANKING OR MONEY LENDING BUSINESS CAN BE DEDUCTED ONLY IF IT REPRESEN TS MONEY GIVEN AS LOAN IN ORDINARY COURSE OF MONEY LENDING BUSINESS IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF AMAR CHAND SOBHA CHAND VS. CIT, 82 ITR 591 (SC). WHILE MAKING DISALLOWANCE, THE ASSE SSING OFFICER HAS ALSO OBSERVED THAT AS PER AUDIT CERTIFICAT E, THE INVESTMENT WAS SQUARELY AGAINST THE RULES AND REGULATIONS LAID DOWN UNDER SECTION 59(C) AND 32(D) OF THE RESERVE BANK OF INDIA ACT, 1934 AND THE RESOLUTION NO.6637 DATED 23.3.1995 WHICH ONLY APPROVED FOR OP ENING OF A CURREN T DEMAND ACCOUNT IN CITY COOPERATIVE BANK AND NOT FOR MAKING THE INVESTMENT. 10. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT INVESTMENT OF ` 5.88 CRORES WITH CI TY CO-OPERATIVE BANK HAS BECOME IRRECOVERABLE AND THE RBI HAD ISSUED DIRECTIONS TO CREATE REQUISITE PROVISIONS AGAINST THE SAME AND IF IT WAS NOT POSSIBLE TO MAKE PROVISION IN ONE YEAR, IT COULD BE MADE IN TWO OR THREE YEARS. SINCE THE ASSESSEE HAS TRANSFERRED ` 1,18,68,000 TO INVESTMENT DEPRECIATION RESERVE ACCOUNT AS PER THE DIRECTIONS OF THE RBI, THE CLAIM MADE BY THE ASSESSEE DESERVES TO BE ALLOWED. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE FOLLOWING HIS OWN ORDER PASSED IN ASSE SSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. 11. NOW THE ASSESSEE IS BEFORE US AN D HAS REITERATED ITS CONTENTIONS AS RAISED BEFORE THE LD. CIT(A). BE SIDES, THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE TRIBUNA L IN THE CASE OF TEDCO INVESTMENT & FINANCIAL SERVICES PVT. LTD. VS. DCIT , 87 ITD 298 (DELHI); JUDGMENT OF THE :-10-: HON'BLE UTTARANCHAL HIGH COURT IN THE CA SE OF CIT VS. NAINITAL BANK LIMITED, 309 ITR 335 AND THE JUDGMENT OF HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. THE LORD KR ISHNA BANK LTD., 55 DTR 277. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT CHAP TER III-B OF THE RESERVE BANK OF INDIA ACT, 1934 HAS AN OVERRIDING EFFECT OVER THE PROVISIONS OF INCOME-TAX ACT INCLUDING SECTION 145 OF THE ACT AS THE RBI ACT WAS INCORPORATED FOR SPECIFIC PURPOSE AND SECTION 45Q CATEGO RICALLY BRINGS OUT THE INTENTION OF THE LEGISLATURE INASMUCH AS IT STATES THAT CHAPTER III-B SHALL OVERRIDE OTHER PROVISIONS. 12. THE LD. D.R., ON THE OT HER HAND, HAS SUBMITTED THAT THE LD. CIT(A) HAS FOLLOWED HIS ORDER FOR ASSE SSMENT YEARS 2006-07 AND 2007-08 AND NOTHING HAS BEEN BROUGHT ON RECORD THAT THE ORDER PASSED BY THE LD. CIT(A) FOR ASSESSMENT YEARS 2006-07 AND 2007- 08 HAVE BEEN REVERSED BY THE APPELLATE AUTHORITIES. FOLLOWING THE RULE OF CONSISTENCY, THE ORDER OF THE LD. CIT(A) DESERVES TO BE UPHE LD. HE FURTHER INVITED OU R ATTENTION THAT AS PER RESOLUTION NO.6637 DATED 23.3.1995 TH E ASSESSEE WAS PERMITTED TO OPEN AN ACCOUNT IN CITY COOPERATIVE BANK, BUT THE ASSESSEE WAS NEVER PERMITTED TO MAKE THE INVESTMENT WITH THE BANK IN FDRS. SINCE THE ASSESSEE HAS NOT ACTED UPON AS PER THE RESOLUTION, IT IS NOT ENTITLED TO TRAN SFER THE AFORESAID AMOUNT TO INVESTMENT DEPRECIATION RESERVE. 13. HAVING HEARD THE RIVAL SUBMISSION S AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE ASSESSING O FFICER HAS MADE DISALLOWANCE FOLLOWING HIS EARLIER ORDER FO R ASSESSMENT YEAR 2006-07, WH ICH WAS LATER ON UPHELD BY THE LD. CIT(A) AND FOLLOWING THE SAME TH E LD. CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE. DURING THE COURSE OF HE ARING OF THE APPEAL, A SPECIFIC QUERY WAS RAISED FROM THE LD. COUNSEL FOR TH E ASSESSEE AS TO WHAT HAS HAPPENED WITH REGARD TO THE DISALLOWANCE MADE IN ASSESSMENT YEARS 2006-07 AND 2007-08, BUT THE LD. COUNSEL FOR THE A SSESSEE COULD NOT FURNISH A SPECIFIC REPLY. ON A CAREFUL PERUSAL OF RECO RD, WE FIND THAT THE ASSESSEE HAS MADE REFERENCE TO THE RESOLUTION AND THE LETTER WRITTEN BY THE RBI IN SEPTEMBER, :-11-: 2003 APPEARING AT PAGE 10 OF THE COMPILA TION OF THE ASSESSEE, ACCORDING TO WHICH THE ASSESSEE WAS ADVISED TO MAKE NECESSARY PROVISIONS FOR ` 5.88 CRORES DURING THE CURRENT FI NANCIAL YEAR AND IF IT IS NOT POSSIBLE IN ONE YEAR, IT MAY BE DONE IN TWO OR THREE YEARS. THIS ADVISE WAS RECEIVED IN THE MONTH OF SEPTEMBER, 2003, THEREFORE, THE ASSE SSEE COULD HAVE MADE PROVISION PURSUANT TO THE DIRECTION OF THE RBI DURING THE FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSESSMENT YEAR 2004-05. IF THE PROVISION OF THE ENTIRE AMOUNT IS NOT POSSIBLE IN THE CURRENT FINANCIAL YEAR, IT COULD HAVE BEEN DONE IN 2 OR 3 YEARS I.E. IN ASSESSMEN T YEARS 2005-06 AND 2006-07, BUT NOTHING HAS BEEN PLACED BEFORE US AS TO HOW THE ASSESSEE HAS ACTED AS PER ADVISE OF THE RBI IN ASSESS MENT YEARS 2004-05; 2005-06 AND 2006-07. IN ANY CASE, THE LOWER AUTHORITIES HAVE MADE REFERENCE TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN EAR LIER YEARS I.E. ASSESSMENT YEAR 2006-07 AND 2007-08 WHICH WAS LATER ON UPHELD BY THE LD. CIT(A). BUT NOTHING HAS BEEN PLACED BEFORE US AS TO WHAT HAS HAPPENED THEREAFTER. WHETHER THE LD. CIT(A)S ORDER HAS ATTAINED FINALITY OR IT WAS CHALLENGED IN THE APPELLATE COURT. IF THE AFORESAID LE TTER OF THE RBI IS PROPERLY READ, WE WOULD FIND THAT THE ASSESSEE WAS ADVISED TO MA KE PROVISIONS OF A SUM OF ` 5.88 CRORES WHICH WAS INVESTED IN CITY CO-OPERATI VE BANK AND HAS BECOME IRRECOVERABLE IN THE CURRENT FINANCIAL YEAR. IF THE ENTIRE AMOUNT CANNO T BE ADJUSTED IN ONE YEAR, PROVISION CAN BE MADE FOR TWO OR THREE YE ARS. EVEN IF WE TAKE MAXIMUM TIME GIVEN BY THE RBI I.E. THREE YEARS, THE PROVISION COULD HAVE BEEN MADE DURING TH E ASSESSMENT YEARS 2004- 05; 2005-06 AND 2006-07 AND NOT IN THE IMPUGNED ASSESSMENT YEAR 2008-09. 14. SO FAR AS THE JUDGMENTS REFERRED TO BY THE ASSESSEE ARE CONCERNED, WE HAVE CAREFULLY EXAMIN ED THEM AND FIND THAT THROUGH THESE JUDGMENTS IT HAS BEEN HELD THAT THE RB I ACT IS A SPECIAL ACT APPLICABLE ONLY TO SPECIAL CLASS OF ASSESS EES AS IT WAS INCORPORATED FOR A SPECIFIC PURPOSE AND SECTION 45Q OF THE RBI ACT CATEGORICA LLY STATES THAT CHAPTER III-B SHALL OVERRIDE ALL THE INTENTS AND PURPOSES AND ANYTHING INCONSISTENT WITH ANY :-12-: OTHER ACT FOR THE TIME BE ING IN FORCE OR ANY INST RUMENT HAVING EFFECT BY VIRTUE OF ANY SUCH LAW SHALL FADE INTO OBLIVION ON ACCOUNT OF THAT FACT. IT WAS ALSO HELD THAT THE DIRECTIONS ISSU ED BY THE RBI BY VIRTUE OF POWERS VESTED IN IT BY SECTION 45JA WHICH IS TO BE EXERCISED IN PUBL IC INTEREST OR TO REGULATE THE FINANCIAL SYSTEM OF THE CO UNTRY TO ITS ADVANTAGE OR TO PREVENT THE AFFAIRS OF ANY NBFC BEING CONDUC TED IN MANNER DETRIMENTAL TO THE INTEREST OF THE DEPOSITORS OR IN A MANNER PREJUDICIAL TO THE INTEREST OF THE NBFC ARE BINDING ON THE CONCERNED AUTHORITIES. 15. SIMILAR VIEW WAS ALSO EXPRESSED BY THE HON'BLE UTTARANCHAL HIGH COURT IN THE CASE OF CIT VS. NAINITAL BANK LIMITED (SUPRA) BY HOLDING THAT THE RBI ACT, 1934 WAS INCORPORATED FO R SPECIFIC PURPOSE AND SECTION 45Q CATEGORICALLY BRINGS OUT THE INTENTION OF THE LEGISLATURE INASMUCH AS IT STATES THAT CHAPTER III-B SHA LL OVERRIDE OTHER PROVISIONS. 16. IN THE CASE OF CIT VS. THE LORD KRISHNA BANK LTD. (SUPRA), THE HON'BLE KERALA HIGH COUR T HAS HELD THAT THE RBI BEING THE APEX BODY ISSUING GUIDELINES TO THE BANKS FO R VALUATION OF UNQUOTED GOVERNMENT SECURITIES, ITS GUIDELINES ARE THE RATI ONAL BASIS WHICH ASSESSEE WAS BOUND TO ADOPT. 17. IN THE LIGHT OF THE AFORESAID VA RIOUS JUDICIAL PRONOUNCEMENTS, THERE IS NO CONTROVERSY WITH REGARD TO THE OVERRIDING EFFECT OF THE GUIDELINES ISSUED BY THE RBI OVER TH E PROVISIONS OF THE INCOME -TAX ACT. BUT IN THE INSTANT CASE, WE HAVE TO EXAMINE CAREFU LLY AS TO WHAT GUIDELINES HAVE BEEN ISSUED TO THE ASSESSEE BY THE RBI FO R MAKING PROVISIONS OF INVESTMENT MADE IN THE CITY COOPERATIVE BANK WHIC H HAS BECOME IRRECOVERABLE. IN THIS REGARD, A LETTER DATED 6 TH SEPTEMBER, 2003 WRITTEN BY THE RBI TO THE ASSESSEE IS VERY CRUCIAL DOCUMENT TO RE SOLVE THE PRESENT CONTROVERSY AS TO WHETHER PROVISION WAS MADE BY THE A SSESSEE AS PER THE DI RECTIONS/ ADVICE/ GUIDELINES OF THE RBI. TH IS LETTER IS APPEARING AT PAGE 10 OF THE COMPILATION OF THE ASSESSEE AND ON ITS CAREFUL PERU SAL, IT APPEARS THAT THE ASSESSEE HAS SOUGHT ADVICE/GUIDELINES FROM TH E RBI VIDE ITS LETTER DATED 8 TH AUGUST 2003 :-13-: WITH REGARD TO THE INVESTMENT MADE WITH THE CITY COOPERATIVE BANK LIMITED, LUCKNOW WHICH HAS BECOME IR RECOVERABLE AND TH E RBI HAS ADVISED THE ASSESSEE VIDE LETTER DATED 6 TH SEPTEMBER, 2003 TO MAKE NECESSARY PROVISION OF THE ENTIRE AMOUNT OF ` 5.88 CRORES AND IF THE PROVISION OF ENTIRE AMOUNT OF ` 5.88 CRORES IS NOT POSSIBLE IN ONE YEAR, IT SHOULD BE ENSURED THAT THE PROVISION BE MADE WITHIN TWO OR THREE YEARS. THE CONTENTS OF THE LETTER ARE IN HINDI AND ARE REPRODUCED AS UNDER FOR THE SAKE OF REFERENCE:- / / / 2003 8 2003 . 5.88 3 . . 1965 18. THIS LETTER WAS WRITTEN BY THE RBI TO THE ASSESSEE IN SEPTEMBER, 2003, THEREFORE, AS PER AD VICE OF THE RBI, THE A SSESSEE WAS REQUIRED TO MAKE PROVISION OF THE ENTIRE INVESTMENT OF ` 5.88 CRORES WHICH HAS BECOME IRRECOVERABLE, WITHIN THE CURRENT FINANCIAL YEAR RE LEVANT TO THE ASSESSMENT YEAR 2004-05. IF PROVISION OF THE ENTIRE AMOUNT IS NOT PO SSIBLE WITHIN ONE YEAR, IT SHOULD ENSURE THAT IT IS DO NE WITHIN TWO OR THREE YEARS, MEANING THEREBY AT THE MOST PROVISION OF THE EN TIRE AMOUNT SHOULD HAVE BEEN DONE WITHIN THE FINANCIAL YE ARS RELEVANT TO THE AS SESSMENT YEARS 2004-05, 2005- 06 AND 2006-07 AND NOT THEREAFTER. BUT IN THE INSTANT CASE PROVISION WAS MADE IN THE ASSESSMENT YE AR 2008-09, FOR WHICH NO DIRECTION/ADVICE WAS EVER ISSUED BY THE RBI. :-14-: 19. ON PERUSAL OF THE ORDER OF THE LD . CIT(A), IT APPEARS THAT THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE FOLLOWING THE DISALLOWANCE MADE IN ASSESSMENT YEARS 2006-07 AND 2007-08 AND NOTHING HAS BEEN PLACED ON RECORD AS TO WHAT HAS HAPPENED TO TH E SAID DISALLOWANCE. WHETHER IT WAS CHALLENGED BEFORE THE APPELLATE AUTHOR ITIES OR IT WAS ACCEPTED BY THE ASSESSEE. IN ANY CASE, AS PER ADVICE OF THE RBI PROVISION OF THE AFORESAID INVESTMENT AMOUNT OF ` 5.88 CRORES IS POSSIBLE DU RING THE FIRST THREE YEARS I.E. FINANCIAL YEARS RE LEVANT TO THE ASSESSMEN T YEARS 2004-05, 2005-06 AND 2006-07 AND THEREAFTER ITS PROVISION CA NNOT BE ALLOWED WITHOUT ANY FURTHER INSTRUCTION OF THE RBI. THE A SSESSEE HAS CLAIMED PROVISION OF ` 1,17,60,000 DURING THE IMPUGNED ASSESSMENT YEAR WITHOUT ANY ADVI CE OF THE RBI AGAINST THE PROVISIONS OF THE INCOME-TAX ACT. THEREFORE, WE ARE OF THE VIEW THAT THE CLAIM RAISED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE LAW AND THE LD. CIT(A) IS JUSTIFIED IN DISALLOW ING THE SAME. WE ACCORDINGLY FIND NO MERIT IN THE ARGUMENTS OF THE ASSESS EE AND CONFIRM THE ORDER OF THE LD. CIT(A). 20. GROUND NO.3 RELATES TO THE CHARGE ABILITY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. NO ARGUMEN T WAS RAISED BY TH E LD. COUNSEL FOR THE ASSESSEE ON THIS ISSU E DURING THE COURSE OF HE ARING OF THE APPEAL. WE, HOWEVER, EXAMINED THIS ISSUE AND FIND THAT THE ISSUE OF CHARGEABILITY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT IS CONSEQUENTIAL IN NATURE AND DOES NOT REQUIRE ANY IN DEPENDENT ADJUDICATION. ACCORDINGLY WE FIND NO MERIT IN THIS GROUND, HENCE DISMISS THE SAME. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN TH E OPEN COURT ON 7.8.2013. SD/- SD/- [PRAMOD KUMAR] [S UNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:7.8.2013 JJ:0807 :-15-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR