Appeal details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 4530 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 3 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-02-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
28-01-2021
Assessment Year
2011-2012
Appeal Filed On
03-11-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2116/BANG/2017 ITA NO.1251/BANG/2019 ASSESSMENT YEAR : 2011-12 & 2015-16 THE MANDYA DISTRICT CO- OPERATIVE CENTRAL BANK LTD., POST BOX NO.14, MANDYA-571 401. PAN AAAAT 1518 K VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), MYSORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI S.V RAVISHANKAR, ADVOCATE REVENUE BY : SMT. R PREMI, JCIT (DR) DATE OF HEARING : 28-01-2021 DATE OF PRONOUNCEMENT : 10-02-2021 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: PRESENT APPEAL IS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 28/10/2016 AND 29/03/2019 PASSED BY THE LD.CI T(A), MYSORE FOR ASSESSMENT YEAR 2011-12 AND 2015-16 ON F OLLOWING GROUNDS OF APPEAL: PAGE 2 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 ITA NO.2116/BANG/2017 1. THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS), MYSORE PASSED UNDER SECTION 250 OF THE INCOME TAX A CT, 1961 IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN NOT QUASHING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN THE WRONG STATUS AS A 'COMPANY' ON THE FACTS AND CIRCUMSTANCES OF TH E CASE. 3. THE LEARNED COMMISSIONER (APPEALS) FAILED TO TAK E NOTE THAT THE ASSESSMENT COMPLETED IN WRONG STATUS IS NOT A CURAB LE DEFECT UNDER THE PROVISIONS OF SECTION 292B OF THE ACT ON THE FACTS OF THE CASE. 4. THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING TH E DISALLOWANCE MADE UNDER SECTION 40(A)(IA) IN RESPECT OF AMOUNT O F RS. 73,71,646/- BEING THE PAYMENTS MADE TO PIGMY COLLECTORS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE RELATIONSHIP BETWEEN THE PIGMY COLLECTORS AND THE APPELLANT CO-O PERATIVE BANK IS THAT OF MASTER-SERVANT AND NOT THAT OF PRINCIPAL-AGENT A S HELD BY THE HON'BLE SUPREME COURT IN INDIAN BANKS ASSOCIATION V. WORKME N OF SYNDICATE BANK & ORS. IN CIVIL APPEAL NO. 3355 OF 1998 DECIDE D ON 13.02.2001 REPORTED IN 2001(1) SCR 1011. 6. THE COMMISSIONER (APPEALS) ALSO FAILED TO TAKE N OTE OF AND FOLLOW CBDT'S LETTER DATED 03.03.2008 IN F,NO.275/25/2007/ ITB TO THE INDIAN BANKS' ASSOCIATION WHICH HAS CLARIFIED THAT PAYMENT S TO PIGMY COLLECTORS ARE TO BE MADE UNDER SECTION 192 OF THE ACT AS SALARY. 7. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE APPELLANT COOPERATIVE BANK IS ONLY ELIGIBLE FOR DEDUCTION IN RESPECT OF PROVISION FOR NPA OF SEVEN AND HALF PERCENT OF THE TOTAL INCOME I N TERMS OF SECTION 36(I)(VIIA) OF THE ACT ON THE FACTS AND CIRCUMSTANC ES OF THE CASE. 8. THE COMMISSIONER (APPEALS) ERRED IN DENYING THE DEDUCTION AVAILABLE UNDER THE SECOND LIMB OF CLAUSE (A) OF SE CTION 36(1)(VIIA) OF THE ACT TO THE EXTENT OF 10% OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRI BED MANNER ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE CO- OPERATIVE BANKS CAME TO BE TREATED AT PAR WITH COMM ERCIAL/SCHEDULED BANKS WITH THE AMENDMENT MADE TO THE ACT IN 2007 AN D THEREAFTER, THE DEDUCTIONS AVAILABLE TO COMMERCIAL/SCHEDULED BANKS OUGHT TO BE EXTENDED TO CO-OPERATIVE BANKS ALSO. 10. THE COMMISSIONER (APPEALS) OUGHT TO HAVE FOLLOW ED THE DECISION OF THE NAGPUR BENCH OF THE INCOME TAX APPELLATE TRIBUN AL IN THE CASE OF DCIT V. THE AMRAVATI DISTRICT CENTRAL CO-OPERATIVE BANK LTD. ITA NO. PAGE 3 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 29/NAG/2015 DATED 17.06.2016 WHICH HAS ALSO BEEN UP HELD BY THE HON'BLE BOMBAY HIGH COURT. 11. THE APPELLANT CRAVES FOR LEAVE OF THIS HON'BLE TRIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 12. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APP EAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSMENT YEAR 2011-12 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED I N CARRYING ON BUSINESS OF BANKING. FOR YEAR UNDER CONSIDERATIO N, IT FILED ITS RETURN OF INCOME ON 24/09/2011 DECLARING TOTAL INCO ME OF RS.55,99,195/-. THE RETURN WAS REVISED ON 30/03/201 2 WITH THE TOTAL INCOME OF RS.28,85,763/-. THE CASE WAS SE LECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO ASSESSEE. 3. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE S OF ASSESSEE APPEARED BEFORE THE LD.AO AND FILED REQUIS ITE DETAILS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. AO OBSERVED THAT, THE ASSESSEE IN ITS ORIGINAL RETURN ADDED PIGMY DEPOSIT COMMISSION TO THE EXTENT IT WAS PAID WITHOU T DEDUCTING TDS UNDER SECTION 40(I)(A) OF THE ACT. SUBSEQUENTLY , THE SAID AMOUNT WAS CLAIMED AS DEDUCTION BY ASSESSEE IN THE REVISED RETURN. THE LD.AO WHILE PASSING THE ORDER UNDER SEC TION 143 (3) OF THE ACT DISALLOWED SUM OF RS.73,71,646/- UNDER S ECTION PAGE 4 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 40(A)(IA) OF THE ACT TO THE EXTENT TDS WAS NOT DEDU CTED ON PIGMY DEPOSITS COMMISSION. 4. NEXT ISSUE CONSIDERED BY THE LD.AO WAS IN RESPEC T OF THE PROVISION MADE TOWARDS NPA DEBITED TO THE EXTENT OF RS.2CRORES AND REVERSAL OF NPA TO THE EXTENT OF RS.10,98,57,39 5/- IN THE PROFIT AND LOSS ACCOUNT. THE LD.AO NOTICED THAT NPA PROVISION MADE FOR THE YEAR UNDER CONSIDERATION WAS NEGATIVE AS THE PROVISION AVAILABLE IN THE BALANCE SHEET FOR FINANC IAL YEAR 2009- 10 WAS RS.35,71,21,496/-AND FOR FINANCIAL YEAR 2010 -11 WAS RS.26,45,67,095/-. THE NET PROVISION FOR YEAR WAS R S.(- )8,98,57,395/-. THE LD.AO CONCLUDED THAT, THERE IS NO BAD DEBTS NEWLY FORMED REQUIRING FURTHER PROVISION FOR NPA DURING THE YEAR AND THEREFORE THE SAME WAS DISALLOWED UNDE R SECTION 36(1)(VIIA) OF THE ACT. 5. AGGRIEVED BY THE ORDER PASSED BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A). 6. THE LD.CIT(A) WHILE CONSIDERING THE ISSUE OF DIS ALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTIO N OF TDS ON THE PIGMY DEPOSIT COMMISSION PAID BY ASSESSEE HELD AS UNDER: 6.1 THE AFORESAID SUBMISSIONS OF THE APPELLANT WERE DULY CONSIDERED. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF T HE HONOURABLE SUPREME COURT OF INDIA RENDERED IN THE CASE OF INDIAN BANKS ASSOCIATION VS. WORKMEN OF SYNDICATE BANK AND OTHERS VIDE CASE NO. APPEAL (CIVIL) 3355O11998, DT. 1310212001 WHEREIN THE HONOURABLE SUPREME COURT HELD THAT DEPO SIT COLLECTORS ARE WORKERS WITHIN THE MEANING OF THE TERM AS DEFINED I N THE INDUSTRIAL DISPUTES ACT, THOUGH THEY ARE NOT REGULAR EMPLOYEES OF THE BANK. PAGE 5 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 HOWEVER, IT WOULD NOT BE APPROPRIATE TO EXTEND SUCH LIMITED INTERPRETATION MADE UNDER THE PROVISIONS OF THE IND USTRIAL DISPUTES ACT TO THE INCOME-TAX ACT, 1961 FOR THE PURPOSE OF INTERPR ETING THE RELATIONSHIP OF PIGMY DEPOSIT COLLECTORS WITH THE APPELLANT BECA USE, THE APPELLANT HAS ALREADY TREATED SUCH COLLECTION AGENTS AS COMMISSIO N AGENTS IN ITS BOOKS OF ACCOUNT AND NOT AS WAGE EARNERS HAVING A MASTER- SERVANT RELATIONSHIP, WITH THE APPELLANT AS THEIR EMPLOYER. THEREFORE, WITH REGARD TO THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT, HAVING ALREADY DETERMINED THE NATURE OF COMPENSATION PAID/PAYABLE BY THE APPELLANT TO THE 'PIGMY DEPOSIT COLLECTORS' AS PAYMENT OF COMMIS SION, SUCH COMMISSION IS SUBJECT TO TDS AS PER THE PROVISIONS OF SECTION 194H OF THE ACT AND IT MUST BE TAKEN IN TO CONSIDERATION THAT T HE FIRST PROVISO TO SECTION 194/1 OF THE ACT PRESCRIBES THAT NO DEDUCTI ON OF TAX UNDER THE PROVISIONS OF SECTION 194H OF THE ACT SHALL BE MADE IN A CASE WHERE TILE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY T O BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO TILE ACCOUNT OF OR TO, THE PAYEE, DOES NOT EXCEED FIVE THOUSAND RUPEES' THEREFORE, THE ASSESSI NG OFFICER SHALL VERIFY THIS ASPECT ON THE FACTS OF THE CASE AND RESTRICT T HE DISALLOWANCE AS PER LAW, ONLY TO SUCH AMOUNTS EXCEEDING FIVE THOUSAND R UPEES PAID TO PERSONS WHO RECEIVED SUCH COMMISSION. ACCORDINGLY, THE FIFTH, THE SIXTH AND THE SEVENTH GROUNDS OF APPEAL ARE PARTLY ALLOWE D. 7. REGARDING THE NEXT ISSUE OF PROVISIONS MADE TOWA RDS NPA, THE LD.CIT(A) OBSERVED AND HELD AS UNDER: THE AFORESAID SUBMISSIONS MADE ON BEHALF OF THE AP PELLANT WERE DULY CONSIDERED. THE FACT REMAINS THAT THE APPELLANT IS A NON SCHEDULED CO- OPERATIVE BANK AND THEREFORE, THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION OF AN AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGRE GATE AVERAGE ADVANCES MADE BY ITS RURAL BRANCHES COMPUTED IN THE MANNER PRESCRIBED UNDER RULE 6ABA OF THE INCOME-TAX RULES, 1962. WITH DUE RESPECT TO THE VIEW TAKEN BY THE HONOURABLE BOMBAY HIGH COURT TO THE EFFECT THAT WHERE THE SUBSTANTIVE PROVISION AND THE AMENDED SECTION EXTEND THE BENEFIT AT PAR TO A CO-OPERATIVE BANK AN D WHERE THE MANNER PRESCRIBED GOVERNING THE SCHEDULED BANKS WAS VERY M UCH AVAILABLE, THE INSISTENCE OF THE ASSESSING OFFICER ON CORRESPONDIN G AMENDMENT TO THE RULES WAS UNWARRANTED, IN THE INSTANT CASE, IT IS H ELD THAT SUCH AN AUTHORITY FOR RENDERING A CREATIVE INTERPRETATION O F THE LAW, WHICH IS ALWAYS AVAILABLE TO THE HONOURABLE COURTS OF LAW, A RE NOT AT ALL AVAILABLE EITHER TO THE ASSESSING OFFICER AND THE F IRST APPELLATE AUTHORITY UNDER THE INCOME-TAX ACT, 1961. THE ASSESSING OFFIC ER AND THE FIRST APPELLATE AUTHORITY UNDER THE INCOME-TAX ACT, 1961 ARE ONLY EMPOWERED PAGE 6 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 TO ADMINISTER THE LAW, AS PER THE PROVISIONS OF THE STATUTE. THEREFORE, AFTER DUE CONSIDERATION OF THE ISSUE, IT IS HELD TH AT THE APPELLANT IS ELIGIBLE ONLY FOR A DEDUCTION EQUAL TO AN AMOUNT NO T EXCEEDING SEVEN AND ONE-HALF PERCENT OF THE TOTAL INCOME [COMPUTED BEFO RE MAKING ANY DEDUCTION UNDER SUB- CLAUSE (A) OF CLAUSE (VIIA) OF SUB-SECTION (1) OF SECTION 36 AND CHAPTER VIA OF THE INCOME-TAX ACT, 1 961, AS PER THE EXTANT PROVISIONS CONTAINED III SECTION 36(I)(VIIA) OF THE ACT, READ WITH RULE 6ABA OF THE INCOME-TAX RULES, 1962. ACCORDINGL Y, THE EIGHTH, THE NINTH AND THE TENTH GROUNDS OF APPEAL ARE PARTLY ALLOWED. 8. AGGRIEVED BY THE OBSERVATION OF THE LD.CIT(A), A SSESSEE IS IN APPEAL BEFORE US NOW. 9. THE LD.AR AT THE OUTSET, SUBMITTED THAT, BY DECI DING GROUND 4-8, THE GRIEVANCE OF THE ASSESSEE WOULD BE ADDRESSED. HE SUBMITTED THAT, REMAINING GROUNDS NEED NOT BE A DJUDICATED AS THEY ARE IN CONNECTION WITH THE ALLEGED DISALLOW ANCE. 10. ACCORDINGLY, WE ONLY ADJUDICATE GROUNDS 4-8 AMO NGST THE GROUNDS OF APPEAL FILED BEFORE US. 11. GROUND 4-5 IS IN RESPECT OF THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT OF RS.73,71,646/-. 12. THE LD.AR SUBMITTED THAT, THE AMOUNTS PAID TO T HE PIGMY DEPOSIT COLLECTORS AS COMMISSION UNDER SECTION 194H WAS CONSIDERED TO BE LIABLE TO TDS BY ASSESSEE, WHERE A GGREGATE AMOUNT PAID DURING THE YEAR EXCEEDED RS.5000/-. AND ACCORDINGLY, THE ASSESSEE VOLUNTARILY DISALLOWED TH E AMOUNTS ON WHICH TDS WAS NOT MADE UNDER SECTION 40(A)(IA) OF T HE ACT. HE SUBMITTED THAT, SUBSEQUENTLY, ASSESSEE REALISED THE ERROR BY TREATING THE PAYMENTS MADE TO PIGMY DEPOSIT COLLECT ORS AS COMMISSION INSTEAD OF SALARY THAT IS LIABLE TO TDS UNDER SECTION PAGE 7 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 192 AS PER CBDT CIRCULAR NO.F.NO.275/25/2007/ITB DA TED 03/03/2008. 13. THE LD.AR SUBMITTED THAT, SUBSEQUENTLY ASSESSEE WAS COVERED BY THE CBDT CIRCULAR AND SUBSEQUENT CLARIFI CATION ISSUED IN REGARDS TO THE SAME, AND THAT ASSESSEE FI LED REVISED RETURN REVERSING THE DISALLOWANCE. THE LD.AR ALSO P LACED RELIANCE ON DECISION OF HONBLE SUPREME COURT IN CASE OF INDIAN BANKS ASSOCIATION VS. WORKMEN OF SYNDICATE BANK & O RS. I N C IVIL APPEAL NO.3355 OF 1998, DECIDED ON 13/02/2001 REPORTED IN 2001 (1) SCR 1011 , WHEREIN PIGMY DEPOSIT COLLECTORS WERE HELD TO BE WORKMEN OF BANKS BY HONBLE APEX COURT . THE LD.AR THUS SUBMITTED THAT, REMUNERATION PAID TO PIGMY DEP OSIT COLLECTORS IS NOT IN THE NATURE OF COMMISSION WITHI N THE MEANING OF CLAUSE (I) OF EXPLANATION TO SECTION 194H OF THE ACT. RELIANCE IS ALSO PLACED ON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS JAI DRINKS PVT.LTD., REPORTED IN 336 ITR 383 . ON THE CONTRARY, THE LD.SR.DR SUBMITTED THAT, THE D ECISION OF HONBLE SUPREME COURT IN CASE OF INDIAN BANKS ASSOCIATION VS WORKMEN OF SYNDICATE BANK & ORS., WAS RENDERED IN THE CONTEXT OF INDUSTRIAL DISPUTES ACT, AND THEREFORE CANNOT BE CONSIDERED FOR THE PURPOSE OF DECIDING THE PRESENT ISSUE UNDER CONSIDERATION. SHE SUBMITTED THAT IN THE PRESENT CA SE ASSESSEE WAS LIABLE TO DEDUCT TDS UNDER SECTION 194H AND THE LD.CIT(A) WAS CORRECT IN UPHOLDING THE DISALLOWANCE IN RESPEC T OF THE PAGE 8 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 PAYMENTS ON WHICH TDS WAS NOT DEDUCTED THAT EXCEEDE D RS. 5000/-. 14. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 15. THE CBDT CIRCULAR RELIED BY THE LD.AR HAS BEEN CLARIFIED VIDE LETTER DATED 12/12/2007 BY CBDT TREATING THE REMUNERATION (COMMISSION) EARNED BY THE PIGMY DEPOS IT COLLECTORS AS SALARY AND SUBJECT TO TDS UNDER SECTI ON 192 OF THE ACT. THE SAME HAS BEEN PLACED AT PAGE 78 OF PAPER B OOK NO.2. VIDE LETTER DATED 03/03/2008 THE POSITION HAS BEEN REITERATED AND CONFIRMED BY CBDT FOLLOWED BY 01/12/2011 AND 14/12/2011. THE SUBSEQUENT CLARIFICATIONS BY CBDT S TATES APPLICABILITY OF PROVISIONS OF SECTION 192 OF THE A CT ON THE REMUNERATION EARNED BY PIGMY DEPOSIT COLLECTORS, AN D THAT, THE SAME WILL BE TREATED AS SALARY. IN THE LIGHT OF THE CIRCULARS AND SUBSEQUENT CLARIFICATIONS ISSUED BY CBDT, IN OUR VI EW THE AUTHORITIES BELOW COULD NOT HAVE TREATED THE PAYMEN T MADE BY ASSESSEE TO THE PIGMY DEPOSIT COLLECTORS AS COMMISS ION FOR MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON- DEDUCTION OF TDS UNDER SECTION 194H OF THE ACT. 16. WE ARE THEREFORE OF THE OPINION THAT THE DISALL OWANCE DESERVES TO BE DELETED. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED. PAGE 9 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 17. GROUND NO. 7-8 IS IN RESPECT OF THE DENIAL OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IN RESPECT OF PROVISION FOR NPA OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE B Y THE RURAL BRANCHES. 18. THE LD.AR SUBMITTED THAT, THE AMOUNT CREDITED T O PROFIT AND LOSS ACCOUNT OF RS.10,98,87,395/- REGARDING NP A PROVISION MADE FOR ASSESSMENT YEAR 2007-08, WHICH HAVE BEEN R ECOVERED DURING THE YEAR AND HENCE NECESSARY TO BE REVERSED. THE LD.AR SUBMITTED THAT PROVISION MADE FOR YEAR UNDER CONSID ERATION IS RS.2 CRORE, WHICH IS DEBITED TO THE PROFIT AND LOSS ACCOUNT. HE REFERRED TO PAGE 18 OF THE PAPER BOOK, WHEREIN THE SAID AMOUNT HAS BEEN ADDED AS INADMISSIBLE EXPENSES FOR THE YEA R UNDER CONSIDERATION FOR THE PURPOSES OF COMPUTING INCOME FROM BUSINESS. THE LD.AR SUBMITTED THAT NO DISALLOWANCE COULD BE MADE UNDER SECTION 36(1)(VIIA) OF THE ACT, TO THE E XTENT OF RS.64,49,179/-, WHICH IS UPHELD BY THE LD.CIT(A). 19. ON THE CONTRARY, THE LD.SR.DR SUBMITTED THAT, N O DISALLOWANCE IS CONFIRMED THE LD.CIT(A). SHE SUBMIT TED THAT, THE LD.CIT(A) DIRECTED THE LD.AO TO VERIFY THE FACT UAL POSITION THAT THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS. 64,49,179/- AND THEN TO ADOPT THE CORRECT AMOUNT OF DISALLOWANC E TO BE MADE. AND THEREFORE NO GRIEVANCE ARISES FROM THE VI EW TAKEN BY THE LD.CIT(A) ON THIS ISSUE. PAGE 10 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 20. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOT H SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. WE NOTE T HAT LD.CIT(A) WHILE CONCLUDING ON THIS ISSUE, HELD THAT ASSESSEE IS ELIGIBLE ONLY FOR DEDUCTION EQUAL TO AN AMOUNT NOT EXCEEDING 7 % OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTI ON UNDER SECTION 36 (1) (VIIA) OF THE ACT, READ WITH RULE 6 ABA OF INCOME TAX RULES. 21. SECTION 36 OF THE ACT DEALS WITH VARIOUS DEDUCT IONS THAT COULD BE ALLOWED IN COMPUTING INCOME UNDER SECTION 28 OF THE ACT. AS PER SECTION 36(1)(A)(VIIA), DEDUCTION COULD BE CLAIMED BY BANKS REFERRED TO IN CLAUSE (VIIA) IN RESPECT OF BA D AND DOUBTFUL DEBTS. IT PROVIDES CERTAIN TERMS AND CONDITIONS UND ER WHICH SUCH DEDUCTIONS COULD BE CLAIMED BY A PARTICULAR BA NK. SECTION 36(1)(VIIA) COMMENCES WITH THE FOLLOWING WORDS 'IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY' AND SUB- CLAUSE (A) READS AS UNDER : 'A SCHEDULED BANK NOT BEING A BANK APPROVED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF CLAUSE (VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AG RICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF PE R CENT. OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND AN AMOUNT NOT EXCEEDIN G TEN PER CENT. OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER.' SUB-CLAUSE (A) CONSISTS OF TWO TYPES OF DEDUCTIONS: PAGE 11 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TO TAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A); DEDUCTION OF AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES O F SUCH BANK WHILE COMPUTING IN THE PRESCRIBED MANNER. 22. SO FAR AS BENEFIT OF 7.5% OF THE TOTAL INCOME, THERE IS NO CONDITION THAT IT SHOULD BE IN RESPECT OF ANY RURAL BRANCH. IN THE PAPER BOOK PAGE 20, COMPUTATION OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AND 10% OF AGGREGATE ADVANCES OF RULE RURAL BRANCHES HAVE BEEN PLACED. WE NOTE FROM PAGE 19 OF COMPUTATION OF INCOME PLACED IN PAPER BOOK THAT THE INCOME FROM BUSINESS OF BANKING CLAIMING ANY DEDUCTION UND ER SECTION 36(1)(VIIA) IS RS.64,49,179/- AND THAT THE LD.AO DI SALLOWED THE SAID SUM UNDER SECTION 36(1)(VIIA) OF THE ACT, THER EBY TREATING THE DEDUCTION TO BE NIL. THE LD.CIT(A) DIRECTED T HE LD.AO TO VERIFY THE REVERSAL OF THE OPENING BALANCE OF PROVI SION RELATING TO THAT ASSET, WHICH IN OUR VIEW CANNOT BE FOUND FAULT WITH. IF THE ASSESSEE CREATED A NEW PROVISION ON A PARTICULAR AS SET BY FULLY REVERSING THE OPENING BALANCE OF PROVISION RELATING TO THAT ASSET THEN THE NET RECREATION SHOULD BE TREATED AS A NEW PROVISION WHICH NEEDS VERIFICATION AT THE END OF THE LD.AO. PAGE 12 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 23. ACCORDINGLY THIS ISSUE IS REMANDED TO THE LD.AO FOR VERIFICATION ON THE LIGHTS OF VARIOUS JUDICIAL PROC EEDINGS PASSED BY THIS TRIBUNAL AND IN ACCORDANCE WITH LAW. ACCORDINGLY THIS GROUND STANDS ALLOWED FOR STATISTI CAL PURPOSES. IN THE RESULT APPEAL FOR ASSESSMENT YEAR 2011-12 ST ANDS ALLOWED AS INDICATED HEREINABOVE. ITA NO. 1251/BANG/2019 ASSESSMENT YEAR 2015-16 24. FOLLOWING GROUNDS HAVE BEEN RAISED BY ASSESSEE IN THIS APPEAL: ITA NO.1251/BANG/2019 1. THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOM E TAX (APPEALS), MYSORE PASSED UNDER SECTION 250 OF THE INCOME TAX A CT, 1961 IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE COMMISSIONER (APPEALS) GROSSLY ERRED IN DISM ISSING THE APPEAL OF THE APPELLANT BY RELYING ON THE IRRELEVANT PORTI ONS OF THE PREDECESSOR'S APPELLATE ORDER FOR THE ASSESSMENT YE AR 2011-12 ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE COMMISSIONER (APPEALS) EFFECTIVELY FAILED TO ADJUDICATE THE GROUNDS OF APPEAL RAISED AND 4 PRESSED BY THE APPEL LANT ON THE ISSUE OF. DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT AND/ CONSEQUENTLY THE IMPUGNED APPELLATE ORDER IS LIABLE TO BE QUASHE D ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 4. THE COMMISSIONER (APPEALS) ERRED IN IMPLIEDLY UP HOLDING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF RS. 33 ,89,445/- IN RESPECT OF THE PAYMENTS MADE TO PIGMY COLLECTORS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECI ATED THAT THE RELATIONSHIP BETWEEN THE PIGMY COLLECTORS AND THE A PPELLANT CO- OPERATIVE BANK IS THAT OF MASTER-SERVANT AND NOT TH AT OF PRINCIPAL-AGENT AS HELD BY THE HON'BLE SUPREME COURT IN INDIAN BANK S ASSOCIATION V. PAGE 13 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 WORKMEN OF SYNDICATE BANK & ORS. IN CIVIL APPEAL NO . 3355 OF 1998 DECIDED ON 13.02.2001 REPORTED IN 2001(1) SCR 1011. 6. THE COMMISSIONER (APPEALS) OUGHT TO HAVE TAKEN N OTE OF AND FOLLOWED CBDT'S LETTER DATED 03.03.2008 IN F.NO.275 /25/2007/ITB TO THE INDIAN BANKS' ASSOCIATION WHICH HAS CLARIFIED T HAT PAYMENTS TO PIGMY COLLECTORS ARE TO BE MADE UNDER SECTION 192 O F THE ACT AS SALARY. 7. WITHOUT PREJUDICE, THE COMMISSIONER (APPEALS) OU GHT TO HAVE APPRECIATED THAT THE APPELLANT HAS MADE DEDUCTIONS OF TAX AT SOURCE U/S 192 OF THE ACT WHEREVER APPLICABLE AND IT IS NO T A CASE OF NON- DEDUCTION OF TAX AT SOURCE, BUT AT THE MOST OF SHOR T DEDUCTION OF TAX AT SOURCE FOR WHICH PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT ATTRACTED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E 8. WITHOUT PREJUDICE, THE COMMISSIONER (APPEALS) OU GHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAS MADE DIS ALLOWANCE U/S 40(A)(IA) OF THE ACT EVEN IN RESPECT OF AMOUNTS WHI CH ARE BELOW THE THRESHOLD LIMIT FOR TDS AND HENCE NOT IN ACCORDANCE WITH LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE APPELLANT CRAVES FOR LEAVE OF THIS HON'BLE T RIBUNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME OF HEARING. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APP EAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 25. ONLY ISSUE RAISED BY ASSESSEE IS IN RESPECT OF DISALLOWANCE UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TDS UN DER SECTION 194H OF THE ACT ON THE PAYMENTS MADE BY ASSESSEE TO PIGMY DEPOSIT COLLECTORS. 26. IT HAS BEEN ADMITTEDLY SUBMITTED THAT, FACTS FO R YEAR UNDER CONSIDERATION IS IDENTICAL AND SAME AS THE FACTS FO R ASSESSMENT YEAR 2011-12 DEALT WITH HEREIN ABOVE ON THIS ISSUE. BOTH SIDES SUBMITTED IDENTICAL ARGUMENTS IN RESPECT OF THIS GR OUND. AS WE HAVE ALREADY ALLOWED THE CLAIM OF ASSESSEE IN GROUNDS 4- 6 HEREINABOVE, THE VIEW TAKEN THEREIN IS APPLIED MUTATIS MUTANDIS TO THESE GROUNDS IN PRESENT APPEAL. PAGE 14 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2015-16 STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 10 TH FEBRUARY, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 15 OF 15 ITA NO.2116/BANG/2019 ITA NO.1251/BANG/2019 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -2-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -2-2021 JM/AM 4. DRAFT DISCUSSEDAPPROVED BY SECOND MEMBER. -2-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -2-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -2-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -2-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -2-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS
