The Assistant Commr. of Income Tax, Junagadh Circle, JUNAGADH V. The Junagadh Jilla Sahakari Bank Ltd., JUNAGADH

ITA 223/RJT/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2468 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DM RINDANI
• Assessee Lawyers: M N MAURYA
• Keywords: Bad and doubtful debts; Revised return; TDS
• Section: 80P; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER ./ ITA NO. 2 23 /RJT/201 6 / ASS ESSMENT YEAR: 2009 - 1 0 THE A.C.I.T. JUNAGADH CIRCLE, JUNAGADH VS THE JUNAGADH JILLA SAHAKARI BANK LTD. SAHAKAR BHAVAN, SAHID VIJAY MARG, JUNAGADH PAN NO. A AA AJ0 397 E / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M. N. MAURY A , CIT (DR) REVENUE BY : SHRI D. M. RINDANI , A R / DATE OF HEARING : 2 6 / 02 /20 20 / DATE OF PRONOUNCEMENT : 28 / 02 / 20 20 PER BENCH : THE INSTANT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 04 . 0 4 .201 6 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 , RAJKOT ARISING OUT OF THE ORDER DATED 06 . 09 .201 1 PASSED BY THE JC IT , JNAGADH , RANGE - 1, JUNAGADH UNDER SECTION 14 3(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT ) FOR THE ASSESSMENT YEAR (A.Y.) 20 09 - 1 0 . 2. T HE FIRST AND SECOND GROUND RELATES TO PROVISIONS MADE FOR SALARY AND LEAVE FARE PAYABLE TO THE EMPLOYEES. THE AMOUNT CLAIMED AGAINST THE CLOSING SALARY BALA NCE WAS OF RS. 16493508 / - AND AGAINST THE LEAVE FARE WAS RS. 7203600 / - . THE A SSESSMENT WAS FINALISED BY THE L EARNED A SSESSING O FFICER UPON MAKING ADDITION OF THE SAID AMOUNTS WHICH WAS IN TURN REVERSED BY THE FIRST A PPELLATE A UTHORITY. HENCE , THE INSTANT A PPEAL BEFORE US. ITA NO . 2 23 /RJT/201 6 AY 2009 - 1 0 - 2 - 3. WE HAVE HEARD THE RESPECTIVE SUBMISSIONS MADE BY THE PARTIES. WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. 4 . THE CASE OF THE ASSESSEE IS THIS THAT THE LIABILI TIES PERTAINED TO EARLIER YEAR AND ACTUAL PAYMENTS WERE MADE UPON DEDUCTION OF TDS TWO YEARS AFTER THE RELEVANT PREVIOUS YEAR. IT APPEARS FROM THE RECORDS THAT COMPUTATION OF LIABILITIES, LEDGE R A CCOUNTS OF THESE PROVISIONS FOR F.Y. 2008 - 09 TO 2012 - 2013 ALONG WITH PERSON WISE BIFURCATIONS OF CLOSING SALARY, AS WELL AS THE SETTLEMENT SCHEME HAS BEEN SUBMITTED BEFORE THE LD. AO BY THE ASSESSEE. A PART FROM THAT THE BOARDS RESOLUTION PASSED TOWARDS SUCH PROVISIONS AT DIFFERENT STAGES OF NEGOTIATION IN THE YEAR 2005 AS WELL AS 2009 AND 2010 WERE ALSO DULY SUBMITTED BEFORE THE LD. AO . IT FURTHER APPEARS FROM THE SETTLEMENT THAT THE SCHEME OF FITMENT WAS VERY DELAYED ENCOMPASSING SO MANY FACTORS AND ITEMS AND IT CAN BE EASILY APPRECIATED THAT FINAL AMOUNT PAYABLE TO THE INDIVIDUAL EMPLOYEES WOULD DEFINITELY V A RY EVEN IF THEY WE R E UNDER THE SAME SCALE. 5 . IT FURTHER APPEAR S THAT THE BANK IN THE YEAR 2005 SE TTLE D WITH THE EMPLOYEES UNION AFTER NEGOTIATION BUT THE SETTLEMENT COULD NOT BE AFFECTED IN DUE TIME AND ULTIMATELY AFTER A PROTRACTED NEGOTIATION PROVISIONS WERE MADE IN THE F.Y. 2008 - 09. IN FACT , THE LIABILITY ACTUAL LY GOT CRYSTALISED ON 31.03.200 9. THE CASE OF THE REVENUE IS THIS THAT SUCH CLAIMS THAT HIS CLOSING BALANCE OF SALARY AND LEAVE FARE ALLOWANCE HAD NOT BEEN MADE IN THE PAST AND THAT THE FINAL LIABILITI ES AGAINST THE INDIVIDUAL EMPLOYEES DO NOT MATCH WITH THEIR MONTHLY PAY. HOWEVER , AS IT ALSO APPEARS FROM THE RECORDS THAT THE LD. AO HIMSELF ACCEPTED THAT THE ACTUAL PAYMENT TO THE EMPLOYEES WERE MADE AFTER TWO YEARS. THE L EARNED CIT - A WHILE ALLOWING THIS GROUND OF APPEAL FILED BY THE ASSESSEE OPINED THAT EVEN UNDER THE MERCANTILE S YSTEM OF ACCOUNTING ACCRUAL OF THE LIABILITY WAS ACTUALLY ONLY IN THE F.Y. 2008 - 09 AND THE APPELLANT WAS RIGHT IN CLAIMING SUCH EXPENSES IN THE YEAR CONCERNED. APART FROM THAT ITA NO . 2 23 /RJT/201 6 AY 2009 - 1 0 - 3 - T HE LD. CIT - A OBSERVED THAT THE TDS UPON THE S UM DEDUCTED IN THE LA TER ASSESSMENT YEAR WILL NOT HAVE ANY EFFECT ON DETERMINATION OF ASSESSMENT YEAR IN WHICH EXPENSE SHOULD BE CLAIMED AND THUS THE SAME HAS TO BE DECIDED SOLELY ON THE ACCRUABLE LIABILITY TO P AY , WHICH IN OUR CONSIDERED OPINION IS WITHOUT ANY AMBIGUITY SO AS TO WARRANT INTERFERENCE. HENCE , THE GROUND OF APPEAL PREFERRED BY R EVENUE IS FOUND TO BE DEVOID OF ANY MERIT AND THUS DISMISSED. 6 . THE NEXT ROUND RELATES TO DELETION OF DISALLOWANCE AMOUN TING TO RS. 39, 69,173 / - ON ACCOUNT OF INTEREST RETURN OF. 7. WE HAVE HEARD THE PARTIES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. 8. THE LD. AO DISALLOWED THE SAID AMOUNT ON THE GROUND THAT THIS WRITTEN OF F OF AMOUNT IS LESS THAN THE CREDIT BA LANCE IN THE BAD DEBT RESERVE ACCOUNT A S STIPULATED UNDER SECTION 36(1 )(VII). THE CASE OF THE ASSESSEE IS THIS THAT THE ASSESSEE NEVER CLAIMED SUCH PROVISION AS DEDUCTION FROM ITS INCOME AS IT WAS ALSO ELIGIBLE FOR DEDU CTION UNDER SECTION 80P OF THE A CT. SINCE NO PROVISION OF BAD AND DOUBTFUL D EBTS HAS BEEN MADE OR CLAIMED BY THE APPELLANT IN THE PAST AND AS SUCH CONDITIO NS STIPULATED UNDER PROVISO TO S ECTION 36( 1 )(VII) NOT APPLICABLE AND HENCE THE SAID DISALL OWANCE HAS BEEN DELETED BY THE L D . CIT - A. WE F IND NO AMBIGUI TY IN SUCH ORDER PASSED BY THE L D . CIT - A F OR THE REASON MENTIONED THEREIN. THUS , THIS GROUND OF APPEAL IS DISMISSED. 9 . THIS GROUND OF APPEAL RELATES TO DISALLOWANCE OF RS. 1,00,02,174 / - ON ACCOUNT OF BAD DEBTS. ITA NO . 2 23 /RJT/201 6 AY 2009 - 1 0 - 4 - AS PER REVISE COMPUTATION OF TOTAL INCOME FILED WITH REVISED RETURN OF TOTAL INCOME , THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,00,02,17 4 / - ON ACCOUNT OF INTEREST INCOME ACTUALLY WRITTEN O F F. THE ASSESSEE HAD NOT DEBITED THIS AMOUNT TO ITS P&L ACCOUNT BUT DIRECTLY CLAIMED IT WHILE COMPUTI NG ITS TOTAL INCOME IN REVISED RETURN. THE CASE OF THE ASSESSEE IS THIS THAT THE SAME IS ACTUALLY WRITTEN OFF ON COMPLETION OF ONE - TIME SETTLEMENT SCHEME BY THE BANK AFTER OBTAINING PRIOR APPROVAL OF NABARD AND GUJARAT S TATE COOPERATIVE B ANK BEING THE A P EX B ANK OF THE STATE. BEFORE THE LD. AO THE ASSESSEE SUBMITTED AS FOLLOWS IN ORDER TO SUBSTANTIATE ITS CLAIM: (I) THE ABOVE AMOUNT IS CLAIMED AS BAD DEBTS ACTUALLY WRITTEN OFF, SINCE THE BORROWERS A/CS W ERE CREDITED TO THE EXTENT THE INTEREST AMOUNT WAS WAIVED AS AGAINST THE TOTAL AMOUNT RECEIVABLE FROM THEM. (II) THE INTEREST RECEIVABLE FROM BORROWERS WAS DEBITED TO THE BORROWERS' ACCOUNTS EVERY YEAR BY CREDITING INTEREST INCOME A/ C OF RESPECTIVE YEARS. THE TOTAL INTEREST INCOME FOR RESPECTIVE YEARS WER E SHOWN IN PROFIT & LOSS ACCOUNT AS MENTIONED IN ANNUAL REPORTS FILE WITH RELEVANT INCOME TAX RETURNS FILED. (III) THE BANK HAD MADE A PROVISION FOR OVER DUE INTEREST RESERVE IN RESPECT OF INTEREST INCOME SHOWN AS INCOME AND DEBITED TO BORROWERS ACCOUNTS B UT NOT REALIZED. SUCH PROVISION AMOUNT OF REST. 101502000/ - WAS DEBITED TO PROFIT & LOSS A / C FOR FY. 2004 - 05 RELEVANT A. Y. 2005 - 06 (COPIES OF OVERD UE INTEREST RESERVE FUND FOR F. Y. 2004 - 05 TO 2008 - 09 WERE SUBMITTED EARLIER) BUT SAID PROVISION AMOUNT WAS A DDED BACK TO THE T. T.I. OF THE SAID YEAR, COPIES OF COMPUTATION AS WELL AS A. O . WERE SUBMITTED UNDER POINT NO. 3 OF SUBMISSION OF DATED 03 - 08 - 11, FROM WHICH IT CAN BE SEEN THAT DEDUCTION IN RESPECT O F PROVISION WAS NOT CLAIMED. N OW WHEN THE INTEREST ELEME NT WHICH WAS ACTUALLY WAIVED UNDER OTS, THE SAID AMOUNT IS CLAIMED AS BAD DEBTS IN RESPECT OF AMOUNT WHICH WAS RECEIVABLE UNDER THE NORMAL COURSE OF BANKING BUSINESS BUT NOT RECEIVED AND HENCE WRITTEN OFF. (IV) THE ABOVE AMOUNT WAS DEBITED TO OVERDUE INTE REST PROVISION A / C FOR THE YEARS 2007 - 08 AND 2008 - 09 COPIES FILED EARLIER, BY CREDITIN G VARIOUS BORROWERS / LOANEES A/ CS FOR WHICH THE MASETER/CONTROL REGISTER IS PRODUCED HEREWITH FROM WHICH BRANCH WISE/PERSON WISE DETAILS OF INTEREST ACTUALLY WAIVED CAN BE VERIFIED. AND ACCORDINGLY EACH BRANCH HAS CREDITED THE RESPECTIVE BORROWERS A / CS IN THE LEDGER MAINTAINED AT RESPECTIVE BRANCHES. THUS TOTAL AMOUNT OF RS. 10002174/ - WAS CLAIMED AS BAD D EBTS WRITTEN OFF EXPS. THIS YEAR ON CLOSURE OF OTS.' THE L D . AO , HOWEVER , DISALLOWED THE SAID AMOUNT SINCE THE SAME IS LESS THAN THE CREDIT BALANCE IN THE BAD DEBT RESERVE ACCOUNT AS STIPULATED UNDER SECTION 36( 1 )(VII) OF THE A CT FURTHER THAT INTEREST INCOME WAS NEVER INCLUDED IN TAXABLE INCOME IN THE HANDS OF THE APPE LLANT AS THE APPELLANT WAS CLAIMING ITA NO . 2 23 /RJT/201 6 AY 2009 - 1 0 - 5 - DEDUCTION UNDER SECTION 80P IN THOSE YEARS AND FINALLY PART OF AMOUNT WAS WRITTEN OF F IN PREVIOUS YEAR RELEVANT TO A . Y . 2008 - 09. ULTIMATELY THE ADDITION WAS DELETED BY THE L D . CIT - A WITH THE OBSERVATION THAT THE BANK DEB T PROVISION ACCOUNT WAS NEVER CLAIMED BY THE ASSESSEE IN THE PAST AS A DEDUCTION WHICH IS PROVED BY PAST SCRUTINY ASSESSMENT. FURTHER THAT IN THE PAST THE INCOME WAS DEDUCTIBLE UNDER SECTION 80 P OF THE A CT AND NOT EXEMPT. APART FROM THAT WHEN THE DEDUCTION UNDER SECTION 36 WAS NOT CLAIMED FOR BAD DEBT PROVISION , THE AMOU NT RETURN OF THIS YEAR IS NOT HI T BY THE PROVISO TO S ECTION 36(1 )(VII) OF THE A CT , WHICH ACCORDING TO US JUST AND PROPER SO AS TO WARRANT INTERFERENCE. HENCE , GROUND PREFERRED BY THE R EVENUE IS FOUND TO BE DEVOID OF ANY MERIT AND THUS DISMISSED. 10 . BY THIS P ARTICULAR GROUND OF APPEAL THE R EVENUE HAS CHALLENGED THE ORDER PASSED BY THE L D . CIT ALLOWING THE CLAIM OF BROUGHT FORWARD LOSSES OF A.Y. 2006 - 07 AND EARLIER YEARS TO THE TUNE OF RS. 70, 50,000 / - . 11. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. 12. IT APPEARS FROM THE RECORDS THAT THE LD. AO HAS NOT ALLOWED THE SAME TO BE SET OFF AGAINST THE CURRENT YEAR S INCOME ON THE GROUND THAT THIS IS BROUGHT FORWARD LOSS PERTAINING TO 2006 - 07 AND EARLIER YEARS WHEN INCOME OF THE APPELLANT WAS EXEMPT , LOSS CANNOT BE ALLOWED TO CARRY FORWARD. WHILE ALLOWING SUCH SET OFF OF UNABSORBED LOSS THE L D . CIT - A POINTED OUT THAT DEDUCTION AND EXEMPTION IS A DIFFERENT PROVISION AND MER ELY BECAUSE DEDUCTION UNDER C HAPTER - VIA WAS AVAILABLE TO THE ASSESSEE IT CANNOT BE SAID THAT INCOME WAS EXEMPT. RELYING UPON THE JUDGMENT PASSED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS . ALEMBIC C HEMICALS WORKS CO. LTD . REPORTED IN (1 982) 133 ITR 578(GUJ) THE L D . AO ALLOWED SUCH SET OFF OF UNABSORBED LOSS OF RS. 70,50,000 / - WHICH ACCORDING TO US IS WITHOUT ANY ITA NO . 2 23 /RJT/201 6 AY 2009 - 1 0 - 6 - AMBIGUITY AND IN TERMS OF THE RATIO LAID DOWN BY THE JUDGMENT CITED ABOVE. HENCE, THIS GROUND OF APPEAL PREFERRED BY THE R EVENU E IS FOUND TO BE DEVOID OF ANY MERIT AND THUS DISMISSED. 13 . IN THE RESULT R EVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28 TH FEBRUARY , 2020 AT RAJKOT . SD/ - SD/ - ( WASEEM AHMED ) ACCOUNTANT MEMBER ( MADHUMITA ROY ) JUDICIAL MEMBER RAJKOT ; DATED, 28 / 02 /20 20 TANMAY DATTA , SR.PS TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, RA JKOT 6. / GUARD FILE . / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, RAJKOT 1. DATE OF DICTATION - 2 7 / 02 /20 20 (DICTATED IN DRAGON) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMB ER 2 7 /02 /20 20 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. - /02/2020 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT /02/2020 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28 /02/2020 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .. 8. DATE OF DESPATCH OF THE ORDER