The Nanded District Central Co-Opp Bank Ltd, V. Jt. CIT Rg- 3 Nanded, Nanded

ITA 2328/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79918 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKULESH DUBE; SHRIA K MODI
• Assessee Lawyers: S N DOSHI
• Keywords: Bad and doubtful debts; Revised return
• Section: 43B; 37(1); 37; 28; 10; 15; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2328/PN/2012 (ASSESSMENT YEAR : 2009-10) THE NANDED DISTRICT CENTRAL COOPERATIVE BANK LTD., STATION ROAD, NANDED .. APPELLANT PAN NO.AAAAN0696A VS. JCIT, RANGE-3, NANDED .. RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI MUKULESH DUBE & SHRIA.K. MODI DATE OF HEARING : 29-05-2014 DATE OF PRONOUNCEMENT : 25-06-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28-09-2012 OF THE CIT(A), AURANGABAD RELATING TO ASSESSMENT YEAR 2009-10. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ID. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 7,23,70,661 /- IN RESPECT OF PROVISION MADE FOR LEAVE ENCASHMENT ON THE GROUND THA T IT REPRESENTS THE PRIOR PERIOD EXPENSES. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A COOPERATIVE BANK ENGAGED IN BANKING BUSINESS. IT FILED ITS RETU RN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30-09-2009 DECLARING TO TAL INCOME OF RS.11,98,15,470/. SUBSEQUENTLY, A REVISED RETURN W AS FILED ON 25-01- 2 2010 AND 29-03-2010 DECLARING TOTAL INCOME AT NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED FROM THE AUD ITORS REPORT THAT THE AUDITORS HAD GIVEN A REMARK THAT THE BANK HAD M ADE A PROVISION OF RS.8,07,03,000/- DURING THE YEAR FOR LEAVE ENCASHME NT OF THE EMPLOYEES FOR THE CURRENT YEAR AS WELL AS AGAINST PREVIOUS YE AR LIABILITIES ON ADHOC BASIS INSTEAD OF VALUATION BY ACTUARY. SUCH SUM WA S PROVISION AND THAT TOO ON ADHOC BASIS AS COMMENTED BY THE AUDITOR. TH E AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SH OULD NOT BE DISALLOWED AND ADDED BACK. IT WAS REPLIED BY THE A SSESSEE THAT PROVISION FOR LEAVE ENCASHMENT STARTED FIRST TIME DURING THIS YEAR AND IN THE EARLIER YEARS, IT WAS A PRACTICE TO MAKE PROVISION ON RETIR EMENT. SINCE BANK HAS COME INTO FINANCIAL CRISIS, MOST OF THE EMPLOYEES W ERE ON THE VERGE OF LEAVING THEIR JOB AND SO IT WAS FELT THAT PROVISION HAS TO BE MADE HEREAFTER REGULARLY AND HENCE IT WAS MADE. IT WAS ARGUED THAT IT CANNOT BE DISALLOWED JUST ON THE GROUND THAT IT IS ADHOC. THE ASSESSEE ENCLOSED THE WORKING OF LEAVE ENCASHMENT PROVISION AND REQUE STED THE AO NOT ADD THE SAME. 3. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE SINCE ACCORDING TO HIM IT WAS JUST A PROVISION AND NOT ACTUAL PAYMENT. FURTHER, AS PER THE AUDITORS R EMARK THE PROVISION WAS MADE ON ADHOC BASIS AND NOT AS PER ACCOUNTING S TANDARD-15 AND THE PROVISION ALSO CONTAIN PRIOR PERIOD EXPENSES WHICH ARE NOT TO BE ALLOWED. HE, THEREFORE, AGAIN CONFRONTED THE ASSESSEE. THE ASSESSEE IN ITS REPLY REITERATED THAT IT IS NOT A PROVISION BUT ACTUAL LI ABILITY OF EARLIER PERIOD AND CURRENT PERIOD. THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF BEML VS. CIT REPORTED IN 245 ITR 428 WAS RE LIED UPON. 3 3.1 HOWEVER, THE AO DID NOT ACCEPT THE ABOVE EXPLAN ATION OF THE ASSESSEE. APPLYING THE PROVISIONS OF SECTION 43B(F ), THE AO DISALLOWED AN AMOUNT OF RS.8,07,03,000/-. WHILE DOING SO, HE OBSERVED THAT PROVISIONS OF SECTION 43B OF THE ACT HAVE BEEN AMEN DED BY THE FINANCE ACT, 2001 W.E.F. 01-04-2002 AFTER THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF BEML LTD. (SUPRA). ACCORDING TO THE SAID PROVISIONS, DEDUCTION OF ANY SUM PAYABLE BY THE ASS ESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE SHALL BE ALLOWED (IRRESPECTIVE OF PREVIOUS YEAR IN WHICH THE LIABILI TY TO PAY THE SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFER RED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUA LLY PAID BY HIM. THUS, HE WAS OF THE OPINION THAT DEDUCTION FOR LEAV E ENCASHMENT IS ALLOWABLE ONLY IF IT IS PAID DURING THE YEAR UNDER CONSIDERATION AND NOT ON PROVISION BASIS. SINCE THE ASSESSEE, IN THE PRE SENT CASE, HAS NOT MADE ANY PAYMENT DURING THE YEAR UNDER CONSIDERATION BUT ONLY MADE A PROVISION FOR LEAVE ENCASHMENT, THEREFORE, BY APPLY ING PROVISIONS OF SECTION 43B(F) HE DISALLOWED THE PROVISION FOR LEAV E ENCASHMENT OF RS.8.07 CRORES. 4. BEFORE THE CIT(A) IT WAS ARGUED THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNIO N OF INDIA REPORTED IN 292 ITR 470 HAS HELD THAT INSERTION OF CLAUSE (F) I S NOT CONSISTENT WITH THE ORIGINAL PROVISION OF SECTION 43B WHICH WAS INS ERTED TO PLUG EVASION OF STATUTORY LIABILITIES. WITH THIS OBSERVATION TH E HONBLE CALCUTTA HIGH COURT HAS STRUCK DOWN SECTION 43B(F) BEING ARBITRAR Y, UNCONSCIONABLE, DE HORS THE APEX COURT DECISION IN THE CASE OF BHARAT EARTH MOVERS 4 (SUPRA). IT WAS ACCORDINGLY ARGUED THAT THE DISALL OWANCE BY APPLYING PROVISIONS OF SECTION 43B(F) IS NOT JUSTIFIED. BAS ED ON THE ARGUMENTS OF THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPO RT FROM THE AO. AFTER CONSIDERING THE REMAND REPORT FROM THE AO AND THE SUBMISSION OF THE ASSESSEE IN ITS REJOINDER TO THE REMAND REPORT, THE CIT(A) SUSTAINED AN AMOUNT OF RS.7,23,70,661/- AND DELETED THE AMOUN T OF RS.83,32,339/- BY OBSERVING AS UNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICE D THAT DURING THE YEAR UNDER APPEAL, THE APPELLANT BANK HAS MADE PROVI SION FOR LEAVE ENCASHMENT OF RS.8,07,03,000/- AS PER THE DIRECTIONS OF R.B.I. THE SAID PROVISION INCLUDES PROVISION IN RESPECT OF EARLIER YE ARS TO THE EXTENT OF RS.7,23,70,661/-. IN SUPPORT OF THE DEDUCTION CLAIM ED IN RESPECT OF THE ABOVE PROVISION MADE, THE APPELLANT HAS RELIED ON T HE DECISION IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 ( SC). IN THIS REGARD IT HAS BEEN NOTICED THAT AFTER THE SAID DECISION THE PR OVISIONS OF SECTION 43B HAVE BEEN AMENDED BY FINANCE ACT, 2001 WHICH HAS IN SERTED CLAUSE(F) TO SECTION 43B WHICH READS AS UNDER - 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RES PECT OF (A) .... (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE, SHALL BE ALLOWED IRRESP ECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM W AS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARL Y EMPLOYED BY HIM ONLY IN COMPUTING TO THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RELATION TO ANY SUM WHICH WAS ACTUALLY PAID BY THE ASSESSEE ON OR B EFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIO US YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE E VIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETU RN.' THE ABOVE MENTIONED SUB-CLAUSE (F) HAS BEEN INSERTED BY FINANCE ACT, 2001 W.E.F. 01/04/2002 I.E. W.E.F. A.Y.2002-03. IN VIEW OF THIS AMENDMENT, THE DECISION IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 (SC) HAS BECOME INAPPLICABLE AND ACADEMIC FOR THE ASSE SSMENT YEARS 2002-03 AND ONWARDS. IN THIS REGARD, THE APPELLANT VI DE LETTER DATED 12/09/2012 HAS SUBMITTED THAT THE HON'BLE CALCUTTA HI GH COURT IN THE CASE OF EXCIDE INDUSTRIES LTD. VS. UNION OF INDIA ( 2007) 292 ITR 470 HAS HELD THAT INSERTION OF CLAUSE (F) IS NOT CONSISTENT WITH THE ORIGINAL PROVISION OF SECTION 43B WHICH WAS INSERTED TO PLUG IN EVASION OF STATUTORY LIABILITIES. WITH THIS OBSERVATION, THE HON'BLE CALCU TTA HIGH COURT HAS STRUCK DOWN SECTION 43B(F) BEING ARBITRARY, UNCONSCI ONABLE AND DE HORS APEX COURT DECISION IN THE CASE OF BHARAT EARTH MOVER S (SUPRA). THE APPELLANT ACCORDINGLY CLAIMED THAT THE DISALLOWANCE BY APPLYING 5 PROVISIONS OF SECTION 43B(F) IS THEREFORE NOT JUSTIFIED. THE ABOVE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT A ND HENCE ACCEPTED BY RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE CALC UTTA HIGH COURT RELIED ON BY THE APPELLANT. IT HAS ALSO BEEN NOTICED THAT THE HON'BLE BOMBAY HIGH COURT WHILE DECIDING APPEAL FOR A.Y.2003-04 IN THE CASE OF CIT VS. UNIVERSAL MEDICARE (P) LTD. (2010) 324 ITR 263 (BOM) HAS ADMI TTED THE APPEAL IN RESPECT OF ISSUE OF LEAVE ENCASHMENT STATING AS UND ER: 'THE TRIBUNAL HAS RELIED UPON THE JUDGEMENT OF THE C ALCUTTA HIGH COURT IN THE CASE OF EXCIDE INDUSTRIES LTD. VS. UNI ON OF INDIA (2007) 292 ITR 470 IN WHICH THE PROVISIONS OF SECTION 43B(F) HAVE BEEN STRUCK DOWN. THE TRIBUNAL DIRECTED THE A.O. TO ALLOW THE AMOUNT AS CLAIMED TOWARDS LEAVE ENCASHMENT. THE ISSUE AS R EGARDS THE CORRECTNESS OF JUDGEMENT OF THE CALCUTTA HIGH COURT I N EXCISE INDUSTRIES LTD. (SUPRA) IS PENDING IN APPEAL BEFORE S UPREME COURT AND INTERIM ORDERS HAVE BEEN PASSED.' IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPE CTFULLY FOLLOWING THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF EXCIDE INDUSTRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470, I HOLD THAT T HE A.O, IS NOT JUSTIFIED IN MAKING ADDITION OF RS.8,07,03,000/- BY APPLYING PROVISIONS OF SECTION 43B(F) OF THE ACT. ` 6.4 THE A.O. HAS ALSO RAISED ANOTHER CONTENTION THAT T HE EXPENDITURE WHICH RELATES TO THE PRECEDING YEARS I.E. PRIOR PERI OD EXPENDITURE IS ALLOWABLE U/S 37(1) OF THE ACT. ON PERUSAL OF THE S AID SECTION IT HAS BEEN NOTICED THAT ONE OF THE CONDITION FOR EXPENDITURE TO B E ALLOWED IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED DURING THE PRE VIOUS YEAR. IN THE CASE UNDER APPEAL IT IS UNDISPUTABLE FACT THAT THE EXPENDITURE ON ACCOUNT OF LEAVE ENCASHMENT TO THE EXTENT OF RS.7,23,70,661 /- RELATES THE PRIOR PERIOD. THEREFORE, IN VIEW OF PROVISIONS OF SECTION 37 A ND ALSO IN VIEW OF MATCHING PRINCIPLE OF ACCOUNTING, THE DEDUCTION OF EX PENDITURE IS TO BE ALLOWED IN THE YEAR IN WHICH IT HAS BEEN INCURRED. THE REFORE, THE DISALLOWANCE TO THE EXTENT OF RS.7,23,70,661/- IS JUS TIFIED BEING PRIOR PERIOD EXPENDITURE. IN VIEW OF THE ABOVE FACTS AND DIS CUSSION, THE ADDITION OF RS.7,23,70,661/- IS CONFIRMED AND THE BALA NCE ADDITION OF RS.83,32,339/- IS DELETED. GROUND NO.2 IS PARTLY AL LOWED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISION FOR LEAVE ENCASHMENT WAS MADE IN THIS YEAR FOR THE FIRS T TIME. PRIOR TO IMPOSITION OF RESTRICTIONS BY RBI SUCH PROVISION WA S MADE ONLY ON THE RETIREMENT OF THE EMPLOYEES. HE SUBMITTED THAT RBI IMPOSED THE RESTRICTIONS U/S.35A AND THE ENTIRE BANKING ACTIVIT Y HAD TO BE SUSPENDED. REFERRING TO PAGES 5 AND 6 OF THE PAPER BOOK, HE SU BMITTED THAT RBI VIDE LETTER DATED 20-10-2005 HAD DIRECTED THE ASSESSEE B ANK U/S.35A OF THE 6 BANKING REGULATION ACT, 1949 NOT TO ACCEPT FRESH DE POSITS OR ALLOW WITHDRAWAL OF ANY SUM EXCEEDING RS.1,000/- OUT OF T HE TOTAL BALANCE IN EVERY SAVINGS BANK ACCOUNT OR CURRENT ACCOUNT OR AN Y OTHER DEPOSIT ACCOUNT OR TO INCUR CERTAIN EXPENSES AS PER THE GUI DELINES WITHOUT THE APPROVAL OF THE RBI. HE SUBMITTED THAT IN VIEW OF THE RESTRICTIONS IMPOSED BY RBI ALMOST THE ENTIRE BANKING ACTIVITY H AD TO BE SUSPENDED. IN VIEW OF THESE RESTRICTIONS THE ASSESSEE DID NOT MAKE ANY PROVISION IN THOSE RESPECTIVE YEARS. HE SUBMITTED THAT THE BOAR D OF DIRECTORS IN THE MEETING HELD ON 31-03-2009 PASSED A RESOLUTION PROV IDING THE AMOUNT OF LEAVE ENCASHMENT OF 604 EMPLOYEES AS IT WAS NECESSA RY IN ORDER TO ENSURE THE EMPLOYEES TO AVAIL THE LEAVE ENCASHMENT AMOUNT (A COPY OF THE RESOLUTION IS PLACED AT PAPER BOOK PAGES 7 TO 11). HE SUBMITTED THAT ONCE THE BOARD RESOLUTION IS PASSED, PROVIDING FOR LEAVE ENCASHMENT SALARY, THE LIABILITY HAS ACCRUED. HE SUBMITTED TH AT MAKING ANY SUCH PROVISION EVEN IN THE EARLIER YEARS WAS IN THE LARG ER INTEREST OF THE ASSESSEE BANK ENABLING THE EMPLOYEES TO CONTINUE. THEREFORE, THIS PROVISION WAS NECESSARY FOR THE PROTECTION AND BENE FIT OF THE ASSESSEES BANKING BUSINESS. THIS CHANGE IN MAKING THE PROVIS ION WITHOUT WAITING FOR THE RETIREMENT OF THE EMPLOYEES IS BONAFIDE. H E ACCORDINGLY SUBMITTED THAT THE DISALLOWANCE IN RESPECT OF PROVI SION MADE FOR LEAVE ENCASHMENT SHOULD BE ALLOWED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT NOTHING PREVENTED THE ASSESSEE IN NOT MAKING ANY PROVISION IN THE RES PECTIVE YEARS. HE SUBMITTED THAT THE ASSESSEE HAS NOT FOLLOWED ANY AC COUNTING STANDARD. 7 THEREFORE, IF THEY CAN SHOW THAT RBI HAD PREVENTED THEM FROM NOT MAKING ANY PROVISIONS THE SAME CAN BE ALLOWED AS A DEDUCTION. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD.CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSEE HAD MADE PROVISION FOR LEAVE ENCASHMENT OF RS.8,07,03,000/-. THIS INCLUDES PROVISION IN RESPECT OF EARLIER YEARS TO THE EXTENT OF RS.7,23,70,661/-. THE AO DISALLOWED THE ENTIRE AMO UNT APPLYING PROVISIONS OF SECTION 43B(F). IN APPEAL THE LD.CIT (A) RELYING ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT INSERTIO N OF CLAUSE (F) IS NOT CONSISTENT WITH THE ORIGINAL PROVISIONS OF SECTION 43B AND HAS ACCORDINGLY STRUCK DOWN THE SAID SECTION BEING ARBI TRARY, UNCONSCIONABLE AND DE HORS APEX COURT DECISION IN THE CASE OF BHAR AT EARTH MOVERS LTD. (SUPRA), DELETED THE AMOUNT OF RS.83,32,339/- WHICH RELATES TO THE PROVISION FOR THE CURRENT YEAR. THE REVENUE IS NOT IN APPEAL BEFORE US ON THIS DELETION. SO FAR AS THE BALANCE AMOUNT OF RS. 7,23,70,661/- IS CONCERNED WHICH RELATES TO PROVISION FOR EARLIER YE ARS HE CONFIRMED THE SAME. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ABOVE LIABILITY ALSO ACCRUED DURING THIS YEAR IN VI EW OF THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS. 7.1 WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSEE IN THE PAST USED TO MAKE SUCH PROVISION ONLY AT THE TIME OF RETIREMENT OF TH E EMPLOYEES. IT IS ALSO AN ADMITTED FACT THAT THE RBI VIDE ITS LETTER DATED 20-10-2005 HAD 8 RESTRICTED ACTIVITIES OF THE ASSESSEE BANK U/S.35A OF THE BANKING REGULATION ACT, 1949 WHICH AMOUNTED TO COMPLETE SUS PENSION OF THE ACTIVITIES OF THE BANK. THE BOARD OF DIRECTORS VID E RESOLUTION DATED 31- 03-2009 PASSED A RESOLUTION PROVIDING LEAVE ENCASHM ENT SALARY OF 604 EMPLOYEES AT 8.00 CRORES. SINCE THE RESOLUTION WAS PASSED DURING THE IMPUGNED FINANCIAL YEAR, THEREFORE, THE LIABILITY H AS ACCRUED DURING THIS YEAR. SINCE THE AO APPLYING THE PROVISIONS OF SECT ION 43B(F) HAS DISALLOWED THE DEDUCTION AND SINCE THE HONBLE CALC UTTA HIGH COURT HAS STRUCK DOWN THE SAID PROVISION WHICH HAS BEEN FOLLO WED BY THE LD.CIT(A) AND SINCE THE REVENUE IS NOT IN APPEAL BE FORE US AS AGAINST THE DELETION OF RS.83,32,339/-, THEREFORE, WE ARE O F THE CONSIDERED OPINION THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN SUS TAINING THE AMOUNT OF RS.7,23,70,661/-. WE ACCORDINGLY SET-ASIDE THE ORD ER OF LD. CIT(A) AND THE AO IS DIRECTED TO DELETE ADDITION OF RS.7,23,70 ,661/-. GROUND OF APPEAL NO.1 BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 8. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ID. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 6,91,15,000 /- IN RESPECT OF PROVISION MADE FOR INTEREST ON MATURED TERMED DEPOSITS. 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE AUDITORS RE PORT THAT THE BANK HAD MADE THE PROVISION OF RS.7,04,68,000/- AS INTER EST ON MATURED TERM DEPOSITS FOR CURRENT YEAR AS WELL AS FOR THE PRIOR PERIOD ON ADHOC BASIS. THE AO ASKED THE ASSESSEE TO FURNISH THE COMPLETE D ETAILS BIFURCATING THE ABOVE AMOUNT FOR THE CURRENT YEAR AND PRIOR PERIOD. THE AO ALSO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISION MAD E ON ADHOC BASIS 9 SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE TOTA L INCOME OF THE ASSESSEE. THE ASSESSEE IN ITS REPLY SUBMITTED AS U NDER WHICH HAS BEEN REPRODUCED BY THE AO IN THE BODY OF THE ASSESSMENT ORDER : 'PROVISION FOR INTEREST ON MATURED TERM DEPOSIT WAS MADE DURING THE YEAR. IT CANNOT BE DISALLOWED ON THE GRO UND THAT SOME PORTION OF IT PERTAINS TO PRIOR PERIOD AS THERE WER E RESTRICTION IMPOSED BY RBI ON BANK FOR ITS ACTIVITY AND DEPOSIT ORS WERE NOT READY TO RENEW THE DEPOSITS WITH FEAR OF BLOCKING; THEIR MONEY UNDER THE SHADOW OF RESTRICTIONS IMPOSED BY RBI. UNDER SUCH CIRCUMSTANCES THERE WAS NECESSITY TO MAK E PROVISION FOR PRIOR PERIOD ALSO AND UNDER SUCH EXCEPTIONAL CI RCUMSTANCES IT CANNOT HE TREATED AS PRIOR PERIOD ITEM AS PER ACCOU NTING STANDARD 5. THEREFORE, YOU ARE KINDLY REQUESTED NOT TO ADD I F BACK TO INCOME. MOREOVER, IT IS NOT A AD-HOC PROVISION. WE ARE ENCL OSING DETAILS OF INTEREST PAYABLE ON MATURED DEPOSITS, THE PROVISION OF RS.7 CRORES IS NOT MADE ON AD-HOC BASIS. PROVISION UPTO FINANCIAL YEAR 2007-08 WAS OF RS.6,91,15,000/- AND FOR FINANCIAL YEAR 2008-09 RS.13,53,000/-. THUS, TOTAL RS. 7,04,6 8,000/-. AS FAR AS TRADING RS.6,91,15,000/- AS PRIOR PERIOD ITEM OF EX PENDITURE WE WOULD LIKE TO SUBMIT THAT IT CANNOT BE TREATED AS P RIOR PERIOD ITEM OF EXPENDITURE UNDER THE SHADOW OF SECTION 53A (I) OF BANKING REGULATION ACT.] 1949.' 8.2 HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE. HE NOTED THAT ASSESSEE HAS NOT GIVEN ANY WORKING AS TO HOW THE FIGURE OF RS.7,04,68,000/- HAS BEEN ARRIVED AT. HE HAS GIVEN ONLY THE BRANCH-WISE DETAILS BUT NOT THE WORKING AS TO HOW THE FIGURE HAS BEEN ARRIVED AT. FURTHER, ALTHOUGH THE ASSESSEE BI FURCATED THE AMOUNT INTO PRIOR PERIOD AND CURRENT YEAR, NO BASIS FOR BI FURCATING THE SAME WAS GIVEN BY THE ASSESSEE. THEREFORE, THE SAME CANNOT BE ALLOWED. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.6,91,15,000/- PERTAINS TO THE PROVISIONS UPTO F. Y. 2007-08 AND RS.13,53,000/- FOR F.Y. 2008-09. THUS, AN AMOUNT O F RS.6,91,15,000/- ACCORDING TO THE AO, IS A CLEAR CUT PRIOR PERIOD IT EM OF EXPENDITURE AND IS NOT ALLOWABLE AS PER PROVISIONS OF SECTION 37 OF THE I.T. ACT. HE REJECTED THE EXPLANATION OF THE ASSESSEE THAT IN VI EW OF PROVISIONS OF 10 SECTION 53A(I) OF THE BANKING REGULATION ACT IT CAN NOT BE TREATED AS PRIOR PERIOD EXPENDITURE. REJECTING THE VARIOUS EX PLANATIONS GIVEN BY THE ASSESSEE AND CONSIDERING THE FACT THAT ASSESSEE HAS NOT FURNISHED ANY WORKING IN THE CALCULATION AS WELL AS BIFURCATION O F THE ENTIRE AMOUNT, THE AO DISALLOWED THE AMOUNT OF RS.7,04,68,000/- PR OVIDED BY THE ASSESSEE BEING PROVISION OF INTEREST ON MATURED TER M DEPOSITS. 9. IN APPEAL THE LD.CIT(A) DELETED THE AMOUNT OF RS .13,53,000/- BEING INTEREST ON MATURED DEPOSITS RELATING TO THE CURRENT YEAR AND SUSTAINED THE ADDITION OF RS.6,91,15,000/- WHICH RE LATES TO THE PRECEDING ASSESSMENT YEARS BY OBSERVING AS UNDER : 7.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIV AL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED T HAT DURING THE YEAR UNDER APPEAL, THE APPELLANT HAS MADE PROVISION FOR INTER EST ON MATURED TERM DEPOSITS TO THE EXTENT OF RS.7,04,68,000/-. THE A .O. HAS DISALLOWED THE SAID PROVISION STATING THAT IN THE AUDITOR' S REPORT IT HAS BEEN MENTIONED THAT THE PROVISION OF RS.7,04,68,000/- HAS BEEN MADE ON ADHOC BASIS AND WHICH INCLUDES PROVISION FOR PRIOR P ERIOD. IN THIS REGARD, THE APPELLANT HAS POINTED OUT THAT THE PROVISION IS ON ACTUAL BASIS AND RELATES TO THE EARLIER YEARS TO THE EXTENT OF RS.6,91,15,000/- AND TO THE YEAR UNDER APPEAL TO THE EXTENT OF RS.13,53,000/-. ON PERUSAL OF SECTION 37(1) IT HAS BEEN NOTICED THAT ONE OF TH E CONDITION FOR EXPENDITURE TO BE ALLOWED IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED DURING THE PREVIOUS YEAR. IN THE CASE UNDER AP PEAL IT IS UNDISPUTABLE FACT THAT THE EXPENDITURE ON ACCOUNT OF INTE REST ON FIXED DEPOSITS TO THE EXTENT OF RS.6,91,15,000/- RELATES THE PRI OR PERIOD. THEREFORE, IN VIEW OF PROVISIONS OF SECTION 37 AND ALSO IN VIEW OF MATCHING PRINCIPLE OF ACCOUNTING, THE DEDUCTION OF EXPE NDITURE IS TO BE ALLOWED IN THE YEAR IN WHICH IT HAS BEEN INCURRED. THER EFORE, THE DISALLOWANCE TO THE EXTENT OF RS.6,91,15,000/- IS JUSTIFIED BE ING PRIOR PERIOD EXPENDITURE AND NOT JUSTIFIED IN DISALLOWING IN TEREST ON FIXED DEPOSIT AMOUNTING TO RS.13,53,000/- WHICH RELATES TO THE Y EAR UNDER APPEAL. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, THE ADDITION OF RS.6,91,15,000/- IS CONFIRMED AND THE BALANCE ADDITION OF RS.13,53,000/- IS DELETED. GROUND NO.3 IS PARTLY ALLOWED . 9.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO P AGE 8 OF THE PAPER BOOK, WHICH CONTAINS THE RESOLUTION PASSED IN THE M EETING OF THE BOARD 11 OF DIRECTORS ON 16-01-2009, DREW THE ATTENTION OF T HE BENCH TO RESOLUTION NO.25 WHEREIN THE BOARD OF DIRECTORS HAS PASSED A RESOLUTION ALLOWING INTEREST ON THE MATURED TERM DEPOSITS. HE SUBMITTED THAT DUE TO RESTRICTIONS IMPOSED BY RBI U/S.35A OF THE BANKING REGULATION ACT, 1049 THE BANK WAS UNABLE TO MAKE ANY PROVISION OF I NTEREST ON THE MATURED DEPOSITS. HE SUBMITTED THAT AS PER THE GUI DELINES OF RBI, BOARD OF DIRECTORS ARE GIVEN POWERS TO DECIDE ON THIS ISS UE. ONCE THE BOARD PASSED THE RESOLUTION ALLOWING PROVISION OF INTERES T ON MATURED TERM DEPOSITS, IT BECOMES THE LIABILITY OF THE BANK. TH EREFORE, THE SAME IS AN ALLOWABLE EXPENDITURE DURING THIS YEAR. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT T HE BANK SHOULD HAVE MADE PROVISIONS FOR SUCH INTEREST ON MATURED TERM D EPOSITS IN THE PRECEDING YEARS, WHICH IT HAS NOT DONE. THEREFORE, THE ORDER OF THE LD.CIT(A) BEING IN ORDER SHOULD BE UPHELD. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS MADE PROVISION FOR INTER EST ON MATURED TERM DEPOSITS TO THE EXTENT OF RS.7,04,68,000/- DURING T HE YEAR WHICH INCLUDES THE AMOUNT OF RS.6,91,15,000/- RELATING TO THE PRIO R PERIOD. THE LD.CIT(A) DISALLOWED THE AMOUNT OF RS. RS.6,91,15,0 00/- BY APPLYING THE PROVISIONS OF SECTION 37(1) BY HOLDING THE SAME TO BE PRIOR PERIOD EXPENDITURE. WE FIND FROM THE VARIOUS DETAILS FURN ISHED BY THE ASSESSEE THAT THE RBI HAD MADE CERTAIN RESTRICTIONS U/S.35A OF THE BANKING REGULATION ACT, 1949 FOR WHICH THE ACTIVITIES OF TH E ASSESSEE BANK WERE 12 ALMOST SUSPENDED. THE BOARD OF DIRECTORS VIDE RESO LUTION DATED 16-01- 2009 HAD PASSED THE RESOLUTION WHICH READS AS UNDER (ENGLISH TRANSLATION OF THE BOARDS RESOLUTION PLACED AT PAGE 8 OF THE PAPER BOOK): FREE ENGLISH TRANSLATION OF RELEVANT PORTION OF BOAR D'S RESOLUTION PASSED IN THE MEETING HELD ON 16.01.2009. SUBJECT NO 25 :- REGARDING RENEWAL AND INTEREST MATURED FIXED DEPOSI TS. RESOLUTION NO 25 :- PRIOR TO SUSPENSION OF BANKING ACTIVITIES THERE WERE DEPOSITS MADE IN THE DIFFERENT SCHEMES AND WHICH DEPOSIT S HAVE BEEN MATURED SIMILARLY IN RESPECT OF MONTHLY DEPOSIT SCHEME AFTER RESTRICTION IMPOSED U/S 35(A) ON 23.10.2005 THE REGULAR MONTHLY D EPOSITS HAVE BEEN STOPPED .SOME OF THE MONTHLY DEPOSITS ARE MATURE D HOWEVER AS PER THE SCHEME THE INTEREST PAYABLE PER MONTH TO THE DEPO SITOR COULD NOT BE PAID. AS PER THE CIRCULAR NO 10414 DATED 20.07.2007 THE RENEWAL OF THE DEPOSITS IS DIRECTED TO BE MADE MINIMUM FOR 4 YEARS. IN THE MEETING OF BOAR OF ADMINISTRATORS 13.. 08.2008 AS PER RESOLUTION NO 22 IN RESPECT OF MONTHLY DEPOSITS AS OF 30.09.2005 AS PER THE SCHEME AN D IF THE DEPOSIT IS REGULAR THE INTEREST IS TO BE PAID AT THE AGREED RATE AND FOR SUBSEQUENT PERIOD I.E AFTER 1.10.2005 INTEREST IS TO BE PAID AT THE RATE AS APPLICABLE TO SAVING ACCOUNT. HOWEVER...... ON TAKING INTO CONSIDERATION FINANCIAL POSITION OF BA NK AND ITS INABILITY TO ENCASH THE MATURED DEPOSITS FOR WANT OF FUNDS THAT BEIN G THE REASON FOR IMPOSING THE RESTRICTION U/S35(A). IN THIS SITUATION IF FOLLOWING RESOLUTION IS PASSED THE SAME WILL BE INFORMED TO THE DEPOSITORS THR OUGH THE BRANCHES OF BANK : 1) THE PERIOD OF RENEWAL OF FIXED DEPOSITS SHOULD BE MINIMUM OF 1 YEAR AND WHILE RENEWING THE SAME THE INTEREST SHALL BE PAID AT THE RATE APPLICABLE TO SAVING ACCOUNT FOR THE PERIOD SUBSEQUENT TO THE MATURITY TILL RENEWAL AND SUCH AMOUNT OF INTEREST TO BE CREDITED TO THE INTEREST ACCOUNT. 2) . . . . . . 3) IN RESPECT OF MATURED FIXED DEPOSITS THE INTEREST IT TO BE PROVIDED HALF YEARLY AND THE SAME INSTEAD OF CREDITING TO THAT ACCO UNT WILL BE CREDITED TO INTEREST PAYABLE ACCOUNT. 4) APPROVAL IS SOUGHT FOR THE DECISION OF CONSUMER FORUM. RESOLUTION - IN RESPECT OF MATURED DEPOSIT THE SAME SHOU LD BE RENEWED ATLEAST FOR 2 YEARS AND AS FAR AS OTHER ISSUES ARE CONCERN ED IT IS DECIDED TO GRANT THE APPROVAL. RESOLUTION PASSED UNANIMOUSLY. 13 12.1 SINCE THE BANK HAS TO PAY INTEREST ON THE MATU RED TERM DEPOSITS AS PER THE RESOLUTION OF THE BOARD OF DIRECTORS, THE L IABILITY OF THE BANK HAS ACCRUED DURING THE YEAR ITSELF AND THEREFORE, IN OU R OPINION, THE SAME IS AN ALLOWABLE EXPENDITURE. IN THIS VIEW OF THE MATT ER, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO DELETE THE DISALLOWANCE OF RS.6,91,15,000/-. GROUND OF APPEAL NO.2 BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 13. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ID. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 30,00,000/- RELATING TO THE PAYMENT OF GRATUITY BY INVOKING THE PROVISION OF SECT ION 43 B OF THE ACT. 13.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE COMPUTATION O F INCOME THAT THE ASSESSEE WHILE COMPUTING TAXABLE INCOME HAS CLAIMED RS.4,30,00,000/- UNDER THE HEAD GROUP GRATUITY PREMIUM. ON BEING ASKED BY THE AO TO FURNISH THE CHALLANS AND EXPLAIN THE SAME IT WAS SU BMITTED THAT THERE WAS A TYPOGRAPHICAL ERROR IN THE AMOUNT MENTIONED AND T HE CORRECT AMOUNT IS RS.4,80,00,000/-. HOWEVER, THE AO DID NOT ACCEPT T HE SUBMISSION REGARDING THE MISTAKE OF THE ASSESSEE AND NOTED THA T THE PAYMENT OF RS.80 LAKHS HAS BEEN MADE ON 01-10-2009 AFTER THE D UE DATE OF FILING OF THE RETURN OF INCOME AND DUE PAYMENT OF ONLY TO THE EXTENT OF RS.4 CRORES WAS PAID DURING THE YEAR UNDER CONSIDERATION. HE A CCORDINGLY DISALLOWED THE AMOUNT OF RS.30 LAKHS U/S.43B OF THE I.T. ACT. 14. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE AMO UNT OF RS.80 LAKHS WAS PAID ON 24-09-2009 AND RECEIVED BY LIC ON 30-09 -2009 BUT THE CHALLAN BEARS THE DATE 01-10-2009. IT WAS SUBMITTE D BY THE AO IN HIS 14 REMAND REPORT DATED 03-08-2012 THAT AS PER THE LETT ER OF LIC DATED 23- 05-2012 THE LIC OFFICE HAS STATED THAT THE LETTER F ROM THE BANK MAKING PAYMENT ALONG WITH CHEQUE DATED 24-09-2009 FOR RS.8 0 LAKHS WAS RECEIVED ON 30-09-2009 AFTER CLOSURE OF CASH HOURS. THE AO, THEREFORE, OBSERVED THAT THE CHEQUE WAS NOT CLEARED BEFORE THE DUE DATE AND THEREFORE THE ASSESSEES CLAIM FOR PAYMENT OF RS.30 LAKHS HAS TO BE DISALLOWED. 15. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND THE REMAND REPORT OF THE AO THE LD.CIT(A) SUSTAINED THE ADDITI ON BY OBSERVING AS UNDER : 9.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTIC ED THAT THE APPELLANT HAS FILED LETTER FROM LIC IN RESPECT OF HAN DING OVER OF CHEQUE TO LIC TOWARDS GRATUITY PAYMENT, THE RELEVANT PORTION O F WHICH IS REPRODUCED BELOW : 'THIS HAS REFERENCE TO YOUR LETTER ADM/GRATUITY/34 76 /2009.10 DT 24.09.2009 ALONG WITH CHEQUE NO 138277 DT 24.09.200 9 FOR RS.80,00,000/- (EIGHTY LACS). THE AMOUNT WAS TOWARDS GR ATUITY CONTRIBUTION UNDER ABOVE SCHEME. THE SAID LETTER WAS R ECEIVED ON 30.09.2009 AT OUR OFFICE. BUT AS CASH HOURS WERE OVER FOR THE DAY WE COULD NOT ISSUED THE RECEIPT. THE RECEIPT NO 2777 WAS ISSUED ON 01.10.2009 IE ON NEXT DAY.' FROM THE ABOVE LETTER DATED 23/05/2012 ISSUED BY THE LIFE INSURANCE CORPORATION OF INDIA, AURANGABAD BRANCH IT IS EVIDEN T THAT THE APPELLANT HAS HANDED OVER CHEQUE OF RS.80,00,000/- TO LIC OF IN DIA ON 30/09/2009. THE RELEVANT PROVISO OF SECTION 43B ON TH E ISSUE UNDER APPEAL IS AS UNDER : 'PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHAL L APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RET URN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFO RESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALO NGWITH SUCH RETURN.' IT IS WORTH NOTING HERE THAT UP TO ASSESSMENT YEAR 2003 -04, ONE OF THE PROVISO TO SECTION 43B WAS AS UNDER 'PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPECT OF ANY SUM REFERRED TO IN CLAUSE (B), SHALL BE ALLOWED UNLESS SUCH SUM HAS ACTUALLY BEEN PAID IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE ON OR BEFORE THE DUE DATE AS DEFINED IN EXPLANATION BELOW CLAUSE (VA) 15 OF SECTION (1) OF SECTION 36, AND WHERE SUCH PAYMENT H AS BEEN MADE OTHERWISE THAN IN CASH, THE SUM HAS BEEN REALIZED WITHI N 15 DAYS FROM THE DUE DATE.' THE ABOVE PROVISO HAS BEEN DELETED BY FINANCE ACT, 2 003 W.E.F. A.Y.2004-05. IN VIEW OF THE ABOVE AMENDMENT, IT IS CLEAR THAT THE PAYMENT IN RESPECT OF GRATUITY WHICH IS COVERED UNDER CLAUSE (B) OF SECTION 43B IS TO BE ACTUALLY PAID AS PER EXISTING PROVISO TO SECTION 43B AND CANNOT BE ALLOWED AS CLAIMED BY THE APPELLANT AS THE EARLIER PROVISO REPRODUCED AB OVE HAS BEEN DELETED BY FINANCE ACT, 2003 W.E.F. A.Y.2004-05. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. I S JUSTIFIED IN DISALLOWING GRATUITY AMOUNTING TO RS.30,00,000/- U.S.4 3B(B) OF THE ACT AS THE SAID GRATUITY HAS NOT BEEN ACTUALLY PAID BEFORE THE D UE DATE OF FILING THE RETURN. THE ADDITION OF RS.30,00,000/- IS, THEREFORE , CONFIRMED. GROUND NO.5 STANDS DISMISSED . 15.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 16. AFTER HEARING BOTH THE SIDES, WE ARE OF THE CON SIDERED OPINION THAT THE ASSESSEE SHOULD SUCCEED ON THIS ISSUE. UNDISPU TEDLY, THE CHEQUE DATED 24-09-2009 FOR RS.80 LAKHS WAS RECEIVED BY LI C ON 30-09-2009. SINCE THE CASH HOURS WERE CLOSED FOR THAT DAY THEY COULD NOT ISSUE THE RECEIPT. THE RECEIPT WAS ISSUED ON THE NEXT DAY. IT IS ALSO AN UNDISPUTED FACT THAT THE CHEQUE HAS BEEN CLEARED SUBSEQUENTLY AND IT HAS NOT BEEN DISHONOURED, A STATEMENT MADE BY LD. COUNSEL FOR TH E ASSESSEE AT THE BAR AND NOT DISPUTED BY THE LD. DEPARTMENTAL REPRES ENTATIVE. 16.1 THE HONBLE MADRAS HIGH COURT IN THE CASE OF C IT VS. KUMUDAM PUBLICATIONS PVT. LTD. WHILE DEALING WITH PAYMENT O F ADVANCE TAX UNDER THE INCOME TAX ACT, 1961 HAS HELD THAT IN VIEW OF T HE TREASURY RULES WHEN CHEQUES WERE HANDED OVER TO GOVERNMENT OFFICIA LS OR TO THE GOVERNMENT OFFICER AUTHORIZED TO RECEIVE PAYMENT ON BEHALF OF THE GOVERNMENT, PAYMENT WOULD BE DEEMED TO HAVE BEEN MA DE ON THE DATE THE CHEQUE WAS HANDED OVER AND THE AMOUNT SHOULD BE TREATED AS PAYMENT OF ADVANCE TAX. THE HONBLE SUPREME COURT IN THE CASE OF K. SARASWATTY VS. P.S.S. SOMASUNDARAM CHETTIAR REPORTE D IN (1989) 4- 16 SCC-527 WHILE DEALING WITH A CASE U/S.10 AND 82 OF THE NEGOTIABLE INSTRUMENT ACT, 1881 HAS HELD THAT PAYMENT BY CHEQU E SHOULD BE TAKEN TO BE DUE PAYMENT IF THE CHEQUE IS SUBSEQUENTLY ENC ASHED IN THE ORDINARY COURSE. 16.2 SINCE IN THE INSTANT CASE THE CHEQUE DATED 24- 09-09 WAS RECEIVED BY LIC ON 30-09-09 AND SINCE THE RECEIPT WAS ISSUED ON THE SUBSEQUENT DATE AS THE CASH HOURS WAS CLOSED ON 30-09-2009, TH EREFORE, WE ARE OF THE CONSIDERED OPINION THAT UNDER THE FACTS AND CIRCUMS TANCES OF THE CASE THE CHEQUE WAS TENDERED BY THE ASSESSEE TO LIC BEFORE T HE STIPULATED DATE, I.E. BEFORE FILING OF RETURN OF INCOME. IN THIS VI EW OF THE MATTER, WE SET- ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE GROU ND RAISED BY THE ASSESSEE. GROUND NO.3 BY THE ASSESSEE IS ACCORDING LY ALLOWED. 17. GROUND OF APPEAL NO.4 BY THE ASSESSEE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.27,29,51,500/- WHI CH REPRESENT THE PROVISION MADE FOR BAD AND DOUBTFUL DEBTS UNDER THE P ROVISION OF SECTION 36(1)(VII)(A), ONLY ON THE GROUND THAT THE SAME IS NO T ROUTED THROUGH OR PROVIDED IN THE BOOKS OF ACCOUNTS. 17.1 FACTS OF THE CASE, IN BRIEF, ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED FROM COMPUTATION OF TOTAL INCOME THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.36(1)(VIIA) OF T HE I.T. ACT AMOUNTING TO RS.27,29,51,500/-. HE NOTED THAT THE ASSESSEE, HOWEVER, HAS NOT MADE PROVISION FOR THE SAME. THE AO ANALYSED THE PROVIS IONS OF SECTION 36(1)(VIIA) AND CONFRONTED THE SAME TO THE ASSESSEE REGARDING THE ALLOWABILITY OF THE CLAIM. IT WAS SUBMITTED BY THE ASSESSEE THAT DEDUCTION U/S.36(1)(VIIA) IS IRRESPECTIVE OF THE PR OVISIONS MADE ON ACCOUNT OF NPA AND HENCE THE ASSESSEE IS ELIGIBLE T O CLAIM THE SAID DEDUCTION. HOWEVER, THE AO REJECTED THE ABOVE CONT ENTION OF THE 17 ASSESSEE AND DISALLOWED AN AMOUNT OF RS.27,29,51,50 0/-. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 10.3 I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE AN D RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT IN ORD ER TO CLAIM DEDUCTION U/S.36(1)(VIIA), THE BANK HAS TO MAKE PROVI SION FOR BAD AND DOUBTFUL DEBTS. THE RELEVANT PORTION OF THE SAID SECT ION IS AS UNDER : '36 (1) THE DEDUCTION PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 - (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTF UL DEBTS MADE BY - FROM THE ABOVE MENTIONED PROVISION OF SECTION 36(1)( VIIA), IT IS CLEAR THAT IN ORDER TO CLAIM DEDUCTION FOR BAD AND DOUBTFUL DEBTS, THE PROVISION IN RESPECT OF THE SAME IS REQUIRED TO BE MADE. THIS PROPOSITION IS ALSO SUPPORTED/CLARIFIED BY CBDT INSTRUC TION NO. 17/2008 DATED 26/11/2008. THIS PROPOSITION 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). IN THIS CASE, IT HAS BE EN LAID DOWN THAT MAKING A PROVISION FOR BAD AND DOUBTFUL DEBTS EQ UAL TO THE AMOUNT MENTIONED IN SECTION 36(1)(VIIA) IS A CONDITI ON PRECEDENT FOR ALLOWING DEDUCTION; ASSESSEE CLAIMING DEDUCTION FOR BAD DEBT UNDER UN-AMENDED SECTION 36(1)(VIIA) BUT AFTER AMEN DMENT 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. FROM THE ABOVE REFERRED DECISION IT IS CLEAR THAT IN ORDER TO CLAIM DEDUCTION U/S 36(1)(VIIA), THE PROVISION HAS TO BE MADE IN THE YEAR IN WHICH THE DEDUCTION HAS BEEN CLAIMED; THE PROVISION MADE IN THE SUBSEQUENT YEAR IS OF NO RELEVANCE. IT IS ALSO UNDISPUTED FACT THA T THE APPELLANT HAS NOT MADE PROVISION FOR BAD AND DOUBTFUL DEBTS IN T HE YEAR UNDER APPEAL. THE DECISIONS RELIED ON BY THE APPELLA NT IN SUPPORT OF THIS GROUND ARE ON DISTINGUISHABLE FACTS. IN VIEW OF TH E ABOVE FACTS AND DISCUSSION AND UNAMBIGUOUSLY WORDED PROVISION OF SEC TION 36(1)(VIIA) AND CBDT CIRCULAR CLARIFYING THE PROVISI ONS OF THE SAID SECTION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS JUSTIFIED IN MAKING DISALLOWANCE OF INTEREST AMOUNTING TO RS.27,29, 51,500/- CLAIMED BY THE APPELLANT U/S 36(L)(VIIA) OF THE ACT. THE ADDITION OF RS.27,29,51,500/- IS ACCORDINGLY CONFIRMED. GROUND NO.6 STANDS DISMISSED. 17.2 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. 18. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY THE DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHR I MAHALAXMI CO-OP BANK LTD. VS. ITO VIDE ITA NO.1658/PN/2011 ORDER DA TED 29-10-2013. 18 18.1 IN VIEW OF THE ABOVE SUBMISSION OF THE LD. COU NSEL FOR THE ASSESSEE AND IN ABSENCE OF ANY OBJECTION BY THE LD. DEPARTMENTAL REPRESENTATIVE THIS GROUND IS DECIDED AGAINST THE A SSESSEE. THE ORDER OF CIT(A) IS ACCORDINGLY UPHELD ON THIS ISSUE AND THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25-06-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 25 TH JUNE, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE