The S.K. Dist. Central Co.-Op. Bank Ltd., Sabarkantha V. The Asstt. Commissioner of Income Tax, S.K. Circle, Sabarkantha

ITA 2363/AHD/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9382 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: A C SHAH
• Section: 143(3); 143(2)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER &SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO. 2363/AHD/2016 ( / ASSESSMENT YEAR: 2013-14) THE S.K. DIST. CENTRAL CO.OP. BANK LTD. HIMATNAGAR- 383 001 DIST- SABARKANTHA / VS. ACIT S.K. CIRCLE, AAYKAR BHAVAN, NR. GANDHI TOWN HALL, HIMATNAGAR- 383 001, DIST- SABARKANTHA ./ ./PAN/GIR NO. : AAA AT1 019 P ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A. C. SHAH, AR / RESPONDENT BY: SHRI S. K. DEV, SR. DR ! /DATE OF HEARING 27/06/2019 '# ! / DATE OF PRONOUNCEMENT 23/09/2019 $% /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2013-14, ARISE FROM ORDER OF THE CIT(A)-2, AHMEDABAD DATED 17.08.2016, IN PROCEEDING S UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS PE RTAINED TO THE DISALLOWANCE OF PROVISION OF COMPUTER ASSISTANCE INCENTIVES OF RS. 1,50,00,000/-. THE ASSESSEE HAS FILED APPEAL AGAINST THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR COMPUTER ASSISTANCE INCENTIVES OF RS. 1,50,00,000/- ON THE GROUND THAT IT IS NOT ASCERTAINED LIABILITY. ITA NO. 2363/AHD/2016 [THE S.K. DIST CENTRAL CO.OP. BANK LTD. VS. ACIT] A.Y. 2013-14 2 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RET URN OF INCOME ON 29.09.2013 DECLARING TOTAL INCOME OF RS. 11,06,98,580/-. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 02.09.2014. DURING THE COURSE OF ASSESSMENT THE AO NOTICED THA T ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 1,50,00,000/- IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD PROVISION FOR COMPUTER ASSISTANCE INCENTIVE. THE AO OBSERVED THA T ASSESSEE HAS NOT INCURRED ANY EXPENSES OUT OF THE PROVISION AND IT WAS NOT ASCERT AINED LIABILITY. HE HAS FURTHER OBSERVED THAT OUT OF THE AFORESAID PROVISION AN AMO UNT OF RS. 77,35,500/- WAS INCURRED IN THE SUBSEQUENT YEAR AFTER 07.09.2013. THEREFORE , HE WAS OF THE VIEW THAT THE AMOUNT CLAIMED UNDER THE HEAD COMPUTER ASSISTANCE I NCENTIVE WAS NOT ALLOWABLE. THE ASSESSEE HAS EXPLAINED THAT IT WAS APEX DISTRICT CO OPERATIVE BANK AND ITS MAIN OBJECT WAS TO PROVIDE ASSISTANCE TO THE PRIMARY AGRICULTUR AL SOCIETIES. THE BOARD HAS PASSED RESOLUTION FOR PROVIDING ASSISTANCE FOR INSTALLATIO N OF COMPUTER IN PRIMARY AGRICULTURAL SOCIETY, THEREFORE, THE ASSESSEE HAS MADE THE AFORE SAID PROVISION SINCE THE LIABILITY WAS ASCERTAINED LIABILITY. HOWEVER, CERTAIN PRIMARY AG RICULTURAL SOCIETIES HAVE FAILED TO SEEK COMPUTER ASSISTANCE, THEREFORE, THE ACTUAL AMO UNT FOR THE AFORESAID EXPENDITURE WAS INCURRED IN THE SUBSEQUENT YEAR TO THE EXTENT O F RS. 77,35,500/- AND THE ASSESSEE HAS TRANSFERRED THE BALANCE AMOUNT OF RS. 72,64,500 /- TO THE PROFIT AND LOSS ACCOUNT DURING THE SUBSEQUENT YEAR. THE AO HAS NOT ACCEPTE D THE EXPLANATION OF THE ASSESSEE STATING THAT ASSESSEE BANK HAS NOT PROVIDED THE LIS T OF ALL THE CREDIT COOPERATIVE SOCIETY FOR WHICH THE PROVISION OF COMPUTER ASSISTANCE OF R S. 1,50,00,000/- WAS MADE. THE AO WAS OF THE VIEW THAT THE AFORESAID PROVISION WAS NOT ALLOWABLE AS THERE WERE NO ASCERTAINED LIABILITIES TO CREATE THE PROVISION DUR ING THE YEAR UNDER CONSIDERATION. THEREFORE, THE AO HAS DISALLOWED THE AMOUNT OF RS. 1,50,00,000/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS A GAINST THE DECISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF PROVISION FOR CORE BANKING SOLUTION OF RS. 1,50,00,000/- ON THE GROUND THAT IT IS NOT ASCERTAI NED LIABILITY. ITA NO. 2363/AHD/2016 [THE S.K. DIST CENTRAL CO.OP. BANK LTD. VS. ACIT] A.Y. 2013-14 3 DURING THE COURSE OF ASSESSMENT THE AO NOTICED THA T ASSESSEE HAS MADE PROVISION OF RS. 1,50,00,000/- UNDER THE HEAD UNPAI D CBS EXPENSES DURING THE YEAR UNDER CONSIDERATION. THE AO HAS FURTHER OBSERVED T HAT OUT OF THE AFORESAID PROVISION AN AMOUNT OF RS. 1,09,98,641/- WAS INCURRED IN THE PERIOD FROM 09.07.2013 TO 31.03.2015 WHICH PERTAINED TO SUBSEQUENT TWO YEARS AND REMAINING AMOUNT WAS NOT UTILIZED AT THE END OF THE TWO SUBSEQUENT YEARS. H E WAS ALSO OF THE VIEW THAT ASSESSEE HAD NOT INCURRED ANY EXPENSES OUT OF THE PROVISION DURING THE YEAR UNDER CONSIDERATION AND THERE WAS NO ASCERTAINED LIABILITY TO CREATE TH E AFORESAID PROVISION UNDER THE HEAD OF CBS EXPENSES. THE ASSESSEE EXPLAINED THAT THE P ROVISION FOR EXPENSES OF CORE BANKING SOLUTION WAS MADE ON THE BASIS OF NEGOTIATI ON WITH TCS AND INSTALLED CBS SYSTEM WAS COMMENCED FROM JUNE 2012 ONWARDS. THE A SSESSEE HAS FURTHER SUBMITTED THAT THE TCS HAS RAISED BILL OF ONLY RS. 1,09,98,64 1/- AND THE BALANCE AMOUNT OF RS. 40,01,359/- TO BE TRANSFERRED TO THE PROFIT AND LOS S ACCOUNT IN SUCCEEDING YEARS. THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS ACTUALLY INCURRED AN AMOUNT OF RS. 1,09,98,641/ - FOR THE PURPOSES OF CBS IN THE SUBSEQUENT YEAR AND THERE WAS NO ASCERTAINED LIABIL ITY. THEREFORE, THE FULL AMOUNT OF PROVISION UNDER HEAD OF CBS EXPENSES OF RS. 1,50,00 ,000/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE T HE LD. CIT(A). LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 6. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE US THE LD. COUNSEL HAS SUBMITTED PAPER BOOK COMPRISING DETAIL AND COPIES O F DOCUMENT FURNISHED BEFORE THE AO AND THE CIT(A) AT THE TIME OF HEARING. THE LD. COUNSEL HAS ALSO SUBMITTED COPIES OF AGREEMENT FOR CORE BANKING PROJECT IMPLEMENTATIO N EXECUTED ON FEBRUARY 2012, BETWEEN THE ASSESSEE AND TCS LTD. UNDER ASP MODEL U NDER THE DIRECTION OF NABARD (NATIONAL BANK FOR AGRICULTURE AND RURAL DEV ELOPMENT) FOR IMPLEMENTING CORE BANKING SOLUTION (CBS) TO FACILITATE OPTIMAL T ECHNOLOGY IN RURAL FINANCIAL SECTOR. FURTHER THE LD. COUNSEL HAS ALSO SUBMITTED COPY OF INSTRUCTIONS FROM NABARD TO PROVIDE VARIOUS FACILITIES TO THE FARMERS WHO ARE M EMBERS OF PRIMARY AGRICULTURE SOCIETY BY PROVIDING KISHAN CREDIT CARD, CREDIT CAR D, DEBIT CARD ETC. AFTER REFERRING ITA NO. 2363/AHD/2016 [THE S.K. DIST CENTRAL CO.OP. BANK LTD. VS. ACIT] A.Y. 2013-14 4 THE AFORESAID DIRECTION OF THE NABARD THE LD. COUNS EL HAS CONTENDED THAT PROVIDING COMPUTER ASSISTANCE AND CORE BANKING SOLUTION ASSIS TANCE UNDER THE DIRECTION OF THE NABARD TO THE PRIMARY AGRICULTURAL COOPERATIVE SOCI ETY WAS THE ASCERTAINED LIABILITY OF THE ASSESSEE. THEREFORE, THE DECISION OF LD. CI T(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED. 7. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE R OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. THE AO HAS DISALLOWED THE PROVISION FOR COMPUTER ASSISTANCE IN CENTIVES OF RS. 1.50 CRORE ON THE GROUND THAT THIS LIABILITY WAS NOT ASCERTAINED LIAB ILITY. IN THIS REGARD, WE HAVE NOTICED THAT NABARD VIDE CIRCULAR NO. 228/PCD-25 HAS ADVISE D THE DISTRICT CENTRAL COOPERATIVE BANK TO PROVIDE VARIOUS FACILITIES TO T HE FARMERS WHO ARE MEMBERS OF PRIMARY AGRICULTURAL SOCIETY BY PROVIDING KISHAN CR EDIT CARD, ATM CARD, DEBIT CARD, POS MACHINE, MOBILE BASED TRANSFER ETC. IN ORDER T O IMPLEMENT, THE AFORESAID OPERATION IT WAS REQUIRED TO COMPUTERISED THE FUNCT IONING OF PRIMARY AGRICULTURAL SOCIETY AS ADVISED BY THE NABARD. THE NABARD ADVIS ED THAT IT WILL BE NECESSARY THAT THE SOCIETY MEMBER INTRODUCE COMPUTER SYSTEM S O THAT THE TRANSACTION BETWEEN THE BANKS AND MEMBERS WERE EASILY RECORDED AND IT WOULD PROVIDE CONVENIENCE TO BOTH THE SOCIETIES. THEREFORE, THE BOARD BY ITS RESOLUT ION DATED 26.02.2013 PLACED AT PAGE 4 OF THE PAPER BOOK HAS DECIDED TO PROVIDE COMPUTER ASSISTANCE TO THE SOCIETIES BY GIVING ASSISTANCE ACCORDING TO GRADE OF THE SOCIETY . THE ASSESSEE BANK HAS ALSO ADDRESSED LETTER DATED 09.03.2013 TO ALL THE COOPER ATIVE SOCIETIES WHO WERE ELIGIBLE FOR ASSISTANCE FOR COMPUTERISATION AS PER THE SCHEME. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS CLEAR THAT THE ASSESSEE BANK H AS MADE PROVISION AFTER MAKING COMPLIANCE TO THE GUIDELINES OF THE NABARD AND RESO LUTION OF THE BOARD FOR PROVIDING COMPUTER ASSISTANCE TO THE COOPERATIVE SO CIETIES. HOWEVER, SOME OF THE SOCIETY HAS DEFAULTED IN AVAILING THE ASSISTANCE TH EREFORE, THE BALANCE UNUTILISED AMOUNT WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS ALSO MADE PROVISION FOR CORE BANK ING SOLUTION (CBS) FOR RS. 1.50 CRORE. IT IS DEMONSTRATED FROM COPY OF AGREEM ENT EXECUTED IN THE FEBRUARY 2012 ITA NO. 2363/AHD/2016 [THE S.K. DIST CENTRAL CO.OP. BANK LTD. VS. ACIT] A.Y. 2013-14 5 WITH TCS LTD. THAT THE TOTAL EXPENDITURE OF CBS SYS TEM WOULD BE AROUND RS. 1.50 CRORE TO IMPLEMENT THE GUIDELINE OF NATIONAL BANK F OR AGRICULTURE AND RURAL DEVELOPMENT TO ENSURE AVAILABILITY OF SOFTWARE APPL ICATION LIKE CORE BANKING APPLICATION, E-MAIL SYSTEM AND OTHER APPLICATION AN D EACH USER MACHINE FOR ENABLING THE BANK TO CONDUCT BANKING FUNCTION IN AN UNINTERR UPTED MANNER. HOWEVER, FINALLY THE TCS HAS CHARGED RS. 1,09,98,641/- AND THE BALAN CE AMOUNT WAS SUBSEQUENTLY CREDITED TO THE PROFIT AND LOSS ACCOUNT. IT IS CLE AR FROM ABOVE FACT THAT BOTH THE LIABILITIES WERE ASCERTAINED LIABILITY WHICH WERE C REATED UNDER THE GUIDELINES OF NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT WHICH IS A APEX BANK ESTABLISHED UNDER THE ACT OF PARLIAMENT VIZ. NABARD IN 1981 FOR PROVIDING AND REGULATING CREDIT AND OTHER FACILITIES FOR PROMOTIN G INTEGRATED RURAL DEVELOPMENT AND SUPERVISING AND CONTROLLING THE COOPERATIVE BANK. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES AS ADDUCED ABOVE THE IMPUGNED PROVISI ONS WERE CREATED AS PER THE GUIDELINES OF NABARD, THEREFORE, THE SAME WERE OF T HE NATURE OF ASCERTAINED LIABILITY. THEREFORE, BOTH THE GROUNDS OF APPEAL O F THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE ARE AL LOWED. SD/- SD/- (SUDHANSHU SRIVASTAVA) (AMARJIT SINGH) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD: DATED 23/09/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. &' ( / CONCERNED CIT 4. ( - / CIT (A) 5. )*+ ' , ! ' , ,-$&$ / DR, ITAT, AHMEDABAD 6. +. / / GUARD FILE. BY ORDER / $% , 0 / , ! ' , ,-$&$ 1 THIS ORDER PRONOUNCED IN OPEN COURT ON 23/09/2019