Telangana Grameena Bank(Earlier known as M/s Deccan Grameena Bank ), Hyderabad V. Asst. Commissioner of Income Tax, Circle-9(1), Hyderabad

ITA 2366/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8396 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 04-04-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 24-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Bad and doubtful debts; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 2366/HYD/2018 ASSESSMENT YEAR: 2015-16 TELANGANA GRAMEENA BANK, (EARLIER KNOWN AS M/S. DECCAN GRAMEENA BANK) , HYDERABAD [PAN: AAAAD3893M] VS ACIT, CIRCLE-9(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI LAXMINIWAS SHARMA, AR FOR REVENUE : SHRI Y.V.S.T. SAI, DR DATE OF HEARING : 04-04-2019 DATE OF PRONOUNCEMENT : 12-04-2019 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL FOR THE AY. 2015-16, AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD, DATED 09-10-2018. 2. THE ASSESSEE IS IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN FACTS AND LAW WHILE PASSING THE ORDER U/S. 250. ITA. NO. 2366/HYD/2018 :- 2 -: 2. THE LEARNED CIT(A) ERRED BY CONFIRMING THE DISAL LOWANCE OF DEDUCTION OF RS. 12,43,39,317/- MADE BY ASSESSING O FFICER, IGNORING THAT THE DEDUCTION IS CLAIMED IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. 3. FOR THESE AND ANY OTHER GROUNDS WHICH MAY BE RAI SED ON OR BEFORE HEARING OF THE APPEAL. 3. AT THE OUTSET, WE NOTICED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 936 & 889/HYD/2015 FOR THE AY. 2011-12, TO WHICH BOTH OF US ARE SIGNATORIES. COPY OF THE SAID ORDER IS ALSO FILED B EFORE US. 4. TAKING THE SAME INTO CONSIDERATION, FOR THE SAKE OF CONVENIENCE AND READY REFERENCE, THE RELEVANT PORTION OF THE SAID ORDER IS EXTRACTED HEREIN BELOW: 12. AS REGARDS GROUND NO.4, WE FIND THAT IT IS AGA INST THE ORDER OF THE CIT (A) ALLOWING THE CLAIM OF PROVISIONS FOR BA D AND DOUBTFUL DEBT, DESPITE THE FACT THAT SECTION 36(2)(V) MANDATES THA T THE PROVISIONS CAN BE ALLOWED ONLY WHEN THE AMOUNT IS CREDITED TO THE BAD AND DOUBTFUL DEBT A/C IN THE BOOKS OF THE ASSESSEE. THE BRIEF FA CTS ARE AS UNDER. THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.4,90,11, 393 IN THE COMPUTATION OF INCOME TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBT U/S 36(1)(VIIA) OF THE ACT. ON PERUSAL OF THE RETUR N OF INCOME AND THE FINANCIAL STATEMENTS, THE AO OBSERVED THAT THE ASSE SSEE HAS NOT MADE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS IN IT S BOOKS OF ACCOUNT AND FURTHER THAT BOTH IN THE ORIGINAL RETUR N OF INCOME AND IN THE REVISED RETURN OF INCOME, THE PROVISIONS FOR BA D AND DOUBTFUL DEBTS HAS BEEN MENTIONED AS NIL. HE OBSERVED THAT SECTION 36(2) SPECIFIES CERTAIN CONDITIONS TO BE FULFILLED FOR EL IGIBILITY TO CLAIM DEDUCTION U/S 36(1) OF THE ACT AND AS PER PROVISO T O SUB SECTION 4 OF SECTION 36(1) IN THE CASE OF A BANK TO WHICH CLAUSE 7(A) APPLIES, THE AMOUNT OF DEDUCTION RELATING TO ANY SUCH DEBT OR PA RT THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION OF BAD AND DOUBTFUL ACCOUNT MADE UNDER CLAUSE (VIIA) OF THE ACT. HE ALSO OBSERVED TH AT THE DEDUCTION ITA. NO. 2366/HYD/2018 :- 3 -: ALLOWABLE UNDER CLAUSE 7 IS SUBJECT TO THE PROVISIO NS OF SECTION 36(2) AND CLAUSE 5 OF SUB-SECTION 2 OF SECTION 36 PROVIDE S THAT NO DEDUCTION SHALL BE ALLOWED UNLESS THE BANK HAS DEBITED THE AM OUNT OF SUCH DEBT OR PART OF THE DEBT IN THAT PREVIOUS YEAR TO T HE PROVISION FOR BAD AND DOUBTFUL DEBTS A/C MADE UNDER THE CLAUSE. SINCE THE ASSESSEE ADMITTED THAT IT HAS NOT MADE ANY PROVISIONS IN ITS BOOKS OF ACCOUNTS TOWARDS THE PROVISIONS OF RURAL BAD AND DOUBTFUL DE BTS, BUT HAS WRONGLY CLAIMED RS.4,19,11,393 AS DEDUCTION, THE AO DISALLOWED THE SAME AND ADDED IT TO THE INCOME OF THE ASSESSEE. AG GRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE ITAT IN ASSES SEES OWN CASE FOR THE A.Y 2010-11 IN ITA NO.1742 OF 2014 DATED 25.03. 2015. THE LEARNED DR SUPPORTED THE ORDER OF THE AO, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A) . 13. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAD ARISEN IN TH E CASE OF A.P. GRAMEEN BANK IN ITA NOS.713 & 714/HYD/2015 FOR THE A.YS 2007- 08 & 2008-09 AND THIS TRIBUNAL VIDE ORDER DATED 14. 06.2016 HAS HELD THAT THE DEDUCTION U/S 36(1)(VII)(A) CAN BE AL LOWED ONLY TO THE EXTENT THE PROVISIONS FOR BAD AND DOUBTFUL DEBT HA S BEEN MADE IN THE BOOKS OF ACCOUNTS. TO COME TO THIS CONCLUSION, THE BENCH HAS FOLLOWED THE DECISION OF THE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF STATE BANK OF PATIALA REPORTED IN 272 ITR 5 4. FURTHER, THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CI T VS. ANDHRA BANK IN ITA NO.715 OF 2012 FOR THE A.Y 2007-08 (TO WHICH ONE OF US THE JM IS THE SIGNATORY) HAS FOLLOWED THE DECISION OF THE STATE BANK OF PATIALA AND HAS DISMISSED THE ASSESSEES APPEAL. FO R THE SAKE OF READY REFERENCE, THE RELEVANT PORTION OF THE ORDER OF THIS TRIBUNAL IN ITA NO.610/HYD/2013, DATED 12.08.2015 IS REPRODUCED HEREUNDER: 6. ON A REFERENCE TO THE PROVISIONS OF SECTION 36( L) (VIIA) OF THE ACT, IT IS VERY MUCH CLEAR THAT FOR CLAIMING DEDUCTION UNDE R THE SAID PROVISION, ASSESSEE HAS TO CREATE A PROVISION FOR BAD AND DOUB TFUL DEBTS IN ITS BOOKS OF ACCOUNT. THEREFORE, CONTENTION OF ID. AR T HAT THERE IS NO NEED FOR MAKING ANY PROVISION FOR BAD AND DOUBTFUL DEBTS FOR CLAIMING DEDUCTION U/S 36(1)(VIIA) IS NOT ACCEPTABLE. THE HO N 'BLE P & H HIGH COURT IN CASE OF STATE BANK OF PATIALA VS. CIT (SUP RA) WHILE EXAMINING THE PROVISIONS OF SECTION 36( L)(VIIA) HELD THAT FO R CLAIMING DEDUCTION UNDER THE SAID PROVISION, ASSESSEE BANK HAS TO MAKE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT AND DEDUCTION U/S 36( L)(VIIA) IN RESPECT OF RURAL ADVANCES CAN ONLY BE A LLOWED TO THE EXTENT OF THE PROVISION MADE. THE COORDINATE BENCH IN ASSESSE E'S OWN CASE FOR ITA. NO. 2366/HYD/2018 :- 4 -: AY 2010-11 IN ITA NO. 51/HYD/2015 DATED 10/04/2015, WHILE DEALING WITH IDENTICAL ISSUE, HAS HELD AS UNDER: 'IT IS OBSERVED THAT THE ASSESSEE IN THE PRESENT CA SE, BEING ELIGIBLE BANK, IS ENTITLED TO CLAIM DEDUCTION AS PE R THE MAIN PROVISION CONTAINED IN CLAUSE (A) OF S.36(1) (VIIA) , IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXT ENT OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TOTAL INCOME 'COMP UTED BEFORE MAKING ANY DEDUCTION UNDER S.36(1) (VIIA) AN D CHAPTER VIA' AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGA TE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. A PERUSAL OF THE IMPUGNED ORDER OF THE LEARNED CLT(A) HOWEVER, SHOWS THAT IT WAS STATED BY THE ASSESSEE BEFORE THE LEARNED CLT(A) THAT NO P ROVISION WAS MADE TOWARDS AVERAGE RURAL ADVANCES. IF IT IS SO, I T IS NOT CLEAR AS TO WHAT IS THE BASIS ON WHICH THE PROVISION OF R S.22.40 CRORES (RS.5.38 CRORES IN RESPECT OF URBAN ADVANCES AND RS . 17.02 CRORES IN RESPECT OF RURAL ADVANCES) WAS MADE BY TH E ASSESSEE DURING THE YEAR UNDER CONSIDERATION. MOREOVER, ALL THESE FACTS AND FIGURES WERE FURNISHED BY THE ASSESSEE BEFORE T HE LEARNED CLT(A) FOR THE FIRST TIME AND THE ASSESSING OFFICER THEREFORE, DID NOT HAVE ANY OPPORTUNITY TO VERIFY THE SAME. THE CL AIM OF THE ASSESSEE OF HAVING ADJUSTED THE AMOUNT OF RS.22.24 CRORES TOWARDS BAD DEBTS WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION AGAINST THE OPENING BALANCE OF THE PR OVISION OF RS.40.13 CRORES WAS ALSO MADE BY THE ASSESSEE FOR T HE FIRST TIME BEFORE THE LEARNED CIT(A), AND THE ASSESSING OFFICE R DID NOT HAVE ANY OPPORTUNITY TO VERIFY THE SAME. HAVING REG ARD TO ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE O F THE VIEW THAT IT WOULD BE FAIR AND PROPER AND IN THE INTERES TS OF JUSTICE TO RESTORE THE ISSUE RELATING TO THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER S.36(1) (VIIA) TO THE FILE OF THE ASSESSING O FFICER FOR DECIDING THE SAME AFRESH, IN ACCORDANCE WITH THE PR OVISION OF S.36(1)(VIIA) AFTER GIVING PROPER AND SUFFICIENT OP PORTUNITY OF HEARING TO THE ASSESSEE AND AFTER VERIFYING ALL THE RELEVANT FACTS AND FIGURES. WE ORDER ACCORDINGLY. THIS APPEAL OF T HE REVENUE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL P URPOSES.' 14. IN THE CASE BEFORE US, SINCE IT IS ADMITTED THA T THE ASSESSEE HAS NOT MADE ANY PROVISIONS FOR BAD AND DOUBTFUL DEBTS, THE SAME IS NOT ALLOWABLE U/S 36(1)(VII)(A) OF THE ACT. THE REVENUE S GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ITA. NO. 2366/HYD/2018 :- 5 -: 4.1. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AS N O PROVISION HAS BEEN MADE BY THE ASSESSEE DURING THE R ELEVANT ASSESSMENT YEAR. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2019 SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED 12 TH APRIL, 2019 TNMM COPY TO : 1. TELANGANA GRAMEENA BANK (EARLIER KNOWN AS M/S. DECCAN GRAMEENA BANK), H.NO. 2-1-520, 2 ND FLOOR, VIJAYA SREE SAI CELESTIA, STREET NO. 9, SHANKARMUTH ROAD, NALLAKUNTA, HYDERABAD. 2. ACIT, CIRCLE-9(1), HYDERABAD. 3. CIT(APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.