ACIT, CHITTORGARH V. M/s.The Banswara Central Co-operative Bank Ltd., BANSWARA

ITA 253/JODH/2016

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9029 (ITAT-JODHPUR)
• Duration Of Justice: 6 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-10-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 17-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; TDS
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 253/ Jodh/2016 (ASSESSMENT YEAR- 2012-13 ) The ACIT Circcle Chittorgarh Vs The Banswara Central Cooperative Bank Ltd. College Road, Banswara (Appellant) (Respondent) PAN NO. AACAT 1916 D Assessee By Shri Amit Kothari,CA Revenue By Smt Alka Rajvanshi Jain, (CIT-DR) Date of hearing 31/10/2022 Date of Pronouncement 3/11/2022 O R D E R PER: SANDEEP GOSAIN, JM This is an appeal filed by the Revenue against the order of the ld. CIT(A)- 1, Udaipur dated 22-03-2016 for the assessment year 2012-13 raising therein following grounds of appeal. 2 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. ‘’1. Whether on the facts and in the present circumstances of the case and in law the ld.CIT(A) was justified in deleting the disallowance of Rs.2,57,53,331/- made on account of provision for bad and doubtful debts. 2. Whether on the facts and in the present circumstances of the case and in law the ld.CIT(A) was justified in deleting the disallowance of Rs.3,86,244/- made u/s 40(a)(ia) on account of rent payment.’’ 2.1 Apropos Ground No. 1 of the Revenue, the facts as emerges from the order of the ld. CIT(A) are as under:- 3.3 I have considered the submissions of the appellant and the relevant findings of the AO. Firstly, the argument of the AO that the consideration of entire outstanding balance of advances at the end of each month would lead to a double deduction is b discussed. The AO failed to appreciate that section 36(1)(viia) and Rule 6ABA only lay down the method of computing the maximum amount that can be claimed as a provision for bad and doubtful debts. The assessee would in fact classify specific debts as "bad and doubtful" and if the total of debts so classified by the assessee exceeds the limits laid down in section 36(1)(viia), the claim would be restricted to the limits laid down in section 36(1)(viia). The question of double deduction would arise if a specific debt classified as "bad/doubtful" is again so classified by the assessee, which is not the AO's case. Accordingly, there is no merit in the argument of the AO that the consideration of entire outstanding balance of advances at the end of each month would lead to a double deduction. 3.3.1. On a reading of Rule 6ABA (reproduced in para 3.3 above) it is clear that for the purpose of calculating the aggregate average advance made by a rural branch, the amount of advance made by such rural branch as outstanding at the end of the last day of each month comprised in the previous year shall be aggregated and the sum so arrived at shall be divided by the number of months for which the outstanding advances have been taken into account. 3.3.2. In view of the provisions of Rule 6ABA and in view of the decision of Hon. ITAT Hyderabad in the case of Hyderabad Vs. Nizamabad District Co-operative Central Bank Ltd. (para 3.2 above refers) it is held that the appellant has rightly calculated the aggregate average advances made by its rural branches at Rs. 3120.14 lacs, and maximum allowable provision in respect of bad and doubtful debts of rural branches at 10% thereof at Rs.312.01 lacs Further, since the actual claim made by the assessee in respect of bad and doubtful debts of rural branches is Rs. 2,69,89,211/- and the same is less than the maximum permissible provision of Rs.312.01 lacs in respect of bad and doubtful debts of rural branches as laid down in Rule 6ABA, claim of 3 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. Rs. 2,69,89,211/- is allowed and disallowance of Rs. of Rs.2,57,53,331/- made by the AO is deleted. The ground of appeal is allowed.’’ 2.2 During the course of hearing, the ld. DR supported the order of the AO and prayed that the ld. CIT(A) erred in deleting the disallowance of Rs.2,57,53,331/- made by the AO. 2.3 On the other hand, the ld. AR of the assessee supported the order of the ld. CIT(A) and submitted that the assessee was entitled to deduction of Rs.3,12,01,400/-, however, against which deduction of Rs.2,69,89,211/- was claimed. He further submitted that the AO had wrongly reduced the opening balance of each month to work out the average of monthly advances which is neither mentioned in Section 36(1)(vii) nor in Rule 6ABA. To this effect, the ld. AR of the assessee relied on following case laws. 1. ITO vs Nizamabad District Cooperative Central Bank Ltd. (ITA No. 905/H/13 dated 10-12-2014) 2. Uttar Banga Kshetriya Gramin Bank vs ACIT (ITA No. 846/KOL/2012 for A.Y. 2009-10 order dated 8-07-2015) 3. Catholic Syrian Bank Ltd. Vs CIT, 248 ITR 1 (SC) 4. Pr. CIT vs Uttar Banga Kshetriya Gramin Bank 408 ITR 393 (Cal) 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee is a cooperative bank and during the assessment year under consideration, the assessee bank had claimed a deduction of Rs.2,98,83,507/- being provision for bad and doubtful debts u/s 36(1)((viia) of the Act. The AO discussed the provision of Rule 6ABA of the 4 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. I.T. Rules, 1962 which lays down the method for computation of aggregate advances made by rural branches and observed that ‘’Clause (a) of the said Rule talks about the ‘’advance made’’ by each rural branch which are ‘’outstanding’’ at the end of each month in the ‘’previous year’’. Therefore, the deduction is allowable only for the advance made in the current year and that too for those which are outstanding at the end of each month. It is clear that for arriving at the deduction u/s 36(1)(vii), the opening advance figure on 1 st April of each financial year has to be ignored. According to calculation as per rule 6ABA,it is clear that opening balance is to be deleted for each month. Fresh monthly balance is to be ascertained. No. Of months for each fresh advances were made are to be counted. Average advance is to be restricted to the number of months in which fresh advances were made.’’ The AO accordingly by considering only fresh advances during each month of the relevant year computed aggregate average advances made by the rural branches at Rs.123.588 lakhs as against Rs.3120.14 lakhs computed by the assessee and required the assessee to explain as to why the provisions for bad and doubtful debts of rural branches may not be restricted to 10% of Rs.123.588 lakhs i.e. Rs.12,35,880/-. In response, the assessee submitted the reply before the AO that as per Rule 6ABA of the I.T. Rules, the entire advance outstanding at the end of each month is to be considered and there was no mention in the Rules that only fresh monthly advances were to be considered. The AO was not convinced with the reply of the assessee and computed aggregate average advances made by the rural 5 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. branches at Rs.123.588 lakhs and allowable provision u/s 36(1)(viia) at Rs.41,30,176/-. Thus the AO made disallowance of Rs.2,57,53,331/-. In first appeal, the ld. CIT(A) deleted the disallowance of Rs.2,57,53,331/- made by the AO taking into consideration the provision of Rule 6ABA and the decision of ITAT Hyderabad Bench in the case of Hyderabad vs Nizam District Cooperative Central Bank Ltd. and held that assessee has rightly calculated the aggregate average advances made by its rural branches at Rs.3120.40 lacs and maximum allowable provision in respect of bad and doubtful debts of rural branches at 10% thereof at Rs.312.01 lacs. The ld. CIT(A) also observed that the AO failed to appreciate that Section 36(1)(viia) and Rule 6ABA only lay down the method of computing the maximum amount that can be claimed as a provision for bad and doubtful debts. The ld. CIT(A) observed that since the actual claim made by the assessee in respect of bad and doubtful debts of rural branches is Rs.2,69,89,211/- and the same is less than the maximum permissible provision of Rs.312.01 lacs in respect of bad and doubtful debts of rural branches as laid down in Rule 6ABA, claim of Rs.2,69,89,211/- is allowed and disallowance of Rs.2,57,53,331/- made by the AO is deleted. In view of the above deliberations, we concur with the findings of the ld. CIT(A). Thus Ground No. 1 of the Revenue is dismissed. 3.1 Apropos Ground No 2, the facts as emerges from the order of the ld. CIT(A) are as under:- 6 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. 5.3.1. I have considered the submissions of the assessee as well as the observation of the AO. Section 194C the Act, specifically includes carriage of goods or passenger by any mode of transport other than by railways. Further, the ITAT Ahmedabad in the case of Income Tax Officer (TDS) vs. GAIL (India) Ltd., while deciding the issue whether hiring of vehicles was covered u/s 194C or section 1941 held as under "In terms of Section 194C(1) any person responsible for paying any some to any resident for carrying out any work in pursuance of a contract shall at the time of credit deduct an amount equal to 2%. An explanation is annexed to this section according to which as per clause (iv) and sub clause (c) the term "work" shall Include carriage of goods or passengers by any mode of transport other than by railways. Once, the statute itself has prescribed the definition of "work" which has included the carriage of passenger by any mode of transport i.e. vehicle then the condition as prescribed under this section ie. 1941 the responsibility of deduction of tax on any person is in respect of payment to a resident any income by way of rent. An Explanation is also annexed below Section 1941 but according to which there is no mention of use of vehicle but pertains to "equipment". Under the term rent" the Explanation prescribes any payment for the use of land, building, plant machinery, equipment furniture, fittings, etc. according to us, the vehicle do not fall under any of such categories; hence, on this basic difference between the provisions of Section 1941 and the provisions of Section 194C we can hereby safely hold that keeping in mind the language of the statute the hiring of vehicle by an agency merely for transportation of the employees of the company do not fall under the provisions of Section 1941 but covered under the provisions of Section 194C of the It Act. 5.3.2. On consideration of the facts of the case, the provisions of section 194C and the decision of ITAT Ahmedabad dt.14.03.2014 in appeal no.1722/Ahd/2010 in the case of Income Tax Officer (TDS) vs. GAIL (India) Ltd. It is held that the appellant rightly deducted TDS on the payment of Rs. 3,86,244/- for hire of vehicles at the rate prescribed u/s 194C of the Act and therefore disallowance of Rs.3,86,244/- u/s 40(a)(ia), made by the AO, is hereby deleted. The ground of appeal is allowed. 3.2 During the course of hearing, the ld. DR supported the order of the AO and prayed that the ld. CIT(A) erred in deleting the disallowance of Rs.3,86,244/- made by the AO u/s 40(a)(ia) on account of rent payment of Jeep. 7 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. 3.3 On the other hand, the ld. AR supported the order of the ld. CIT(A) and submitted that the vehicle was taken on contract basis for which Rs.12,500/- was paid per month for 1500 Kms and further Rs.4.50 for per K.M. for additional running. He submitted that on total payment of TDS made u/s 194C, the objection of the AO was that TDS should be made u/s 194I as rent payment. The ld. AR further submitted that services included vehicle, driver and fuel and was not a simple rent of vehicle. To this effect, he relied on the case of ITO vs Gail (India) Ltd. (2014) 39 CCH 286 (Ahd.) 3.4 We have heard both the parties and perused the materials available on record. It is noted that during the course of assessment proceedings the AO noticed that the assessee had claimed an expenditure of Rs.3,86,244/- under the head ‘’rent payment of jeep to one Shri Praveen Maid but tax had not been deduced at source u/s 194I of the Act. The AO, thus required the assessee to show cause as to why the expenditure of Rs.3,86,244/- should not be disallowed u/s 40(a)(ia) of the Act for which reply of the assessee was submitted to the AO mentioning that the services rendered by Mr. Praveen Madia were covered under contract and accordingly the assessee had deducted TDS u/s 194C of the Act and there was not default u/s 40(a)(ia) of the Act. However, the AO disallowed the expenditure of Rs.3,86,244/- u/s 40(a)(ia) of the Act for non- deduction of tax at source at the rates prescribed u/s 194I of the Act with following observations. 8 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. "The reply of the assessee is not acceptable as it is clear from the multiple entries in the book of accounts that the expenses are in head of rental payment of Jeep. The assessee has not submitted any copy of contract agreement with Praveen Maida. Also in the circular it is no where mentioned that it is applicable for the bank. It is also noticed that the assessee has debited expenses in head of Jeep repairs. If it were a contractual relationship than there was no point of repairs as it would be done by contractor himself. Hence TDS should have been deducted u's.1941 as the payment is related to rent of plant/machinery but no TDS is deducted u/s 1941 of 1.T. Act." In the appeal before the ld. CIT(A) who observed that the assessee had produced a copy of the note sheet regarding payment of rental jeep which showed the jeep had been taken on contract basis for providing facilities for carriages of passenger i.e. bank passenger. As regards the AO’s observation that the assessee had debited the expenses in the head of jeep repairs, it is submitted by the assessee that the observation of the AO is factually incorrect and the repair expenses debited related to vehicle owned by the bank. The ld. CIT(A) further noted that the assessee further submitted that in view of clause (iv) of the explanation to section 104C "work" includes "carriage of goods or passenger by any mode of transport other than by railways" and therefore vehicle hire charges are covered u/s 194C and the assessee had rightly deducted the tax at source at rate prescribed u/s 194C of the Act. The assessee has also relied on the decision of ITAT Ahmedabad in the case of Income Tax Officer (TDS) vs. GAIL (India) Ltd. in support of its contention that vehicle hire is covered u/s 194C and not u/s 1941. Hence taking into consideration all the facts 9 ITA 253/JODH/2016 ACIT, CIRCLE-CHITTORGARH VS BANSWARA CENTRAL COOPERATIVE BANK LTD. and circumstances the ld. CIT(A) deleted the disallowance of Rs.3,86,244/- made by the AO u/s 40(a)(ia) of the Act by observing as under:- ‘’5.3.2. On consideration of the facts of the case, the provisions of section 194C and the decision of ITAT Ahmedabad dt.14.03.2014 in appeal no.1722/Ahd/2010 in the case of Income Tax Officer (TDS) vs. GAIL (India) Ltd. It is held that the appellant rightly deducted TDS on the payment of Rs. 3,86,244/- for hire of vehicles at the rate prescribed u/s 194C of the Act and therefore disallowance of Rs.3,86,244/- u/s 40(a)(ia), made by the AO, is hereby deleted. The ground of appeal is allowed.’’ In view of the above deliberations, we feel that the ld. CIT(A) is justified in deleting the disallowance of Rs.3,86,244/ u/s 40(a)(ia) of the Act and we concur with the findings of the ld. CIT(A). Thus Ground No. 2 of the Revenue is dismissed. 4.0. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 3/11/2022 . Sd/- Sd/- (B. R. BASKARAN) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 3 /11/2022 *Mishra Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 6. Guard File Assistant Registrar Jodhpur Bench