The Saurashtra Co.Op.Bank Ltd., Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 2701/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67910 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: S N SOPARKAR
• Keywords: Non-deduction of tax; Bad and doubtful debts
• Section: 194C

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER !./ I.T.A.NO.2701/AHD/2010 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2007-08) THE SAURASHTRA CO- OP.BANK LTD. OPP. BHIDHANJAN HANUMAN,NIKOL ROAD BAPUNAGAR,AHMEDABAD / VS. THE DY.CIT AHMEDABAD ( !./)* !./ PAN/GIR NO. : AAATT 5544J ( (+ / // / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI S.N.SOPARKAR ,-(+ / . / RESPONDENT BY : SHRI J.P. JHANGID, SR.DR ' 0 / $1 / / / / DATE OF HEARING : 28/10/2013 23' / $1 / DATE OF PRONOUNCEMENT : 15/11/2013 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XVI, AHMEDAB AD (CIT(A) FOR SHORT) DATED 12/08/2010 PERTAINING TO ASSESSME NT YEAR (AY) 2007- 08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE LEARNED CIT(A) HAS ERRED IN: 1. UPHOLDING THE DISALLOWANCE OF RS.31,063/- PAID FOR PRINTING OF ANNUAL REPORTS OF THE BANK U/S.40(A)(IA), THOUGH TH E SAME IS NOT LIABLE FOR TDS U/S.194C. 2. UPHOLDING THE DISALLOWANCE OF RS.1,15,551/- REIMBUR SED TO THE RESERVE BANK OF INDIA THROUGH THE AHMEDABAD DISTRIC T CO- OPERATIVE BANK LTD. FOR MICR AND OTHER CHEQUE PROCE SSING CHARGES ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 2 - U/S.40(A)(IA), THOUGH TAX ON THE SAID REIMBURSEMENT S HAS BEEN DEDUCTED BY THE RESERVE BANK OF INDIA WHILE MAKING PAYMENT TO BANK OF BARODA WHO HAS DONE THE PROCESSING WORK. 3. UPHOLDING THE ESTIMATED ADDITION FOR ACCRUED INTERE ST ON THE NPA ACCOUNTS OF RS.46,19,002/- (RS.25,61,722/- ON OPENI NG BALANCE OF NPA ACCOUNTS WHICH HAS ACCRUED DURING EARLIER PREVI OUS YEARS AND RS.20,57,280/- FOR THE PREVIOUS YEAR), THOUGH NO IN TEREST HAS ACCRUED TO THE BANK. 4. UPHOLDING THE INTEREST U/S.234B. THE APPELLANT RESERVES RIGHTS TO ADD, ALTER, MODIFY OR DROP ANY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30.12.2009, THEREBY THE ASSESSING OFFICER(AO) MADE DISALLOWANCE U/S.40(1)(IA) OF THE ACT OF RS.31,063/-, DISALLOWAN CE OF RS.1,15,551/- U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX AND MADE ADD ITION ON ACCOUNT OF INTEREST ACCRUED BUT NOT OFFERED TO TAX OF RS.46,19 , 002/-. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPE AL. 3. THE FIRST GROUND IS AGAINST THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.31,063/- U/S.40(A)(IA) OF THE ACT F OR NON-DEDUCTION OF TAX IN RESPECT OF THE PAYMENT MADE FOR PRINTING OF ANNUAL REPORT OF THE BANK. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THIS ISSUE IS SQUARELY COVERED IN FAVOUR ASSESSEE BY THE DECISION OF THE HONBLE COORDINATE BENCH OF DELHI RENDERED IN THE CASE OF D Y.CIT VS. EASTERN MEDIKIT LTD. REPORTED AT (2012) 19 TAXMANN.COM 286 (DELHI). ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 3 - 3.1. ON THE CONTRARY, SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORD ER OF THE AUTHORITIES BELOW AS THE ASSESSEE WAS REQUIRED TO DEDUCT THE TA X BUT ASSESSEE HAD NOT DEDUCTED THE TAX. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE COORDINATE BENCH IN THE C ASE OF DY.CIT VS. EASTERN MEDIKIT LTD.(SUPRA) HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER:- 14. WE HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BEFORE US. THE FACTS ARE THAT PAYMENTS HAVE BEEN MA DE TO TWO PARTIES FOR PREPARATION OF DIARIES, CATALOGUES AND FOLDERS AS PER REQUIREMENT OF THE ASSESSEE. NO MATERIAL WAS SUPPLIED AS SPECIFICA LLY STATED BEFORE THE LD. CIT(APPEALS). THE REVENUE HAS NOT BROUGHT ANY M ATERIAL ON RECORD TO DISPUTE THIS FACT. THEREFORE, THE MANUFACTURING AND SUPPLYING DOES NOT AMOUNT TO A WORKS CONTRACT. THE AO HAS ALSO REF ERRED TO NOTIFICATION NO. 275/51/2009-IT(B) DATED 07.10.2009 , WHICH POINTS OUT THAT THE PROVISIONS CONTAINED IN SECTION 194C HAVE BEEN AMENDED BY FINANCE BILL, 2009, WITH EFFECT FROM 01.10.2009 WIT H A VIEW TO INCLUDE WITHIN THE AMBIT OF 'WORK' THE MANUFACTURING OR SUP PLYING A PRODUCT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUST OMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER. HOWEVER, IN RESPECT OF THE WORK-CONTRACT MENTIONED IN CLAUSE (IV)(E) OF THE EX PLANATION, TAX SHALL BE DEDUCTED AT SOURCE ON THE INVOICE VALUE EXCLUDIN G THE VALUE OF THE MATERIAL, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE; OR ON THE WHOLE OF THE INVOICE, IF THE VALUE OF MATERIAL IS N OT MENTIONED SEPARATELY IN THE INVOICE. OBVIOUSLY, THIS PROVISION COMES INT O FORCE IN RESPECT OF WORKS CONTRACT EXECUTED ON OR AFTER 01.10.2009. THI S AMENDMENT IS NOT APPLICABLE TO THE PROCEEDINGS OF ASSESSMENT YEAR 20 07-08, WHICH ARE BEING DECIDED. THEREFORE, IT IS HELD THAT THE EXPEN DITURE WAS NOT IN RESPECT OF A WORKS CONTRACT, THEREFORE, THE ASSESSE E WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE. IN OTHER WORDS, THE AMOUNT IN VOLVED IN THE PAYMENT COULD NOT HAVE BEEN DISALLOWED U/S 40(A)(IA ). THUS, THIS GROUND IS ALSO DISMISSED. ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 4 - 4.1. IN THIS CASE ALSO, THE ASSESSEE HAS MADE PAYME NT FOR PRINTING OF ANNUAL REPORT. THEREFORE, FOLLOWING THE DECISION O F HONBLE COORDINATE BENCH, WE DECIDE THIS ISSUE IN FAVOUR OF ASSESSEE A ND DIRECT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE U/S.40(A)(IA) OF THE ACT. THIS GROUND OF THE ASSES SEES APPEAL IS ALLOWED. 5. THE SECOND GROUND IS AGAINST THE DISALLOWANCE OF EXPENDITURE OF RS.1,15,551/-MADE U/S.40(A)(IA) OF THE ACT ON ACCOU NT OF NON-DEDUCTION OF THE TAX. THE LD.COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THIS EXPENDITURE WAS NOTHING BUT REIMBURSEMENT. HE SUBM ITTED THAT CLEARING OF THE MICR AND OTHER CHEQUES OR INSTRUMENTS IS BEI NG DONE BY THE RESERVE BANK OF INDIA. THE APPELLANT BANK IS NOT A MEMBER OF THE CLEARING HOUSE. THE APPELLANT IS THEREFORE A SUB-M EMBER OF THE AHMEDABAD DIST.CO-OP.BANK LTD., AHMEDABAD. THE APP ELLANT BANK SENDS MICR AND OTHER CHEQUES OR INSTRUMENTS TO THE AHMEDABAD DIST.CO-OP.BANK LTD. WHICH IN TURN SENDS THE SAME TO BANK OF BARODA ON BEHALF OF THE RESERVE BANK OF INDIA. THE RESERV E BANK OF INDIA PAYS THE PROCESSING CHARGES TO BANK OF BARODA AND DEDUCT S TAX AT SOURCE ON THE TOTAL PAYMENTS MADE ON BEHALF OF ALL THE BANKS. THE RESERVE BANK OF INDIA RECOVERS PROPORTIONATE PROCESSING CHARGES FRO M RESPECTIVE BANKS. HE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE COORDINATE BENCH OF AHMEDABAD RENDERED IN T HE CASE OF KARNAVATI CO-OP.BANK LTD. VS. DY.CIT REPORTED AT (2 012) 132 ITD 486 (AHD.). 5.1. ON THE CONTRARY, LD.SR.DR STRONGLY SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 5 - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE SIMILAR ISSUE WAS BEFORE THE HONB LE COORDINATE BENCH, WHEREIN THE HONBLE TRIBUNAL HAS HELD AS UNDER:- HELD-I THE ASSESSEE WAS ONLY A SUB-MEMBER OF THE CLEARING HOUSE. IT HAS AVAILED THE SERVICES OF MICR CLEARING FROM A MEMBER OF THE CLEARING HOUSE, NAMELY, B. AS FAR AS THE LEGAL POSITION OF D EDUCTION OF TAX AT SOURCE IS CONCERNED, THERE IS NO DISPUTE THAT TAX I S REQUIRED TO BE DEDUCTED FROM MICR CHARGES. SINCE B WAS DIRECTLY DE ALING WITH THE CLEARING HOUSE, IT HAD DEDUCTED THE TAX AT SOURCE O N PAYMENT OF MICR CHARGES TO THE CLEARING HOUSE. CONSEQUENT THEREUPON , THE ASSESSEE WAS REQUIRED TO REIMBURSE THE MICR CHARGES TO B. THE SA ID REIMBURSEMENT CHARGES WERE INCLUSIVE OF TAX DEDUCTED AT SOURCE AS WELL. IN CONFIRMATION THERETO, B HAD ALSO ISSUED A LETTER TO THE ASSESSEE. [PARA 6] FROM THE SAID LETTER, IT IS CLEAR THAT AS FAR AS TH E PAYMENT BY THE ASSESSEE WAS CONCERNED, IT WAS NOTHING BUT IN THE N ATURE OF REIMBURSEMENT OF BANK CHARGES. SINCE THE MICR CHARG ES WERE MERELY REIMBURSED BY THE ASSESSEE, THE LATTER WAS NOT REQU IRED TO DEDUCT THE TAX AT SOURCE ON PAYMENT OF REIMBURSEMENT. OTHERWISE AL SO, IT WOULD TANTAMOUNT TO DOUBLE DEDUCTION OF TAX AT SOURCE ON THE SAME PAYMENT OF MICR BANK CHARGES. IN THE RESULT, THE LOWER AUTHORI TIES WERE WRONG IN DISALLOWING THE CLAIM OF REIMBURSEMENT OF CHARGES. [PARA 6.1] 6.1. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE COORDINATE BENCH, WE ARE NOT INCLINED TO TAKE A DIF FERENT VIEW THAN TAKEN BY THE TRIBUNAL, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE AO IS DIRECTED TO DELETE THE ADDITION. THUS, THIS GRO UND OF THE ASSESSEE IS ALLOWED. 7. THE THIRD GROUND IS AGAINST THE CONFIRMATION OF ADDITION OF RS.46,19,002/- BEING THE ESTIMATED ADDITION FOR ACC RUAL OF INTEREST ON NPA ACCOUNTS. THE LD.COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 6 - AUTHORITIES BELOW HAVE GROSSLY ERRED IN MAKING THE ADDITION. HE SUBMITTED THAT THE DECISION OF THE AUTHORITIES BELO W IS CONTRARY TO THE VARIOUS JUDICIAL PRONOUNCEMENTS. HE PLACED RELIANC E ON THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. URJIT INVESTMENTS LTD. IN INCOME TAX REFERENCE NO.107 OF 1995, DATED 13/07/2006 AND ALSO THE DECISION OF THE HONBLE COO RDINATE BENCH RENDERED IN THE CASE OF KARNAVATI CO-OP.BANK LTD. VS. DY.CIT REPORTED AT (2012) 134 ITD 486 (AHD.). 7.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE V IDE PARAGRAPH NO.4.3 OF HIS ORDER AS UNDER:- 4.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATIONS MADE BY THE AO. THE APPELLANT ALSO RE LIED ON DECISION OF GUJARAT HIGH COURT IN THE CASE OF URJIT INVESTMENTS PVT.LTD. ITR NO.107 OF 1995, DATED 13-7-2006 WHERE AFTER CONSIDE RING THE DECISION OF HONBLE SUPREME COURT IT IS STATED THAT IF THE R ECOVERY OF PRINCIPAL AMOUNT IS DOUBTFUL THEN INTEREST WOULD NOT ACCRUE A ND IT SHOULD NOT BE CHARGED HYPOTHETICAL INTEREST INCOME. THIS DECISIO N IS NOT APPLICABLE BECAUSE IN THAT CASE THE LOANS WERE STICKY WHEREAS IN THE CASE OF THE APPELLANT, IT IS TREATING LOANS WHOSE TWO INSTALLME NTS ARE NOT RECEIVED AS NPA. SUCH LOANS CANNOT BE CALLED STICKY OR BAD. T HE APPELLANT BEING CO-OPERATIVE BANK IS NOT COVERED BY THE PROVISIONS OF IT ACT APPLICABLE TO SCHEDULES BANKS. THE DECISION OF UCO BANK & GOT HARA ELECTRICITY ARE THEREFORE NOT APPLICABLE. HENCE THE ACTION OF THE AO IS CORRECT. THE GROUND OF APPEAL IS DISMISSED. ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 7 - 8.1 IN OUR CONSIDERED VIEW, THE DECISION OF THE LD. CIT(A) IS CONTRARY TO THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL H IGH COURT RENDERED IN THE CASE OF CIT VS. URJIT INVESTMENTS PVT.LTD.(SUPR A). WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAID CASE FOLLOWED THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF GODHR A ELECTRICITY CO.LTD. VS. CIT REPORTED AT (1997) 225 ITR 746(SC) AND THE DECISION OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE O F CIT VS. ABBAS WAZIR (P.) LTD. REPORTED AT (2005) 274 ITR 448 (ALL .) AND HELD AS UNDER:- 9. FROM THESE TWO JUDGEMENTS, IT WOULD CLEARLY AP PEAR THAT IN THE GIVEN SET OF FACTS AND BY NOT APPLYING THE PRINCIPL ES IN THEIR GENERALITY, THE INCOME, WHICH IS RECEIVABLE BUT NOT RECEIVED AN D WHICH IS ACCRUED IN A GIVEN CASE, MAY NOT BE DEEMED TO BE AN INCOME. IF THE ASSESSEE IN HIS WISDOM COMES TO THE CONCLUSION THAT IT WOULD BE USELESS TO CARRY FORWARD THE AMOUNT OF DEBT AND ALSO MAKE ENTRY RELA TING TO INTEREST INCOME, THEN, IT WOULD BE AN ACT OF PRUDENCE ON HIS PART. SIMPLY BECAUSE, FOR A PARTICULAR YEAR, THE INCOME TAX OFFI CER DOES NOT ALLOW THAT DELETION OR DEDUCTION, IT WOULD NOT MEAN THAT FOR THE LATER YEAR, THE ASSESSEE CANNOT PROVE THE FACT THAT HE HAD NOT RECE IVED ANY INCOME ON THE SAID BAD DEBT. 10. IT IS ALSO TO BE NOTED THAT THE FINDING IN REL ATION TO THE BAD DEBT IS A FINDING BASED ON APPRECIATION OF FACTS. THE TRIBUN AL HAS RECORDED A FINDING THAT IN VIEW OF THE SUBMISSIONS MADE BY THE ASSESSEE, THE DEBTOR IS TRACELESS AND DESPITE THEIR EFFORTS, IT BECAME I MPOSSIBLE FOR THE ASSESSEE TO RECOVER THE DEBTS, THEREFORE, THE ASSES SEE WAS OBLIGED TO WRITE OFF THE DEBTS AS BAD DEBTS. IF THE FINDING O F FACT IS THAT THE DEBT HAD BECOME BAD DEBT, THEN, INCOME ON BAD DEBT CANN OT BE PRESUMED. 11. IN VIEW OF THE DISCUSSION AFORESAID, WE ANSWER THE QUESTION REFERRED TO US BY SAYING THAT THE APPELLATE TRIBUNAL WAS RIG HT IN LAW AND ON FACTS IN CANCELING THE DISALLOWANCE OF PRESENT AMOUNTING TO RS.78,840/- EVEN WHEN THE INCOME TAX OFFICER HAD FOUND THAT THE DEBT ITSELF HAD NOT BECOME BAD. WE MUST OBSERVE THAT THE TRIBUNAL HAS GIVEN COGENT REASONS TO HOLD THAT THE DEBT HAD BECOME BAD. THE REFERENCE IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. ITA NO.2701/AHD /2010 THE SAURASHTRA CO-OP.BANK LTD. VS. DY.CIT ASST.YEAR 2007-08 - 8 - 8.1. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE THEREFORE ALLOW THIS GROUND OF THE ASSESSEES APPEAL. 9. THE FOURTH GROUND IS AGAINST CHARGING OF INTERES T U/S.234B OF THE ACT. THE GROUND BEING CONSEQUENTIAL IN NATURE DOES NOT REQUIRE ANY SEPARATE ADJUDICATION, THE SAME IS REJECTED AS SUCH . 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15/ 11 /2013 71.., .../ T.C. NAIR, SR. PS 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$ 4 / ,$8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT 4. ':() / THE CIT(A)-XVI, AHMEDABAD 5. 8 #; ,$ , , / DR, ITAT, AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER, -8$ ,$ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD