ACIT, Rohtak V. The Rohtak Central Coop Bank Ltd., Rohtak

ITA 2839/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86762 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 28-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BANSAL
• Assessee Lawyers: B R R KUMAR
• Keywords: Notional interest; Tax effect; Revised return

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K. , JUDICIAL MEMBER ITA NO. 2839 /DEL/201 1 ASSESSMENT YEAR 200 7 - 0 8 ACIT, ROHTAK CIRCLE VS. THE ROHTAK CENTRAL COOP BANK LTD. ROHTAK , CIRCLE, ROHTAK. ROHTAK. (PAN AA AA T 8736 B ) ( APPELLANT) (RESPONDENT) APPELLANT BY : SRI S.K. BANSAL , CA . RESPONDENT BY: SH . B. R . R KUMAR, SR. D.R. ORDER PER SHRI GEORGE GEORGE K , J M : 1. TH IS APPEAL , AT THE INSTANC E OF THE DEPARTMENT , IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 30 .0 3 .201 1 . THE RELEVANT ASSESSMENT YEAR IS 200 7 - 08 . 2. WE SHALL DISPOSE OF THE ISSUE S GROUND - WISE AS UNDER : 3. THE GROUND NO.1 RAISED IN REVENUE S APPEAL READ S AS FOLLOW: 1. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS DELETING THE ADDITION OF RS.45,01,255/ - ON ACCOUNT OF ACCRUED INTEREST NOT CREDITED TO P&L ACCOUNT. THE DEPARTMENT IS IN APPEAL BEFORE THE HON BLE ITAT NEW DELHI I N THIS CASE FOR ASSTT. YEAR 2008 - 09 ALSO. 3. 1 THE BRIEF FACTS IN RELATION TO GROUND 1 ARE AS FOLLOWS. THE AO ADDED A SUM OF RS.45,01,255/ - , FOR THE REASON THAT INTEREST HAD ACCRUED , BUT SAME WAS NOT CREDITED IN THE P&L A/C. THE ASSESSEE S PLEA WAS THAT I NTEREST WAS NOT IT A NO. 2839 /DEL /201 1 2 CREDIT ED TO THE P&L A/C , SINCE IT PERTAINS TO NPA ACCOUNTS. THE REASONING OF AO FOR MAKING THE ADDITION READ S AS FOLLOW: ( PARA 11 ) IN VIEW OF THE ABOVE, THE INTEREST RECEIPTS PERTAINING TO THE CURRENT YEAR BUT NOT CREDITED TO THE P&L ACCOU NT, AMOUNTING TO RS. 4,0 4 ' 99,884/ - , IS BEING BROUGHT TO TAX IN THIS YEAR ITSELF. IT WOULD ALSO BE FAIR, ON THE OTHER HAND, TO GIVE RELIEF IN RESPECT OF THE INTEREST INCOME OF EARLIER YEARS CREDITED TO THE P&L ACCOUNT OF THE CURRENT YEAR ON ACTUAL REALIZATIO N BASIS AMOUNTING TO RS. 3,59,98,629/ - . T HIS WOULD ALSO, AS A NATURAL COROLLARY, REQUIRE RE - OPENING OF THE ASSESSMENTS OF EARLIER YEARS AND TAXING THE ACCRUED INTEREST IN THE RELEVANT YEAR. HOWEVER, SUCH AN EXERCISE WOULD BE SUPERFLUOUS AS IN THE YEARS BEFO RE THE CURRENT Y EAR, THE ASSESSEE ENJOYED 100% DEDUCTION OF ITS INCOME UNDER SECTION 80P(2)(A)(I). EVEN IF THE CASES WERE RE - OPENED AND THE TOTAL INCOME WERE RE - ASSESSED AFTER INCLUDING THE INTEREST INCOME ACCRUED IN THOSE YEARS, THE TAX EFFECT OF SUCH AN EXERCISE WOULD BE NIL . IT WOULD SERVE THE PURPOSE OF REVENUE AND WOULD ALSO BE FAIR TO THE ASSESSEE IF THE DIFFERENCE OF RS . 4,04,99,884/ - AND RS.3 , 59,98,629/ - IS BROUGHT TO TAX IN THE CURRENT YEAR . THIS WOULD BRING TO TAX THE ENTIRE AMOUNT OF INTEREST ACCRU ED TO THE ASSESSEE TILL THE END OF THE CURRENT YEAR. IF THE ASSESSEE HAS SHOWN ANY AMOUNT OUT OF RS . 4,04,99,884/ - AS INCOME IN THE SUBSEQUENT YEARS ON CASH BASIS, THE ASSESSEE SHALL BE ENTITLED TO CLA I M RELIEF FROM DOUBLE TAXATION FOR SUCH AMOUNTS BY FILIN G REVISED RETURNS OR APPLICATION UNDER SECTION 154, AS THE CASE MAY BE. ACCORDINGLY, AN AMOUNT OF RS . 45,01,255/ - (RS . 4,04,99,884 - RS . 3,59,98,629/ - ) IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS ACCRUED INTEREST NOT CREDITED TO P&L ACCOUNT . (ADDITION: RS.45, 01 ,255 / - ) 3.2 THE CIT(A) DELETED THE ADDITION , FOLLOWING HIS PREDECESSOR S ORDER IN ASSESSEE S OWN CASE FOR AY 2008 - 09 , T HE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW: - ( PARA 6.3 ) BEFORE ME, THE AR SUBMITTED THAT THE IS SUE WAS DECIDED IN FAVOUR OF THE APPELLANT BY MY ORDER IN THE APPELLANT S OWN CASE FOR THE AY 2008 - 09 IN APPEAL NO.403/RTK/2010 - 11 DATED 09.03.2011. I FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE ABOVE MENTIONED APPEAL ORDER AN D THEREFORE ON THE SAME GROUNDS, THE ADDITION IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 3. 3 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. AT THE OUTSET, LD. AR SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY IT A NO. 2839 /DEL /201 1 3 THE O RDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE JHAJJAR CENTRAL COOP. BANK LTD. (ITA NO.2486/2011 DATED 31.10.2013) . THE LD. DR WAS UNABLE TO CONTROVERT THE ASSERTION OF LD. AR. 3. 4 . WE HAVE HEARD RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN QUESTION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE JHAJJAR CENTRAL COOP. BANK (SUPRA ) . THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOW: - ( PARA 11 ) CONSIDERING THE ABOVE SUBMISSION OF THE A SSESSEE WHICH IS WELL SUPPORTED BY RBI/NABARD CIRCULAR DATED 17.8.2002 VIDE PARA NO. 3.1 CLEARLY STATES THAT THE POLICY OF INCOME RECOGNITION SHOULD BE BASED ON RECORD OF RECOVERY AND THEREFORE UNREALIZED INCOME SHOULD NOT BE TAKEN INTO PROFIT AND LOSS ACC OUNT BY STATE CO - OP BANK / CENTRAL CO - OP BANKS AND THAT THE PROVISIONS OF SECTION 43D OF THE ACT ARE CLEAR REGARDING THE RECOGNITION OF INTEREST INCOME ON NPA. THE LD. CIT(A) IN OUR VIEW HAS THUS RIGHTLY HELD THAT OVERDUE INTEREST NOT REALIZED DURING THE Y EAR AND CREDITED TO SUSPENSE INTEREST ACCOUNT CANNOT BE TAKEN TO BE THE INCOME OF THE ASSESSEE. THUS THE LD.CIT(A) HAS THUS RIGHTLY DELETED THE ADDITION IN QUESTION. THE SAME IS UPHELD. THERE IS NO SUBSTANCE IN THE CONTENTION OF THE LD. DR THAT THE ASSESS EE WAS HAVING NO OBJECTION TO THIS ADDITION, SINCE WE FIND THAT IT WAS AN ALTERNATIVE SUBMISSION OF THE ASSESSEE BEFORE THE AO THAT EVEN IF ANY ADDITION IS TO BE MADE OF RS.1,29,91,989/ - THEN ADDITION OF RS. 1,00,51,715/ - IS TO BE MADE ON ACCOUNT OF INTER EST OF EARLIER YEARS CREDITED DURING THE YEAR TO P & L ACCOUNT . EVEN OTHERWISE THE AO IS SUPPOSED TO MAKE JUST ASSESSMENT BASED ON THE PROVISIONS OF LAWS WHICH CAN NOT BE IGNORED SINCE IS AGREEABLE TO THE PROPOSED WRONG ADDITION. THE GROUND NO.3 IS ACCORD INGLY REJECTED. 3.5 . IN VIEW OF THE COORDINATE BENCH ORDER OF THE TRIBUNAL IN THE CASE OF CIT VS. THE JHAJJAR CENTRAL COOP. (SUPRA) , WHICH IS IDENTICAL TO THE FACTS OF THE INSTANT CASE, WE REJECT THE GROUND NO.1 RAISED BY THE REVENUE. IT IS ORDERED ACCOR DINGLY. 4. GROUND NO.2 , RAISED READ AS FOLLOWS: - 2 . THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS.542759/ - ON ACCOUNT OF DISALLOWANCES OF EXPENSES. THE DEPARTMENT IS IN APPEAL BEFORE THE HON BLE ITAT NEW DELHI THIS CA SE FOR ASSTT. YEAR 2008 - 09 ALSO. IT A NO. 2839 /DEL /201 1 4 4.1 . BRIEFLY STATED THE FACTS IN RELATION TO THE ABOVE GROUND ARE AS FOLLOWS. THE ASSESSING OFFICER HAD DISALLOWED THE EXPENSES OF RS.5,42,759/ - ON THE GROUND THAT THEY DO NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. TH E RELEVANT PORTION OF THE ASSESSING OFFICER S OBSERVATION WHILE MAKING THE DISALLOWANCE READS AS FOLLOW: - (PARA 15) AN AMOUNT OF RS.542759/ - HAS BEEN PAID BY THE BANK ON ACCOUNT OF TELEPHONE, ELECTRICITY TAX AND INSURANCE, AUDIT FEE, LAW CHARGES, WATER C HARGES ETC. EITHER IN ADVANCE OR TO PERIOD PRIOR TO THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THIS AMOUNT MAY NOT BE ADDED TO THE TOTAL INCOME OF THE BANK AS THESE EXPENDITURES DO NOT PERTAIN TO THE YEAR UNDER CONSIDERATI ON. THE ASSESSEE HAS REPLIED THAT THE PAYMENTS COULD BE MADE ONLY AFTER THE MANAGEMENT PASSED THESE EXPENDITURE. THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED. IT MAY BE POINTED OUT THAT UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, ALL FORESEEABLE EXPENSES M UST, BE PROVIDED FOR IN THE YEAR OF THEIR ACCRUAL. THE ASSESSEE SHOULD HAVE BEEN MADE PROVISIONS FOR THESE EXPENSES IN THE YEAR OF THEIR ACCRUAL. PASSING OF AN EXPENSE BY THE MANAGEMENT IS AN INTERNAL ADMINISTRATIVE MATTER OF THE ASSESSEE INSTITUTION. NOTH ING PREVENTED THE ASSESSEE FROM CREATING PROVISIONS FOR SUCH EXPENSE IN THE RELEVANT YEAR ITSELF RATHER THAN CLAIMING THAN IN THE YEAR OF ACCRUAL PAYMENT. ACCORDINGLY, THE' EXPENSES OF RS.5,42,759/ - ARE HELD AS PREPAID OR PAID IN ADVANCE I.E. EXPENSES NOT PERTAINING TO THE CURRENT PERIOD AND DISALLOWED IN THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. (ADDITION: RS.5, 42,759/ - ) 4 . 2 ON FURTHER APPEAL, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: - (PARA 8.3) I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. AS POINTED OUT BY THE AR, MOST OF THE PAYMENTS PERTAIN TO MARCH 2006 PAYMENT FOR WHICH W OULD BECOME DUE IN APRIL 2006. FURTHER, PAYMENT OF ARREARS ALSO BECAME DUE IN THE YEAR UNDER CONSIDERATION. THE CLAIM, THEREFORE, REQUIRES TO BE ALLOWED. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 4 . 3 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 4.4 THE LD. DR SUPPORTED THE ORDER OF THE ASSESSMENT. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISSION S MADE BEFORE THE INCOME TAX AUTHORITIES. IT A NO. 2839 /DEL /201 1 5 4.5 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE E XPENDITURE WHICH ARE DISALLOWED AS PRIOR PERIOD WERE EXPENSES RELATABLE TO MONTH OF MARCH, 2006 FOR WHICH THE PAYMENTS WERE MADE IN THE MONTH OF APRIL, 2006. THESE EXPENSES BECOME DUE ONLY AFTER THE MANAGEMENT EXAMINES THE EXPENSES AN D AUTHORIZES THE PAYMENT OF THE SAME. THEREFORE, THESE EXPENDITURE S BECOME DUE IN THE CURRENT ASSESSMENT YEAR AND SAME IS TO BE ALLOWED AS DEDUCTION. HENCE , THE ORDER OF CIT(A) IS CORRECT AND NO INTERFERENCE IS CALLED FOR. 4.6 IN THE RESULT , THE G ROUND N O.2 RAISED BY THE REVENUE IS REJECTED. 5. THE GROUND NO.3 RAISED READ AS FOLLOW: - 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED DELETING THE ADDITION OF RS.777838/ - ON ACCOUNT OF SUSPENSE INDIVIDUAL AND SOCIETIES. THE DEPAR TMENT IS IN APPEAL BEFORE THE HON BLE ITAT NEW DELHI THIS CASE FOR ASSTT. YEAR 2008 - 09 ALSO. 5.1 THE RELEVANT FINDING S OF THE AO IN MAKING THE ADDITION READS AS FOLLOW: - (PARA 16) THE SPECIAL AUDIT HAS POINTED OUT THAT BANK HAD SHOWN RS.48,25,788/ - AS SUSPENSE INDIVIDUALS AND SOCIETY IN THE LIABILITY SIDE. THIS AMOUNT RELATES TO THE SUSPENSE PAYABLE TO SOCIETIES AND SUSPENSE PAYABLE TO INDIVIDUALS. 'WHEN CONFRONTED THE ASSESSEE REPLIED THAT THERE IS AN ADDITION OF RS.7,77,838/ - ONLY IN SOCIETY SUNDRIES AND RS.L,52,816/ - WITHDRAWAL IN INDIVIDUAL SUSPENSE DURING THE YEAR UNDER CONSIDERATION. THUS, RS.6,25,022/ - I.E. THE DIFFERENCE OF RS.7,77,838/ - AND RS.L,52,816/ - TO BE' ADDED. THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED. THE CONTENTION OF THE ASSESSEE TO THE EXTENT THAT THE ADDITION DURING THE YEAR UNDER CONSIDERATION IN SUSPENSE PAYABLE TO SOCIETIES I.E. EXCLUDING THE OPENING BALANCE BE ADDED IS ADMISSIBLE. BUT IT IS NOT ADMISSIBLE THAT WITHDRAWAL OF RS.L,52,816/ - IN INDIVIDUAL SUSPENSE IS TO BE SET OF F AGAINST THE SUSPENSE PAYABLE TO SOCIETIES DURING THE CURRENT YEAR AS THIS AMOUNT OF WITHDRAWAL OF RS.L,52,816/ - ' IN INDIVIDUAL SUSPENSE BE MET OUT FROM THE OPENING LIABILITY SHOWN UNDER THE SAME HEAD. ACCORDINGLY, AN ADDITION OF RS.7,77,838/ - IS TO BE MA DE TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT A NO. 2839 /DEL /201 1 6 5 . 2 ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, CIT(A) DELETED THE ADDITION. THE CIT(A) FOLLOWED HIS PREDECESSOR S ORDER IN ASSESSEE S OWN CASE FOR AY 2008 - 09. 5 . 3 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. AT THE VERY OUTSET, THE LD. AR SUBMITTED THAT ISSUE IN QUESTION IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2008 - 09 IN ITA NO. 248 5 /DEL/2011 DATED 22 . 07 .201 1 . LD. DR WAS UNABLE TO CONTROVERT THE SUBMISSIONS OF THE LD. AR. 5 . 4 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR AY 2008 - 09 (SUPRA) . TH E RELEVANT FINDING OF THE COORDINATE BENCH OF THE TRIBUNAL READS AS FOLLOWS: - (PARA 8) WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. SR. DR. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND THE ORDER PASSED BY THE LD. CIT (APPEALS). RI GHT FROM THE OPENING IT AS BEEN THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OUTSTANDING IN THE ACCOUNTS REPRESENTS THE AMOUNT OF DEPOSITS MADE BY THE PERSONS, WHO INTENDED TO OPEN NEW ACCOUNTS WITH THE ASSESSEE BANK AND UNTIL ALL THE FORMALITIES ARE COM PLETED AND ACCOUNTS OF THE ASSESSEE IS OPENED, THE SAID AMOUNT WAS LYING IN THE SAID ACCOUNT. IN CASE OF NON - OPENING OF THE ACCOUNT, THE AMOUNT WAS TO BE REFUNDED BACK TO THE RESPECTIVE DEPOSITORS. THESE CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN CONTROVERT ED EITHER BY THE ASSESSING OFFICER OR THE LD. CIT (APPEALS) AND THERE IS NO MATERIAL ON RECORD TO SHOW THAT SUCH CONTENTIONS OF THE ASSESSEE ARE INCORRECT. IF THE AMOUNT DEPOSITED IN THE SAID ACCOUNT BELONG TO THE VARIOUS DEPOSITORS, WHO INTENDED TO OPEN T HE BANK ACCOUNT WITH THE ASSESSEE, THEN THE SAID AMOUNT CANNOT ATTAIN THE CHARACTER OF INCOME IN THE HANDS OF THE ASSESSEE UNLESS IT IS SHOWN THAT THE SAID AMOUNT HAS BECOME THE INCOME OF THE ASSESSEE. IF THE SAID AMOUNT DOES NOT BELONG TO THE ASSESSEE A ND THE ASSESSEE HAS UTILIZED THE SAME UNTIL THE SAID AMOUNT IS REFUNDED BACK, NO NOTIONAL INTEREST CAN BE ADDED TO THAT AMOUNT AS EITHER THE ASSESSEE HAS TO PAY INTEREST IF THE SAID AMOUNT IS CREDITED TO THE SAVING ACCOUNT OR THE AMOUNT ITSELF HAS TO BE RE FUNDED BACK IN CASE THE ACCOUNT IS NOT OPENED. THERE IS NO QUESTION OF ASSESSING ANY NOTIONAL INTEREST ON THE SAID AMOUNT. IT A NO. 2839 /DEL /201 1 7 THEREFORE, WE FIND NO FAULT OR INFIRMITY IN THE FINDINGS RECORDED BY THE LD. CIT (APPEALS) VIDE WHICH THE IMPUGNED ADDITION AND INTER EST THEREON IS DELETED, WE DECLINE TO INTERFERE. THE APPEAL FILED BY THE REVENUE, BEING DE VOID OF MERIT, IS BEING DISMISSED. 5 . 5 THE FACT OF THIS CASE IS IDENTICAL TO THE FACTS CONSIDERED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2008 - 09 . THEREFORE , FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE CITED SUPRA, WE REJECT THE GROUND NO.3 RAISED BY THE REVENUE. IT IS ORDERED ACCORDINGLY. GROUND NO.4 6 . IN THIS GROUND, THE REVENUE IS AGGRIEVED BY THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.2,12,60 0/ - OUT OF THE TOTAL ADDITION OF RS.12,78,047/ - MADE BY THE AO. THE AO MADE THE ADDITION OF RS.12,78,047/ - BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT , S INCE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE IN RESPECT OF CERTAIN INTEREST PAYMENT MADE BY IT. THE RELEVANT OBSERVATION OF THE AO IN MAKING THE DISALLOWANCE READS AS FOLLOWS: - (PARA 5) IT WAS POINTED OUT BY THE AUDITOR AT PAGE NO.5 OF AUDIT REPORT U / S 142(2A) UNDER THE HEAD TDS THAT AMOUNTS OF RS.55,81,567/ - , RS.7,07,0751 - & RS.1,66,3001 - H AVE BEEN PAID/CREDITED BY THE BANK ON ACCOUNT OF INTEREST (EXCEEDING RS.5,000 / - PER PERSON), HIRING OF SECURITY SERVICES AND LEGAL CHARGES RESPECTIVELY WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THESE PAYMENTS NOT BE DISALLO WED U/S 40(A) (IA). IN ITS REPLY, THE ASSESSEE HAS CONTENDED THAT FOR A PART OF THE PAYMENTS MADE WITHOUT TDS, IT HAD OBTAINED FORM I5G AND I5H FROM THE PAYEES AND SO SUCH AMOUNTS FOR WHICH THESE FORMS HAVE BEEN OBTAINED MAY NOT BE DISALLOWED. THE ASSESSE E HAS ALSO SUBMITTED THE PROOF OF DEPOSITS OF FORM I5G AND 15H IN THE OFFICE OF THE COMMISSIONER OF INCOME TAX, ROHTAK. COPIES OF FORM I5G AND I5H HAVE ALSO BEEN SUBMITTED DURING THE ASSESSMENT. THESE DOCUMENTS ARE PLACED ON RECORD. HOWEVER, IN CASE OF THE FOLLOWING PAYMENTS NEITHER TDS WAS DEDUCTED NOR FORM I5G AND 15H WERE OBTAINED/SUBMITTED: 1. ALL EMPLOYEE ASSOCIATION : RS.26,916/ - IT A NO. 2839 /DEL /201 1 8 2. DIPLOMA ENGG. WELFARE ASSOCIATION : RS.76,961/ - 3. DIPLOMA ENGG. ASSOCIATION : RS.29,375/ - 4. WARDEN MDU : RS. 2,12,600/ - TOTAL RS.3,45,852/ - FURTHER, FORMS I5G & 15H, WAS NOT MADE AVAILABLE FOR A TOTAL AMOUNT OF RS.58,820/ - . THE ASSESSEE HAS CONCEDED THAT THESE FORMS COULD NOT BE TRACED I.E. THEY ARE MISSING. FURTHER PAYMENTS OF RS.7,07,075/ - AND RS.L,6 6,300 / - ARE ALSO TO BE ADDED IN THE INCOME OF THE ASSESS BANK FOR THE YEAR UNDER CONSIDERATION AS ASSESSEE ITSELF HAS ADMITTED THAT NO TAX WAS DEDUCTED IN THAT YEAR AND TDS ON THESE PAYMENTS WERE DEDUCTED AND DEPOSITED IN THE YEAR 2009 - 10, HENCE THE ASSESS EE IS ENTITLED TO CLAIM ALLOWANCE OF THESE EXPENDITURE IN THE YEAR 2009 - 10 I.E. THE YEAR IN WHICH TAX DEDUCTED AND DEPOSITED ON THESE PAYMENTS. IN VIEW OF THE ABOVE DISCUSSIONS ADDITION OF RS.12,78,047/ - (RS.3,45,852 / - RS.58,820 / - + RS.7,07,075 / - + RS.1,66 ,300 / - ) IS MADE TO THE TOTAL INCOME OF THE ASSESSEE UNDER PROVISIONS OF SECTION 40(A)(IA) (ADDITION: RS.12,78,047/ - ) 6 .1 THE CIT(A), OUT OF THE TOTAL DISALLOWANCE OF RS.12,7 8,047/ - DELETED THE ADDITION OF RS.2,12,600/ - FOR THE REASON INTEREST PAYMENTS WERE TO EDUCATION INSTITUTION S WHOSE INCOME IS EXEMPT U/S 10(23C) OF THE ACT . 6 .2 THE LD. DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. 6 .3 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE INTEREST PAYMENT OF RS.2,12,600/ - IS TO AN EDUCATION INSTITUTION , WHOSE INCOME IS EXEMPT U/S 10(23C) OF THE ACT. THEREFORE, AS PER CIRCULA R NO.4/2002 NO TDS IS REQUIRED TO BE MADE ON SUCH INTEREST PAYMENT. HENCE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISSED THE GROUND NO.4 RAISED IN REVENUE S APPEAL. IT IS ORDERED ACCORDINGLY. IT A NO. 2839 /DEL /201 1 9 GROUND NO.5 7 . THE AO MADE AN ADDITION OF RS.3,09,152/ - ON A CCOUNT OF PRINTING AND STATIONARY SUPPLIED TO BRANCHES BY THE HEAD OFFICE. THE RELEVANT OBSERVATION OF THE AO IN MAKING THE ADDITION READS AS FOLLOWS: - PARA 4 IT HAS BEEN POINTED OUT BY THE AUDITORS THAT THE ASSESSEE BANK PURCHASES/ PRINTS THE STATIONERY AT HEAD OFFICE LEVEL AND SHOWS IT AS STOCK OF STATIONERY IN THE BALANCE SHEET . AFTER RECEIVING THE REQUIREMENT FROM BRANCHES, THE HEAD OFFICE DELIVERS THE STATIONERY TO BRANCHES AND REDUCES THE STOCK OF STATIONERY. THE BRANCHES ISSUE STATIONERY TO THE CUS TOMERS AND CHARGE FOR THIS AND CREDIT THE PRINTING AND STATIONERY HEAD AS INCIDENTAL CHARGES. THE BALANCE AMOUNT AFTER DEDUCTING INCIDENTAL CHARGES ARE TREATED AS EXPENSES WHEREAS THE SAME ARE AVAILABLE PHYSICALLY WITH THE BRANCHES AS CLOSING STOCK AT THE END OF THE YEAR. THIS CLOSING STOCK NOT UTILIZED DURING THE YEAR SHOULD INVARIABLY BE SHOWN IN THE CLOSING STOCK OF STATIONERY WITH BRANCHES WHEREAS THE SAME HAS BEEN CHARGED AGAINST THE PROFIT OF THE YEAR. NO STOCK REGISTER IS MAINTAINED. ALL THIS SHOWS THAT THE BANK TREATED CLOSING STOCK WITH BRANCHES AS EXPENSES AND, MOREOVER, INCIDENTAL CHARGES ARE NOT CREDITED PROPERLY. FURTHER , INCIDENTAL CHARGES ARE ABOUT 10 TIMES OF THE COST OF THE STATIONARY ISSUED TO THE CUSTOMERS. THIS RESULTS IN INACCURATE CALC ULATION OF STOCK AT THE END OF THE YEAR AS THE CLOSING STOCK IS ARRIVED AT BY REDUCING THE INCIDENTAL CHARGES FROM THE AMOUNT OF STATIONERY RECEIVED FROM HEAD OFFICE. INSTEAD, THE COST OF STATIONERY ISSUED TO THE CUSTOMERS SHOULD HAVE BEEN REDUCED TO WORK OUT THE CORRECT AMOUNT OF CLOSING STOCK. THE ASSESSEE BANK, WHEN CONFRONTED, CONTENDED THAT MOST OF THE STATIONERY IS FOR SELF USE OF THE BRANCHES WHICH INCLUDE BOOKS, GENERAL LEDGERS, LOAN LEDGERS ETC. INCIDENTAL CHARGES ARE CHARGED ONLY FROM CURRENT ACC OUNT HOLDERS AND NOT AGAINST CHEQUE BOOKS AND PASS BOOKS. IF THIS IS TRUE, THEN IT IS WRONG ON THE PART OF THE ASSESSEE BANK TO REDUCE THE INCIDENTAL CHARGES RECEIVED FROM CUSTOMERS ON ACCOUNT OF STATIONERY FROM THE VALUE OF CLOSING STOCK. THE SAME IS IN THE NATURE OF INCOME AND SHOULD HAVE BEEN TAKEN INTO ACCOUNT FOR THE COMPUTATION OF ASSESSEE'S TOTAL INCOME. IN THIS BACK GROUND AN AMOUNT OF RS.1,15,534/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS RECEIPTS FROM SALE OF BANK STATIONERY NOT CREDITED T O P&L A / C. LIKEWISE PROCESSING CHARGES OF RS.18,2 5 0/ - CHARGED FROM THE CUSTOMERS IS ALSO BEING ADDED BACK. IT IS TRUE THAT STATIONERY ISSUED TO BRANCHES INCLUDE ITEMS FOR SELF CONSUMPTION AS CONTENDED BY THE ASSESSEE. HOWEVER, IT IS ALSO TRUE THAT THE WHO LE OF THE STATIONERY ISSUED BY HEAD OFFICE WAS NOT CONSUMED BY THE BRANCHES. THE CLOSING STOCK OF STATIONERY WITH BRANCHES IS OVER AND ABOVE IT A NO. 2839 /DEL /201 1 10 THE CLOSING STOCK REFLECTED BY THE HEAD OFFICE IN ITS BALANCE SHEET. KEEPING IN VIEW THE FACTS NARRATED BY ASSESSEE IN HIS REPLY, AN AMOUNT OF RS.L,75,368/ - (I.E. 50% OF RS.3, 50 ,736 RECEIVED FROM HEAD OFFICE) IS ADDED TO THE INCOME OF THE ASSESSEE BANK AS UNDER VALUATION OF CLOSING STOCK. (ADDITION: RS.1,15,534+18250+ 1,75,368 = 3,09,152) 7 .1 THE CIT(A) DELETED THE ADDITION . T HE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW: - ( PARA 11.3 ) I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THE NET AMOUNT CHARGED TO P&L A/C UNDER THIS HEAD IS ONLY RS.2,37 ,966/ - AND CLOSING STOCK OF RS.4,47,310/ - HAS ALREADY BEEN SHOWN. THE AO W ORKED OUT THE SAID DISALLOWANCES WITHOUT APPRECIATING THE FACTS PROPERLY. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 7 .2 WE H AVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE FINDING OF THE CIT(A) BY PLACING ON RECORD ANY MATE RIAL/DOCUMENTS, THEREFORE, THE FINDINGS OF THE C IT(A) ARE UPH E LD AND GROUND NO.5 RAISED IN RE VENUE S APPEAL IS REJECTED. IT IS ORDERED ACCORDINGLY. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 3 TH FEBRUARY , 201 5 . SD/ - SD/ - ( S.V. MEHROTRA ) (GEORGE GEORGE K.) A CCOUNTANT MEMBER J UDICIAL MEMBER DATED: 1 3 TH FEBRUARY , 201 5 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR AS ST . REGISTRAR, ITAT, NEW DELHI