The Virudhunagar District Central Co-operative Bank Limited, Virudhunagar V. ACIT Virudhunagar Circle, Virudhunagar

ITA 288/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7473 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO CIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Bad and doubtful debts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NOS.287, 288, 289, 290 & 291/CHNY/2018 / ASSESSMENT YEARS : 2009-10, 2010-11, 2011-12, 2012-03 AND 2014-2015. THE VIRUDHUNAGAR DISTRICT CENTRAL CO-OPERATIVE BANK LTD, 104/1, MADURAI ROAD, VIRUDHUNAGAR. [PAN AAAAV 0147N] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, VIRUDHUNAGAR CIRCLE, VIRUDHUNAGAR. ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE $%! ' # /RESPONDENT BY : SHRI. M. SRINIVASA RAO, CIT. & ' ' () /DATE OF HEARING : 04-07-2018 *+ ' () /DATE OF PRONOUNCEMENT : 04-07-2018 / O R D E R PER BENCH:. THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED A GAINST ORDERS DATED 28.11.2017 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, MADURAI FOR THE IMPUGNED ASSESSMENT YEARS. GROUND S RAISED BY THE ASSESSEE IN ITS APPEALS FOR ASSESSMENT YEARS 2009- 10 TO 2012-2013, ITA NOS.287 TO 291/18 :- 2 -: INCLUDE THOSE WHICH ASSAIL THE VALIDITY OF THE RE-A SSESSMENTS FOR THE SAID YEARS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING SUCH GROUNDS ASSAILING THE VALIDITY OF THE RE-ASSESSMENTS. ACCORDINGLY, GROUNDS ASSAILING VALIDITY OF THE RE- ASSESSMENT FOR ASSESSMENT YEARS 2009-10 TO 2012-13 ARE DISMISSED A S NOT PRESSED. 2. THIS LEAVES US WITH GROUNDS WHICH ARE COMMON FOR A LL THE ASSESSMENTS, WHICH ASSAILS DISALLOWANCE OF DEDUCTIO N CLAIMED BY THE ASSESSEE U/S.36(1) (VIIA) OF THE INCOME TAX ACT, 19 61 (IN SHORT THE ACT). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T IT HAD CLAIMED THE FOLLOWING AMOUNTS AS DEDUCTION U/S.36(1)(VIIA) OF T HE ACT, FOR THE IMPUGNED ASSESSMENT YEARS AS UNDER:- ASSESSMENT YEARS AMOUNT (E) 2009-10 8,20,59,000/- 2010-11 9,53,84,153/- 2011-12 12,83,31,937/- 2012-13 16,74,89,495/- 2014-15 21,76,96,162/- AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD CREATED THE FOLLOWING PROVISIONS IN ITS ACCOUNT FOR THESE YEAR S. ITA NOS.287 TO 291/18 :- 3 -: ASSESSMENT YEAR : 2009-2010:- (I) PROVISION FOR STANDARD ASSET E13,99,324/ - (II) RESERVE FOR SHORT PROVISION WAIVER. E3,20,95,000/ - TOTAL 3,34,94,324/ - ASSESSMENT YEAR : 2010-2011:- (I) PROVISION FOR STANDARD ASSET E28,31,740/- (II) UNEARNED INTEREST WRITTEN OFF E6,50,91,288/- TOTAL 6,79,23,028/- ASSESSMENT YEAR : 2011-2012:- (I) PROVISION FOR STANDARD ASSET E40,89,625/- (II) RESERVE FOR DCB DIFFERENCE E8,88,307/- (III) PROVISION FOR NPA E1,28,00,220/- TOTAL 1,77,78,152/- ASSESSMENT YEAR : 2012-2013:- (I) PROVISION FOR STANDARD ASSET E32,04,605/- (II) RESERVE FOR DCB DIFFERENCE E31,76,574/- (III) PROVISION FOR NPA E1,18,39,364/- TOTAL 1,82,20,543/- ITA NOS.287 TO 291/18 :- 4 -: ASSESSMENT YEAR 2014-2015:- (I) PROVISION FOR STANDARD ASSET E 5,49,38,976/- (II) RESERVE FOR DCB DIFFERENCE E 7,92,125/- (III) NPA PROVISION E 1,35,44,676/- (IV) WAIVER LOANS E 1,06,64,481/- (V) SUNDRY DEBTORS OVER 3 YEARS E 2,00,736/- (VI) BULLET JEWEL LOAN PROVISION E 21,45,389/- (VII) OVERDUE INTEREST RESERVES E 1,50,99,621/- TOTAL E 9,73,86,004/- SUBMISSION WAS THAT, ASSESSEES CLAIM U/S.36(1) (V IIA) OF THE ACT WAS DENIED BY THE LOWER AUTHORITIES FOR A REASON THAT PROVISION AS REQUIRED UNDER THE SAID SECTION WAS NOT CREATED. AS PER THE LD. AUTHORISED REPRESENTATIVE, LOWER AUTHORITIES HAD HELD THAT CREATION OF A PROVISION FOR BAD AND DOUBTFUL DEBTS WAS A NECES SARY PRE-REQUISITE FOR PREFERRING A CLAIM U/S. 36(1) (VIIA) OF THE ACT . FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, LOWER AUTHORITIES R ELIED ON CBDT INSTRUCTION NO.17/2008, DATED 26.11.2008, AND DECIS ION OF A CO- ORDINATE BENCH IN THE CASE OF M /S. SALEM DISTRICT CENTRAL CO-OPERATIVE BANK LTD VS. DCIT ( ITA NO.1168/MDS/2016 ) FOR TAKING THIS VIEW. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT THOUGH ITA NOS.287 TO 291/18 :- 5 -: ASSESSEE DID NOT NAME THE CHARGE MADE IN ITS PROFIT AND LOSS ACCOUNT AS PROVISION FOR BAD AND DOUBTFUL DEBTS, THERE WE RE DEBITS LIKE RESERVE FOR DCB DIFFERENCE, WAIVER OF LOANS, WRITE OFF OF SUNDRY DEBTORS OVER THREE YEARS, BULLET JEWEL LOAN PROVISI ON, OVERDUE INTEREST RESERVES AND NPA PROVISIONS. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT NOMENCLATURE WAS NOT RELEVA NT SINCE ASSESSEE HAD DEBITED PROVISIONS UNDER DIFFERENT HEADS AND HE NCE CLAIM U/S.36(1) (VIIA) OF THE ACT WAS TO BE ALLOWED. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES SUBM ITTED THAT ASSESSEE HAD NOT CREATED A PROVISION AS REQUIRED UNDER THE S ECTION 36(1) (VIIA) OF THE ACT AND THEREFORE COULD NOT MAKE A CLAIM UN DER THE SAID SECTION. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. SECTION 36 (1) (V IIA) OF THE ACT IS REPRODUCED HEREUNDER:- 36 ( 1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO I N SECTION 28- ITA NOS.287 TO 291/18 :- 6 -: (I)............. (II)............ (III)........... ( VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBT FUL DEBTS MADE BY- (A) A SCHEDULED BANK NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A N ON- SCHEDULED BANK 3OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF PER CENT. O F THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND A N AMOUNT NOT EXCEEDING TEN PER CENT. OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER : PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS O PTION, BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FO R ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH T HE GUIDELINES ISSUED BY IT IN THIS BEHALF, FOR AN AMOU NT NOT EXCEEDING FIVE PER CENT. OF THE AMOUNT OF SUCH ASSE TS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LA ST DAY OF THE PREVIOUS YEAR : PROVIDED FURTHER THAT FOR THE RELEVANT ASSESSMENT Y EARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 A ND ENDING BEFORE THE 1ST DAY OF APRIL, 2005, THE PROVI SIONS OF THE FIRST PROVISO SHALL HAVE EFFECT AS IF FOR TH E WORDS 'FIVE PER CENT.', THE WORDS 'TEN PER CENT.' HAD BEE N SUBSTITUTED : A READING OF THE ABOVE SUB-SECTION CLEARLY INDICATE THAT ALLOWANCE IS FOR ANY PROVISION FOR BAD AND DOUBTFUL DEBTS. IN O UR OPINION, THE USE ITA NOS.287 TO 291/18 :- 7 -: OF THE WORD ANY BEFORE THE WORDS PROVISION F OR BAD AND DOUBTFUL DEBTS INDICATE THAT NOMENCLATURE UNDER WHICH THE PROVISION IS MADE MAY NOT BE A CRITICAL FACTOR IN DETERMINING THE ALL OWANCE. ONCE A PROVISION UNDER WHATEVER NAME IS DEBITED IN THE PRO FIT AND LOSS ACCOUNT, THEN IT IS CAN BE ALLOWED, PROVIDED IT IS WITHIN THE LIMITS SPECIFIED. NO DOUBT ASSESSEE HAD PREFERRED CLAIMS IN ITS RETURN WHICH WERE IN EXCESS OF WHAT WAS ALLOWABLE U/S.36(1) (VII A) OF THE ACT, SINCE DEBITS TO THE PROFIT AND LOSS ACCOUNT WHETHER IT WA S CALLED PROVISION FOR STANDARD ASSET, RESERVE FOR DCB DIFFERENCE, NPA P ROVISION, WAIVER LOANS, SUNDRY DEBTORS OVER THREE YEARS, BULLET JEWE L LOAN, OVERDUE INTEREST RESERVES, SUNDRY DEBTORS OVER THREE YEARS, EVEN IF THEY WERE ALL AGGREGATED WAS LOWER THAN THE AMOUNT ASSESSEE COULD HAVE CLAIMED U/S.36(1) (VIIA) OF THE ACT. HOWEVER, NONE OF THE LOWER AUTHORITIES HAD CAREFULLY GONE THROUGH THE NATURE OF THE EACH OF THE DEBITS MENTIONED ABOVE BEFORE COMING TO A CONCLUSI ON THAT THESE WERE ACTUALLY NOT PROVISION FOR BAD AND DOUBTFUL D EBTS, BUT SOMETHING ELSE, LIKE CREATION OF A RESERVE. THOUGH PECULIARI TIES OF NOMENCLATURE BY ITSELF WILL NOT RENDER THE ASSESSEE INELIGIBLE FOR CLAIMING DEDUCTION AVAILABLE TO IT U/S.36(1) (VIIA) OF THE ACT, IT IS REQUIRED FOR THE ASSESSEE TO SHOW THAT THESE WERE INDEED PROVISIONS FOR BAD A ND DOUBTFUL DEBTS. IN THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OP INION THAT THIS ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OF FICER. WE SET ASIDE ITA NOS.287 TO 291/18 :- 8 -: THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE QUESTION WHETHER ASSESSEE COULD BE GIVEN ANY DEDUCTION U/S.36(1) (V IIA) OF THE ACT BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON WEDNESDAY, THE 4 TH DAY OF JULY, 2018, AT CHENNAI. SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER SD/- ( . ! ' ) (ABRAHAM P. GEORGE) $ %& / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED:4 TH JULY, 2018. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF