Gour Gramin Bank (presently merged with Bangiya Gramin Vikash Bank), Murshidabad V. DCIT, Circle - Murshidabad, Murshidabad

ITA 305/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75115 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2012
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Bad and doubtful debts

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.305/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2004-05 GOUR GAMIN BANK (PRESENTLY MERGED WITH VS. DEPUTY COMMISSIONER OF INCOME-TAX, BANGIYA GRAMIN VIKASH BANK) CIRCLE, MURSHIDABAD. (PAN: AAALB0462D) (() /APPELLANT ) (*+()/ RESPONDENT ) & ' / I.T.A NO.320/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER, WD-3, MURSHIDABAD VS. GOUR GAM IN BANK (PRESENTLY MERGED WITH BANGIYA GRAMIN VIKASH BANK) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 31.03.2014 DATE OF PRONOUNCEMENT: 31.03.2014 FOR THE ASSESSEE: SHRI SOUMITRA CHOUDHURY, ADVOCATE FOR THE REVENUE : SHRI RAVI JAIN, CIT, DR / ORDER PER SHRI MAHAVIR SINGH, JM : BOTH THESE CROSS APPEALS BY ASSESSEE AND REVENUE A RE ARISING OUT OF ORDER OF CIT(A)- XXXVI, KOLKATA IN APPEAL NO. 942/CIT(A)-XXXVI/KOL/C IR-MSD/09-10 DATED 27.12.2011. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-MURSHIDABAD U /S. 143(3)/147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEAR 2004-05 VIDE HIS ORDER DATED 24.12.2009. 2. THE FIRST THREE ISSUES IN THIS APPEAL OF ASSESSE E IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING PRO VISION FOR GRATUITY, PROVISION FOR LEAVE ENCASHMENT BOTH PAID BEFORE FILING OF RETURN U/S. 1 39(1) OF THE ACT AND PROVISION FOR BAD AND DOUBTFUL DEBTS. FOR THIS, ASSESSEE HAS RAISED FOLL OWING GROUNDS NO. 1 TO 7: 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PA SSED BY THE LD. C.I.T.(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN NOT ALLOWING PROVISION FOR GRATUITY AMOUNTING TO RS.50,00,000/- WHICH IS COMPL ETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, LD. C.I.T.A) WAS WRONG IN NOT CONSIDERING THE FACT THAT THE GRATUITY AMOUNTING TO RS.50,00,000/- WAS PAID BEFOR E FILING THE RETURN OF INCOME U/S. 139(1), THEREFORE, THE ORDER PASSED BY THE LD. C.I.T.(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN NOT ALLOWING PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS.20,00,000/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN NOT CONSIDERING THE FACT THAT THE TRIPARTITE AGREEMENT WAS ENTERED INTO WITHIN TH E FINANCIAL YEAR, THEREFORE, THE LD. C.I.T.(A) WAS WRONG IN NOT ALLOWING PROVISION FOR LEAVE ENCAS HMENT AMOUNTING TO RS.20,00,000/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGA1. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(A) WAS WRONG IN NOT ALLOWING BAD & DOUBTFUL DEBTS U/S. 36(1)(VIIA) OF THE I. T. ACT, 1961 AMOUN TING TO RS. 1,87,20,000/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGA1. 7. FOR THAT ON THE FACTS OF THE CASE, THE A.O. WAS WRONG IN NOT ALLOWING PROVISION FOR BAD & DOUBTFUL DEBTS AMOUNTING TO RS.1,87,20,000/- AS PER THE GUIDELINES OF RBI WHICH IS A1LOWABLE U/S. 36(1)(VIIA), THEREFORE, THE ORDER PASSED BY TH E LD. C.I.T.(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT AND PAYMENT OF GRATUITY, PAYMENT OF LEAVE ENCASHMENT AND PROVISION FOR DOUBT FUL DEBTS IS ALSO OUT OF ELIGIBLE INCOME AND THAT ALSO GROSS TOTAL INCOME OF THE CO-OPERATIV E SOCIETY. AS POINTED OUT BY LD. COUNSEL FOR THE ASSESSEE TO THE PROVISIONS OF SECTION 80P(1) OF THE ACT THAT THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2) MEANS THE DEDUCTION WILL BE ALLOWED FROM GROSS TOTAL INCOME. THE RELEVANT PROVISION OF SECTION 80P(1) R EADS AS UNDER: (1) WHERE IN THE CASE OF AN ASSESSEE BEING A CO-OP ERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IT MEANS THE ADDITION MADE BY AO ON ACCOUNT OF PROV ISION FOR GRATUITY, PROVISION FOR LEAVE ENCASHMENT EVENTUALLY WHICH WAS PAID BEFORE FILING OF RETURN OF INCOME U/S. 139(1) OF THE ACT AND PROVISION FOR BAD AND DOUBTFUL DEBTS, IS ELIGIB LE FOR DEDUCTION U/S. 80P OF THE ACT IN VIEW OF THE FACT THAT DEDUCTION IS TO BE ALLOWED OUT OF GRO SS TOTAL INCOME. ACCORDINGLY, THIS DISALLOWANCE IN ANY WAY WILL NOT AFFECT ON INCOME F OR THE REASON THAT THIS WILL ALSO BE PART OF GROSS TOTAL INCOME AND WILL BE ELIGIBLE FOR DEDUCTI ON U/S. 80P OF THE ACT. THESE THREE COMMON ISSUES OF ASSESSEES APPEAL ARE ALLOWED. 4. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF DEDUCTION U/S. 80P OF THE ACT IN RE SPECT OF RECEIPTS OF INTEREST ON NON-SLR FUNDS FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND S: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE AIMS AND OBJECTIVES ENSHRINED IN THE PREAMBLE OF THE RRB ACT, 1976, IN TERMS OF THE PRINCIPLE LAID DOWN IN KESHAVANAND BHARTIS CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT TAKING COGNIZANCE OF THE FACT THAT THE ASSESSEE, A CREATIO N OF RRB ACT, IN VIEW OF VIOLATION OF SECTION 3(1) OF THE RRB ACT CANNOT BE GRANTED TAX BENEFITS U/S. 80P(2)(A)(I) ON THE PLEA THAT REGULATORY BODIES HAVE NOT ACTED AGAINST IT WHICH WOULD BE CON TRARY TO THE PRINCIPLE LAID DOWN IN BIHARI LAI JAISWAL & ORS 217 ITR 746 (SC). 3 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. C IT(A) HAS ERRED IN NOT CONSIDERING THE PRIME ISSUE THAT PUBLIC POLICY LAID DOWN BY THE PARLIAMEN T CAN NOT BE OVERLOOKED AND TAX BENEFITS BE GRANTED, DESPITE OBJECTION OF THE REVENUE, ON THE G ROUND THAT REGULATORY BODY HAS NOT TAKEN ANY ACTION AGAINST THE ASSESSEE FOR ITS VIOLATION. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. C IT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE LEGISLATURE HAS NOT GIVEN DEDUCTION TO ALL BANKS BUT ONLY TO RRB TO PROMOTE TARGET AREA AND GROUP FOR UPLIFTMENT AND IN SUCH A SITUATION , ALL OTHER BANKING ACTIVITY OF RRB NOT BE GIVEN THE BENEFIT OF DEDUCTION EXCEPT THE INCOME WHICH IS IN CONFORMITY WITH THE AIMS AND OBJECTS ENSHRINED IN SEC. 3(1) AND THE PREAMBLE OF THE RRB ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. C IT(A) HAS ERRED IN CONCLUDING THAT EXPENSES INCURRED IN CONNECTION WITH OR APPORTIONABLE TO ACT IVITIES IN VIOLATION OF THE RRB ACT OR IN VIOLATION OF PUBLIC POLICY CAN BE ALLOWED AS A DEDU CTION. 6.ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CI T(A) HAS ERRED IN NOT TAKING COGNIZANCE OF THE FACT THAT SECTION 18 OF THE RRB ACT IS SIMPLY A N ENABLING PROVISION AND CAN NEITHER ACT TO THE PREJUDICE OF PROVISION LAID DOWN IN SECTION 3(1 ) OF THE SAID ACT, NOR CAN DEFEAT THE AIMS AND OBJECTIVES ENSHRINED IN THE PREAMBLE OF THE RRB ACT . 5. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE FILED COPY OF TRIBUNALS ORDER IN ASSESSEES OWN CASE IN ITA NO. 1771/K/2008 FOR AY 2005-06 AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE. WE FIND THAT THE TR IBUNAL IN ITA NO. 1771/K/2008 FOR AY 2005-06 IN ASSESSEES OWN CASE HAS HELD AS UNDER: 11. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE BANK HAS DEPLOYED TOTAL DEPOSITS INTO THREE TYPES OF INCOME EARNING INSTRUMENTS I.E. CRR, SLF FUNDS AND NON-SLR FUNDS. THE INVESTMENTS OF THE ABOVE FUNDS ARE MADE AS PER RRB ACT, 1976 AND V IOLATIONS OF THE ACT HAVE BEEN DETERMINED AS SLR FUND AND NON-SLR FUND. INCOME HA S BEEN DETERMINED ACCORDING TO THE FUNDS DEPLOYED AS PER RRB ACT. WE HAVE GONE TH ROUGH THE ABOVE CASE LAWS AND FIND THAT WHETHER INCOME IS ATTRIBUTABLE TO SLR OR NON-S LR FUNDS WOULD NOT MAKE ANY DIFFERENCE FOR THE PURPOSE OF QUANTIFYING DEDUCTION ON INTEREST BY COOPERATIVE BANK U/S. 80P(2)(A)(I) OF THE ACT AS DEPOSITS OF SURPLUS IDLE MONEY AVAILABLE FROM WORKING CAPITAL I.E. RESERVES, EXCESS COLLECTION OF INTEREST AND OT HER INCOMES ALL ATTRIBUTABLE TO BANKING BUSINESS. THEREFORE, THE INTEREST EARNED ON NON-SLR FUNDS WILL ALSO QUALIFY FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. HONBLE ALLAHABAD HI GH COURT IN THE CASE OF CIT VS. MUZAFFARNAGAR DISTRICT CO-OPERATIVE BANK LTD. (2013 ) 214 TAXMAN 498 (ALL) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F BIHAR STATE COOPERATIVE BANK LTD. VS. CIT (1960) 39 ITR 114 (SC) AND OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. GOA URBAN COOPERATIVE BANK LTD., (TAX APPEAL N OS. 6 & 8 OF 2005, AND IN TAX APPEAL NO. 54 OF 2008, DECIDED ON 15.07.2009) HAVE HELD THAT INTEREST EARNED OUT OF DEPOSITS OF SURPLUS FUND AND INTEREST EARNED ON SLR OR NON-SLR FUNDS WILL QUALIFY FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE RELEVA NT PARAS 8, 9 AND 10 READS AS UNDER: 8. THE SUPREME COURT IN BIHAR STATE CO-OPERATIVE B ANK LTD. (SUPRA) EXPLAINED IN PARA 12 AND 13 THAT THE INTEREST EARNED OUT OF DEPOSITS OF SURPLUS FUND HAS TO BE TREATED AS 4 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 5 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 6 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)( A)(I) OF THE ACT ON INTEREST EARNED ON NON-SLR FUNDS. THIS ISSUE OF REVENUES APPEAL IS DISMISSED . 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31ST MARCH, 2014 ,- #./ 0 JD.(SR.P.S.) 7 ITA NO. 320/K/2012 & 305/K/2012 GOUR GRAMIN BANK, AY 2004-05 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ITO, WARD-3, MURSHIDABAD 2 *+() / RESPONDENT GOUR GRAMIN BANK (MERGED WITH BANGIYA GRAMIN VIKASH BANK), NH-34, BMC HOUSE, CHUANPUR, BERHAMPOR E, MURSHIDABAD- 742101. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #