The Kanyakumari District Central Co-Operative Bank Ltd., Kanyakumari V. ACIT Circle 1, Nagercoil

ITA 3074/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0144 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 14-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Bad and doubtful debts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.3074/CHNY/2017 & '& / ASSESSMENT YEAR : 2014-15 M/S THE KANYAKUMARI DISTRICT CENTRAL CO-OPERATIVE BANK LTD., NAGERCOIL, KANYAKUMARI DISTRICT 629 001. PAN : AACFT 6796 L V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, NAGERCOIL. ()*/ APPELLANT) (+,)*/ RESPONDENT) )*/ APPELLANT BY : SH. N. DEVANATHAN, ADVOCATE +,)*/ RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT - . /' / DATE OF HEARING : 11.07.2018 01' . /' / DATE OF PRONOUNCEMENT : 19.09.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, MADURAI, D ATED 12.10.2017 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 36(1)(VIIA) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2 I.T.A. NO.3074/CHNY/17 3. SH. N. DEVANATHAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT. ACCORDING TO THE L D. COUNSEL, AMONG THE LIST OF RURAL BRANCHES FURNISHED BY THE ASSESSEE, T HE ASSESSING OFFICER FOUND THAT SIX BRANCHES OF THEM ARE NOT RURAL BRANC HES. THE AGGREGATE AVERAGE OUTSTANDING OF THESE SIX BRANCHES ARE 1,67,24,01,092/-. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE CLAIMED 4,05,44,538/- AS DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT TOWA RDS BAD AND DOUBTFUL DEBTS. THE ASSESSING OFFICER DISALLOWED 4,05,44,538/- ON THE GROUND THAT THE SIX BRANCHES OF THE ASSESSEE ARE NOT RURAL BRANCHES. THE SIX BRANCHES ARE : (1) THUCKALAY; (2) MONDAY MARKET; (3) ELANKADAI; (4) PUTHUKADAI; (5) PUNNAI NAGAR; AND (6) GANDHI NAGAR. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND THAT SIX PL ACES FOUND TO BE NON- RURAL BRANCHES BY THE ASSESSING OFFICER WERE IN FAC T RURAL BRANCHES. THE CIT(APPEALS) REFERRED TO THE CENSUS DATA 2001 AND 2 011. HAVING FOUND THAT THE SIX BRANCHES ARE RURAL BRANCHES BY THE CIT (APPEALS), ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) FOUND THAT THE ASSESSEE HAS CREATED PROVISION FOR NON-PERFORMING ASSET WHICH COMPRISES THE NON-PERFORMING ASSET AND STANDARD ASSET. THE STANDARD ASSET IS AL WAYS CONSIDERED TO BE RECOVERABLE. THEREFORE, ACCORDING TO THE LD. CO UNSEL, THE 3 I.T.A. NO.3074/CHNY/17 CIT(APPEALS) FOUND THAT THE PROVISION WAS NOT MADE AS REQUIRED. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. COUNSEL, THE ASSESSE E HAS MADE PROVISION AS REQUIRED UNDER SECTION 36(1)(VIIA) OF THE ACT, T HEREFORE, THE DISALLOWANCE MAY BE RESTRICTED TO THE PROVISION MAD E. 5. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R FOUND THAT THE SIX BRANCHES REFERRED IN THE ORDER OF THE ASSESSING OFF ICER WERE NOT RURAL BRANCHES. ACCORDING TO THE LD. D.R., EXCLUDING THE ABOVE BRANCHES, THE AGGREGATE AVERAGE ADVANCE WORKS OUT TO 5,71,86,155/- AND 10% OF THE SAME COMES TO 57,18,615/-. ACCORDINGLY, HE RESTRICTED THE ALLOWA NCE UNDER SECTION 36(1)(VIIA) TO THE EXTENT OF 57,18,615/- AGAINST THE CLAIM OF 4,05,44,538/-. MOREOVER, ACCORDING TO THE LD. D.R ., NO PROVISION WAS MADE AS OBSERVED BY THE CIT(APPEALS), HENCE, DISALL OWANCE WAS RIGHTLY CONFIRMED BY THE CIT(APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT THE PROVISION WAS MADE AS REQUIRED UNDER SECTI ON 36(1)(VIIA) OF THE ACT IN RESPECT OF BAD AND DOUBTFUL DEBTS. EVEN THO UGH THE ASSESSING OFFICER FOUND THAT SIX BRANCHES REFERRED IN THE ASS ESSMENT ORDER, MORE PARTICULARLY AT PAGE 9 OF THE ORDER, ARE NON-RURAL BRANCHES, THE 4 I.T.A. NO.3074/CHNY/17 CIT(APPEALS) AFTER CONSIDERING THE CENSUS DATA OF T HE YEARS 2001 AND 2011 FOUND THAT THESE SIX BRANCHES ARE RURAL BRANCH ES. THE FINDING OF THE CIT(APPEALS) THAT THE ABOVE SIX BRANCHES ARE RURAL BRANCHES IS NOT CHALLENGED BY THE REVENUE. IN OTHER WORDS, THE FIN DING OF THE CIT(APPEALS) THAT SIX BRANCHES ARE RURAL BRANCHES A TTAINED FINALITY. THEREFORE, NOW THE REVENUE CANNOT CONTEND BEFORE TH IS TRIBUNAL THAT THE ABOVE SIX BRANCHES ARE NOT RURAL BRANCHES. 7. NOW COMING TO THE CLAIM OF THE ASSESSEE, IT IS N OT IN DISPUTE THAT TO THE EXTENT OF PROVISION MADE BY THE ASSESSEE FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT, IT HAS TO BE ALLOWED. THE CIT(APPEALS) FOUND THAT THE ASSESSEE HAS NOT MADE P ROPER PROVISION AND THE PROVISION MADE INCLUDES STANDARD ASSET WHICH WO ULD ALWAYS CONSIDERED TO BE RECOVERABLE. HOWEVER, THE CIT(AP PEALS) HAS NOT EXAMINED THE NATURE OF STANDARD ASSET. THE DETAILS OF STANDARD ASSET ARE NOT AVAILABLE ON RECORD. IN THOSE CIRCUMSTANCES, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-E XAMINED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL VER IFY WHETHER THE ASSESSEE HAS MADE ANY PROVISION FOR BAD AND DOUBTFU L DEBTS AND IF THE PROVISION IS MADE, TO THE EXTENT OF THE PROVISION T HE CLAIM OF THE ASSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT HAS TO BE ALLO WED. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE PROVISION MADE BY THE ASSESSEE FOR NON- 5 I.T.A. NO.3074/CHNY/17 PERFORMING ASSET AND THEREAFTER DECIDE THE ISSUE AC CORDINGLY AS OBSERVED ABOVE. TO THAT LIMITED EXTENT, THE APPEAL OF THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 19 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 3 /DATED, THE 19 TH SEPTEMBER, 2018. KRI. . +/45 65'/ /COPY TO: 1. )*/ APPELLANT 2. +,)*/ RESPONDENT 3. - 7/ () /CIT(A)-1, MADURAI 4. PRINCIPAL CIT, MADURAI-2, MADURAI 5. 58 +/ /DR 6. 9& : /GF.