DCIT-AMRAVATI-CIRCLE, Amaravati V. THE AMRAVATI DISTRICT CENTRAL CO-OPERATIVE BANK LTD, Amaravati

ITA 316/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1651 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Section: 263

Judgement Text

1 ITA NOS. 316, 317 & 318/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO S . 3 16, 317 & 318 /NAG/2014 ASSESSMENT YEAR S : 2008 09, 2009 10 & 2010 11 DY. COMMISSIONER OF INCOME TAX, THE AMRAVATI DISTRICT CENTRAL AMRAVATI CIRCLE, AMRAVATI. V/S. COOPERATIVE BANK LTD. IRWIN SQUARE, CAMP ROAD, AMRAVATI. PAN AAAJT0726C. APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI K. P . DEWANI. DATE OF HEARING : 23 - 09 - 2015 DATE OF PRONOUNCEMENT : 24 TH SEPT., 2015 O R D E R PER BENCH: ALL THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE ARISING FROM THE ORDERS OF LEARNED CIT(APPEALS) II, NAGPUR RESPECTIVELY DATED 3 RD MARCH, 2014 AND 10 TH MARCH, 2014 FOR ASSESSMENT YEARS 2008 09 TO 2010 11. THE REVENUE HAS RAISED THE IDENTICALLY WORDED GROUNDS WHICH ARE AS UNDER : 1 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(APPEA L) HAS ERRED IN TREATING THE PROVIS I ONS ON NPA OF RS. 14,27 , 45 , 380/ - ALLOWABLE U/S . 36(1)(VIIA) OF THE LT . ACT , AS THE PROVISIONS MADE IN THE BOOKS ARE NOT ALLOWABLE AS HELD IN VIEW OF THE DECIS I ON OF SOUTHERN TECHNOLOGIES LTD. , VS JCIT , 187 TAXMAN 346 (SC) . 2 ITA NOS. 316, 317 & 318/NAG/2014 2 WHETHER ON THE FACTS AND CIRCUMSTA NCES OF THE CASE AND LAW THE L EARNED C I T ( APPEA L) HAS ERRED I N TREATING THE PROVISIONS ON NPA OF RS . 14 , 27 , 45 , 380 / - AL L OWAB L E U / S . 36(1 )(VIIA) I . E. 10% OF THE AGGREGATE ADVANCES MADE BY RURA L BRANCHES O F SUCH BANK THOUGH THE ASSESEE BANK I S NOT A SCHEDULE BANK OR A NON SCHEDU L E BANK EL I GIBLE FOR T HE SAID DEDUCTION AS REQUIRED TO BE COMPUTED IN ACCORDANCE W I TH RU L E 6ABA OF I T . RU L ES , 1962 . 3 WHETHER ON THE FACTS AND C I RCUMSTANCES OF THE CASE AND L AW THE LEARNED CIT ( APPEAL ) HAS ERRED IN NOT APPRECIATING TH E FACT THAT THE MATTER IS SUBJUDICED AS THE ISSUE OF 10 % AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANK I S DENIED IN THE ORDER U/S. 263 ON WHICH APPEAL IS PENDING BEFORE THE IT AT , NAGPUR . 4 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT ( APPEAL) HAS ERRED IN NOT APPRECIAT I NG THE FACT , THAT AS PE R CLAUSE (I I I )( C ) OF INSTRUCT I ON NO. 1 7 OF 2008 , THE DEDUCTION U/S. 36(1 )(VIIA) OF FIRST PROVISO , 10% OF AGG R EGA T E AVE R AGE ADVANCES OF SUCH RURAL BRANCHES OF BANK SHOULD BE IN ACCORDANCE W IT H RU L E 6ABA , OF I T . RU L E 1962 . 5 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW T HE LEARNED C I T ( APPEA L) HAS ERRED IN NOT APPRECIATING THE SUPREME COURT R UL I NG I N THE CASE OF NAVOPAN IND I A , THAT IN CASE OF AMBIGUIT Y OF DOUBT WITH REGA R D TO EXEMPT I ON P R OV I S I O N S I N A F I SCA L S T ATUTE , AMBIGUITY IF ANY IS TO BE RESOLVED IN FAVOUR OF REVENUE AND NOT THE ASSESSEE . 6 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(APPEAL) HAS ERRED IN TREATING TO INCLUDE THE PROVISIONS ON STANDARD ASSETS OF RS . 39 , 07 , 000/ - ALLOWABLE U/S . 36(1 )(VIIA) OF THE LT . ACT , AS IT I S NOT AKIN TO BAD AND DOUBTFU L DEBTS AS HELD IN THE DECISION IN THE CASES OF BHARAT OVERSEAS BANK LTD . VS CIT ( 2012) 26 TAXMAN 330 (CHENNAI) AND BHARUCH CENTRAL CO - OP . BANK LTD ., VS ITO WARD - 1 BHARUCH (2013) 36 TAXMAN 517 (AHMEDABAD - TRIB . ) . 2. AT THE OUTSET WE HAVE BEEN INFORMED THAT THE ISSUE AS RAISED BY THE REVENUE DEPARTMENT IN THE ABOVE GROUNDS NOW STOOD COVERED BY A DECISION OF ITAT, NAGPUR PRONOUNCED IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. BEARING ITA NOS. 341,342,343&344/NAG/2014 PERTAINING TO THE ASSESSMENT YEARS 2007 - TO 2010 11 ORDER DATED 11 09 2014. 2.1 WE HAVE BEEN INFORMED THAT IN THE CASE OF THE GONDI A DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA) THE CIT(APPEALS) HAS PASSED AN IDENTICALLY WORDED 3 ITA NOS. 316, 317 & 318/NAG/2014 ORDER AS IT WAS PASSED IN THE CASE OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE T HE ISSUE OF DISALLOWANCE UNDER SECTION 36(1)(VIIA) WAS DISCUSSED VIDE PARA 8. IT WAS MENTIONED THAT THE ASSESSEE IS A COOPERATIVE BANK CARRYING ON THE BUSINESS OF BANKING WITHIN THE DISTRICT OF AMRAVATI, MAHARASHTRA. THE ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBT UNDER SECTION 36(1)(VIIA). UNDOUBTEDLY THE SAID PROVI SION WAS MADE BY THE ASSESSEE WITHIN THE PRESCRIBED MONITORY LIMIT AS PER SECTION 36(1)(VIIA) I.E. 7.5% OF THE TOTAL INCOME BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI A OF THE ACT AND 10% OF THE AGGREGATE ADVANCES MADE BY THE RURAL BRANCHES COMPUTED IN THE PRESCRIBED MANNER. THE OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE BANK BEING NEITHER A STATE COOPERATIVE BANK OR A CENTRAL COOPERATIVE BANK OR A PRIMARY COOPERATIVE BANK, THEREFORE, THERE WAS NO QUESTION OF EXTENDING ANY BENEFIT PERTAINI NG TO THE PROVISION FOR A BAD AND DOUBTFUL DEBT. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, VIDE PARA 10 LEARNED CIT(APPEALS) HAD DISCUSSED THE ISSUE AT LENGTH AND AFTER DISCUSSING THE FEW CASE LAWS, CAME TO THE CONCLUSION THAT IN THE LIGHT OF SEVERAL PRECEDENTS A COOPERATIVE BANK CAN BE SAID TO BE A NON SCHEDULE BANK AND, THEREFORE, ENTITLED FOR THE CLAIM OF BENEFIT UNDER SECTION 36(1)(VIIA). A FINDING WAS RECORDED THAT THE ASSESSEE HAD USED THE TERMINOLOGY RESERVE FOR NPA IN A CCORDANCE WITH THE RBI DIRECTIONS FOR CLAIMING THE BENEFIT UNDER SECTION 36(1)(VIIA). SINCE THE LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA), THEREFORE, THE REVENUE IS IN APPEAL BEFORE US FOR ALL THE YEARS. 4. AN IMPORT ANT FACT HAS BEEN BROUGHT TO OUR NOTICE THAT IN A PARALLEL CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. LEARNED CIT(APPEALS) II, 4 ITA NOS. 316, 317 & 318/NAG/2014 NAGPUR VIDE AN ORDER DATED 11 TH MARCH, 2014 IN APPEAL NO. CIT(A) II/502/12 13 HAS VERBATIM FOLLOWED THE ORDER OF THE ASSESSEE PASSED BY LEARNED CIT(APPEALS) AND FINALLY HELD THAT DUE TO THE REASON THAT THE FACTS AND CIRCUMSTANCES WERE IDENTICAL IN THAT CASE WITH THE FACTS OF THE CASE OF THE APPELLANT NOW BEFORE US RELATING TO THE PROVISION MADE FOR BAD AND DOUBTF UL DEBT AND ONCE A VIEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE IN THE CASE OF AMRAVATI DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA), HENCE TO BE ALLOWED ON THE SAME LINES. IN THE PAPER BOOK FILED BEFORE US THE SAID DECISION OF CIT(APPEALS) II, NAGPUR (SUPRA) IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. I S FILED FOR REFERENCE AND WE HAVE NOTED THAT VIDE PARA 8 ON PAGE 13 IT WAS SPECIFICALLY MENTIONED THAT ON IDENTICAL ISSUE A VIEW HAD ALREADY BEEN TAKEN IN THE CASE OF AMRAVATI DIST RICT CENTRAL COOPERATIVE BANK FOR ASSESSMENT YEAR 2008 09 VIDE ORDER DATED 03 03 2004 BY CIT(APPEALS) II, NAGPUR IN APPEAL NO. (CIT(A) II/767/11 12) . THEREFORE, BEFORE US IT HAS BEEN DEMONSTRATED THAT THE IMPUGNED ORDER PASSED BY LEARNED CIT(APPEALS), NO W CHALLENGED BEFORE US, WAS REPRODUCED BY AN ANOTHER FIRST APPELLATE AUTHORITY IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. 5. FURTHER IT IS NOW DEMONSTRATED THAT THE SAID ORDER OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. WAS C HALLENGED BEFORE THE ITAT, NAGPUR AND THE VIEW TAKEN BY CIT(APPEALS) WAS CONFIRMED. IT IS WORTH TO MENTION THAT WHILE CONFIRMING THE RELIEF GRANTED BY CIT(APPEALS), THE RESPECTED COORDINATE BENCH HAS ALSO REFERRED THE CBDT CIRCULAR AND THEREAFTER ALLOWED T HE CLAIM IN THE FOLLOWING MANNER : 13. . . . . ' . ;~ . . .. . . . ~ . - ; . .. . . F . \ ., 13 WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED TH E 5 ITA NOS. 316, 317 & 318/NAG/2014 MATERIAL PLACED BEFORE US. THE ISSUE IS ENTIRELY BASED . ON WHETHER THE ASSESSEE FALLS IN THE AMENDED PROVISION OF SECTION 36( 1 )(VIIA) OR NOT. THIS ISSUE HAS BEEN ANSWERED BY THE BOARD IN THE NOTES & CLAUSES, WHICH READS AS UNDER, SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUB SECTION (1) OF THE SAID SECTION PROVIDES FOR DEDUCTION OF AN AMOUNT NOT EXCEEDING SEVEN AND ONE HALF PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THE SAID CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF A SCHEDULED BANK AS SPECIFIED OR A NON SCHEDULED BANK IN THE COMPUTATION OF INCOME OF SUCH BANKS. THE PROPOSED AMENDMENT SEEKS TO EXTEND THE SAME DEDUCTIONS WHICH ARE AVAILABLE TO A SCHEDULED BANK AND NON SCHEDULED BANK TO A CO OPERATIVE BANK NOT BEING A PRIMARY AG RICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE BOARD HAS ALSO ISSUED CIRCULAR NO. 3 OF 2008, WHICH READS AS UNDER: 21.5 THE PROVISIONS HAS ALSO BEEN RESTRUCTURED TO PROVIDE FOR DIFFERENT CATEGORIES OF ENTRIES (WHICH NOW ALSO INCLUDES CO OPERATIVE BANKS) AND THEIR RESPECTIVE ACTIVITIES FOR ELIGIBILITY OF THE DEDUCTION UNDER THE SAID CLAUSES. FOR CLAIMING DEDUCTION UNDER THE SAID CLAUSE, (I) A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPA NIES ACT OR A FINANCIAL CORPORATION WHICH IS A PUBLIC SECTOR COMPANY OR A BANKING COMPANY OR A CO OPERATIBE BANK (OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK) HAS TO BE ENGAGED TO THE B USINESS OF PROVIDING LONG TERM FINANCE IN INDIA FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY, (II) A HOUSING FINANCE COMPANY HAS TO BE ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR THE CONSTRUCTION OR PU RCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES AND (III) ANY OTHER FINANCIAL CORPORATION 6 ITA NOS. 316, 317 & 318/NAG/2014 INCLUDING A PUBLIC COMPANY, HAS TO BE ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IN INDIA. IT MAY BE CLARIFI ED THAT A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT SHALL INCLUDE SUCH CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT SHALL INCLUDE SUCH CORPORATIONS SPECIFIED UNDER SUB SECTION (1) AND UNDER SUB SECTION (2) OF SECTION 4A OF THE COMPANIES ACT. 21.6 THE AMENDMENT MADE BY THE FINANCE ACT, 2007 ALSO PROVIDES DEFINITIONS OF THE EXPRESSIONS BANKING COMPANY, CO OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY, PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K, HOUSING FINANCE COMPANY, PUBLIC COMPANY, INFRASTRUCTURE FACILITY AND LONG TERM FINANCE. 21.7 APPLICABILITY THIS AMENDMENT WILL TAKE EFFECT FROM 1 4 2008 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2008 09 AND SUBSEQUENT ASSE SSMENT YEARS. . . . ~ 13. IT IS OBVIOUS THAT ONCE THE CIRCULAR IS ISSUED FOR THE BENEFIT OF THE DEPARTMENT . IT IS BINDING ON ALL AUTHORITIES UNDER THE INCOME TAX ACT, 1961, AS PROVIDED IN SECTION 116, AS HELD BY THE C ONSTITUTION BENCH OF . THE HON 'BLE SUPREME COURT OF INDIA IN THE CASE OF ANJUIN MOHAMMAD GHASSWALA, REPORTED IN 252 ITR 1 . . ' T.' 14. IN SUCH A SCENARIO, WHEN THEBOARDDTSELF HAS ' CLARMED I THAT THE ' . ' . . . . : ., ............. ' ': - ';: - . :' ................................ .... '':''. :. - , \ . . .. . COOPERATIVE BANKS SHALLALSO ENJOY THE SAMEBENEFITSAS ' THAT OF. SCHED I R LED . . BANKS, THE ISSUE AND CONTROVERSY GETS ECLIPSED . 15 . WE , THEREFORE , . SUSTAIN THE ORDER OF THE CIT(A) AND CONSEQUENTIALLY REJECT THE GROUND TAKEN BY THE DEPARTMENT . 7 ITA NOS. 316, 317 & 318/NAG/2014 6. HAVING PERUSED THE ORDERS AS REFERRED HEREIN ABOVE AND AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES, WE HEREBY HOLD THAT IN A SITUATION WHEN THE RESPECTED COORDINATE BENCH HAS APPROVED THE VERDICT OF LEARNED CIT(APPEALS) IN A PARALLEL CASE (SUPRA) IN WHICH THE IMPUGNED ORDERS OF LEARNED CIT(APPEALS) NOW BEFORE US WAS VERBATIM REPRODUCED AND THE RELIEF WAS GRANTED, THEREFORE, WE FIND NO OCCASION OR REASON TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE VIEW EXPRESSED BY THE COORDINATE BENCH. FINALLY THE OUTCOME OF THE ABOVE DISCUSSION IS THAT THE ORDER PASSED BY THE LEARNED CIT(APPEALS) IS HEREBY SUSTAINED AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH D AY OF SEPT., 2015. SD/ SD/ (SHAMIM YAHYA) (MUKUL K. SHRAWAT) (ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 24 TH SEPT. 2015. 8 ITA NOS. 316, 317 & 318/NAG/2014 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE