M/S Vikramaditya Nagrik Sahakari Bank Maryadit, Ujjain V. THE ACIT, Ujjain

ITA 36/IND/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2291 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MOURYA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Bad and doubtful debts
• Section: 28

Judgement Text

VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, HONBLE JUDICIAL MEMBER AND SHRI MANISH BORAD, HONBLE ACCOUNTANT MEM BER ITA NO. 36/IND/2017 A.Y. 2013-14 VIKRAMADITYA NAGRIK SAHKARI BANK MARYADIT UJJAIN ::: APPELLANT VS ACIT UJJAIN ::: RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI R.P. MOURYA DATE OF HEARING 6.3.2018 DATE OF PRONOUNCEMENT 2 0 .3.2018 O R D E R PER SHRI MANISH BORAD, AM THIS APPEAL OF THE ASSESSEE RELATING TO THE ASSESSMENT YEAR 2013-14 IS DIRECTED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS), UJJAIN, DATE D 11.11.2016 WHICH IS ARISING OUT OF THE ORDER U/S 143 (3) OF VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 2 THE INCOME TAX ACT (IN SHORT REFERRED AS ACT) ACT DATED 9.12.2015 FRAMED BY THE ITO, CIRCLE 1(1), UJJAIN. 2. BRIEFLY STATED, THE FACTS OF THE CASE, AS CULLED OUT FROM RECORD, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS. THE RETURN OF INCOME WAS FILED ON 30.9.2013 DECLARING INCOME AT RS.1,72,18,260 /-. CASE SELECTED FOR SCRUTINY THROUGH CASS. NOTICES U/S 142(1)( AND 143(2) OF THE ACT WERE SERVED ON THE ASSE SSEE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE UNDER THE HEAD CONTINGENCY PROVIS ION FOR STANDARD ASSETS AT RS. 2,00,000/- U/S 36(1)(VIIA) OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT UNDE R THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT THE ASSE SSEE CAN CLAIM PROVISION FOR BAD AND DOUBTFUL DEBTS AND NOT FOR THE CONTINGENCY FOR STANDARD ASSETS AND ACCORDINGLY DISALLOWE D THE PROVISION FOR STANDARD ASSETS AT RS. 2 LACS ASSESSING THE INCOME AT RS.1,74,18,260/-. AGGRIEVED, THE ASSESS EE VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 3 PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TA X (APPEALS) BUT THE COMMISSIONER OF INCOME TAX (APPEALS ) ALSO HELD THAT CONTINGENCY PROVISION HAS BEEN MADE FOR PERFORMING ASSETS AND NOT FOR BAD AND DOUBTFUL DEBTS THEREBY DISMISSING THE APPEAL OF THE ASSESSEE. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS NOT CLAIME D ANY OTHER EXPENDITURE UNDER THE HEAD PROVISION FOR B AD AND DOUBTFUL DEBTS AND ONLY AN AMOUNT OF RS.2 LACS HAS BEEN CLAIMED AS CONTINGENCY PROVISION FOR STANDARD ASS ETS WHICH ACTUALLY IS PROVISION FOR BAD AND DOUBTFUL DEBTS ONLY. HE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SE CTION 36(I)(VIIA) OF THE ACT THE ASSESSEE IS ENTITLED TO PR OVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF 7.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VIA AND UNDER THIS CLAUSE AND, THEREFORE, THE VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 4 CLAIM OF THE ASSESSEE SHOULD HAVE BEEN ALLOWED BY BOTH THE AUTHORITIES BELOW. 5. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ALLEGED PROVISION IS NOT FOR BAD AND DOUBTFUL DEBTS BU T FOR CONTINGENCY OF STANDARD ASSETS WHICH IS NOT COVERED U/ S 36(1)(VIIA) OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE SOLE GRIEVANCE OF THE ASSESSEE REVOLVES AROUND THE DISALLOWANCE OF RS.2 LACS CONFIRMED BY BOTH THE LOWER AUTHORITIES RELATING TO PROVISION FOR CONTINGENCY OF STANDARD ASSETS CLAIMED BY THE ASSESSEE U/S 36(1)(VIIA) OF THE ACT. BEFORE PROCE EDING FURTHER WE WOULD LIKE TO REPRODUCE THE PROVISION OF SECTION 36(1)(VIIA) OF THE ACT AS UNDER :- OTHER DEDUCTIONS. VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 5 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPU TING THE INCOME REFERRED TO IN SECTION 28 XXXX XXXX XXXX (VIIA) 98 IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DE BTS MADE BY (A) A SCHEDULED BANK [NOT BEING A BANK INCORPORATE D BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIE TY OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING 99 [ SEVEN AND ONE-HALF PER CENT ] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND C HAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGA TE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK CO MPUTED IN THE PRESCRIBED MANNER : PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFE RRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION, BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RESPECT OF ANY PROVI SION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUE D BY IT IN THIS BEHALF, FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE AM OUNT OF SUCH ASSETS 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 YEARS COMMENCING O N OR AFTER THE 1ST DAY OF APRIL, 2003 AND ENDING BEFO RE THE 1ST DAY OF APRIL, 2005, THE PROVISIONS OF THE FIRST PROVISO SH ALL HAVE EFFECT AS IF FOR THE WORDS 'FIVE PER CENT', THE WORDS 'TEN PER CENT' HAD BEEN SUBSTITUTED : PROVIDED ALSO THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFER RED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION, BE ALLO WED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPECIFIED IN THE FOREGOING PROVISIONS, FOR AN AMOUNT NOT EXCEEDING THE INCOME DERIVED FROM REDEMP TION OF SECURITIES IN ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL G OVERNMENT: PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UNDER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN TH E RETURN OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION.' VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 6 EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, ' RELEVANT ASSESSMENT YEARS' MEANS THE FIVE CONSECUTIVE ASSESS MENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2000 A ND ENDING BEFORE THE 1ST DAY OF APRIL, 2005 7. ON PERUSAL OF THE ABOVE PROVISION AND IN THE GIVEN FACTS OF THE CASE, WHEREIN THE ASSESSEE, WHICH IS A COOPERATI VE BANK CARRYING ON BANKING BUSINESS, WE FIND THAT THE ASSESSEE IS ELIGIBLE TO CLAIM PROVISION FOR BAD AND DO UBTFUL DEBTS TO THE EXTENT OF 7.5% OF THE TOTAL INCOME BEF ORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND UNDER CHAPTER VIA. FURTHER IN THE PROFIT AND LOSS ACCOUNT EXCEPT FOR THE ALLEGED PROVISION FOR RS. 2 LACS, NO OTHER PROVISION FOR BAD AND DOUBTFUL DEBTS HAS BEEN CLAIMED. WE FIND F ORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASS ESSEE THAT THE PHRASE CONTINGENCY PROVISION FOR STANDARD ASS ETS IS BASICALLY A PROVISION FOR BAD AND DOUBTFUL DEBTS ONLY WHICH IS IN GENERAL A REGULAR FEATURE OF THE BANKING BUSINESS. IT IS ALSO PERTINENT TO MENTION THAT EVEN THOUGH THE ASSESSEE WAS ELIGIBLE TO CLAIM MUCH HIGHER AMOUNT AS VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 7 AN EXPENDITURE OF PROVISION FOR BAD AND DOUBTFUL DEB TS, IT ONLY CLAIMED RS. 2 LACS. WE, THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ARE OF THE OPINION THAT IN T HE INSTANT APPEAL THE CONTINGENCY PROVISION FOR STANDARD ASSETS IS BASICALLY IN THE NATURE OF BAD AND DOUBTFUL DEB TS ONLY AND THE ASSESSEE HAS RIGHTLY CLAIMED THE EXPENDITU RE U/S 36(1)(VIIA) OF THE ACT. WE, THEREFORE, ALLOW THE SOLE GROUND RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLO WED. PRONOUNCED IN OPEN COURT ON 20 MARCH, 2018. SD/- SD/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER 20 MARCH, 2018 DN/- COPY TO APPELLANT/RESPODENT/PR.CIT/CIT(A)/DR/GUAR D FILE BY ORDER PRIVATE SECRETARY VIKRAMADITYA NAGRIK SAHKARI ITA NO. 36/IND/2017 8