Assistant Commssioner of Income-tax, V. The Jalgaon District Central Co.op. Bank Ltd.,

ITA 367/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7314 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: SHIRUDE; NITIN ZAWAR
• Keywords: Bad and doubtful debts; Revised return; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 367 /P U N/201 5 / ASSESSMENT YEAR : 20 0 8 - 09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, JALGAON ....... / APPELLANT / V/S. THE JALGAON DISTRICT CENTRAL CO - OP. BANK LTD., 27, RING ROAD, JALGAON 425001 PAN : AAAAJ0225F / RESPONDENT ASSESSEE BY : S /S HRI M.R. SHIRUDE & NITIN ZAWAR REVENUE BY : MS. NIRUPAMA KOTRU / DATE OF HEARING : 23 - 08 - 2017 / DATE OF PRONOUNCEMENT : 11 - 10 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK DATED 27 - 01 - 2015 FOR THE ASSESSMENT YEAR 2008 - 09. 2 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A CO - OPERATIVE BANK. THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 29 - 09 - 2009 DECLARING TOTAL INCOME AS NIL. THE INCOME RETURNED BY THE ASSESSEE WAS ACCEPTED BY ASSESSING OFFICER VIDE ORDER DATED 11 - 10 - 2010 PASSED U/S. 143(3) O F THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT ). THEREAFTER , ASSESSMENT WAS REOPENED AND NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 18 - 03 - 2013. IN REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S. 36(1 )(VIIA) OF THE ACT , RS.53.33 CRORES. THE ASSESSING OFFICER HELD THAT COMPUTATION OF DEDUCTION U/S. 36(1)(VIIA) BY THE ASSESSEE IS NOT AS PER THE PROVISIONS OF SAID SECTION READ WITH RULE 6AB OF THE INCOME TAX RULES, 1962. AGGRIEVED BY THE ASSESSMENT OR DER DATED 12 - 03 - 2014 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY FOLLOWING THE ORDER OF HYDERABAD BENCH OF TRIBUNAL IN THE CASE OF NIZAMABAD DISTRICT CO OPERATIVE CENTRAL BANK LTD. VS. INCOME TAX OFFICER IN ITA NOS. 905 & 906/H/2013 FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 DECIDED ON 10 - 12 - 2014 ACCEPTED THE CONTENTION OF ASSESSEE AND DELETED THE SAID ADDITION. NOW, THE REVENUE IS IN APPEAL BEFORE THE TRI BUNAL ASSAILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM U/S. 36(1)(VIIA) OF THE ACT. 3. MS. NIRUPAMA KOTRU REPRESENTING THE DEPARTMENT SUBMITTE D THAT THE DOCUMENTS ON RECORD SHOW THAT THE ASSESSEE HAS CLAIMED NPA TO THE 3 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 TUNE OF RS.53.33 CRORES U/S. 36(1)(VIIA) OF THE ACT. THE ASSESSEE WHILE WORKING AGGREGATE AVERAGE RURAL ADVANCES HAS NOT FOLLOWED THE PROVISIONS OF RULES 6ABA OF THE INCOME TAX R ULES. THE LD. DR REITERATING THE CONTENTS OF STATEMENT OF FACTS SUBMITTED THAT THE RURAL ADVANCES AS PER ASSESSEES FINANCIAL STATEMENT ARE TO THE TUNE OF RS.15965.098 LACS AND 10% THEREOF COMES TO RS.15.96 CRORES. THE SAID AMOUNT IS OUTSTANDING RURAL AG GREGATE ADVANCES FOR THE FINANCIAL YEAR 2007 - 08 I.E. PERIOD RELEVANT TO THE ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAS ALREADY TAKEN THE BENEFIT OF SECTION 36(1)(VIIA) IN RESPECT OF SAID RURAL ADVANCES IN ASSESSMENT YEAR 2007 - 08. HENCE, THE ASSESSEE CANNO T TAKE THE BENEFIT OF SAME OUTSTANDING RURAL ADVANCES DURING ASSESSMENT YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2008 - 09. THE MANNER IN WHICH THE ASSESSEE HAS COMPUTED DEDUCTION U/S. 36(1)(VIIA) AMOUNTS TO DOUBLE DEDUCTION. THE LD. DR PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORING THE ADDITION MADE BY ASSESSING OFFICER IN RESPECT OF ASSESSEES CLAIM OF DEDUCTION U/S. 36(1)(VIIA) OF THE ACT. IN SUPPORT OF HIS SUBMISSIONS THE LD. DR PLACED RELIANCE ON THE DECISION OF CHENNAI BENCH OF TRIBUNAL IN THE CASE OF INDIAN OVERSEAS BANK VS. DY. COMMISSIONER OF INCOME TAX IN ITA NOS. 496 & 497/MDS/2015 FOR ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 DECIDED ON 23 - 02 - 2016. 4. ON THE OTHER HAND SHRI M.R. SHIRUDE APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD FURNISHED DETAILS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) EXPLAINING THE MANNER IN WHICH DEDUC TION U/S. 36(1)(VIIA) W AS COMPUTED. 4 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 THE COMMISSIONER OF INCOME TAX (APPEALS) SOUGHT REMAND REPORT. AFTER ANALYZING THE FACTS OF THE CASE AND THE DECISION OF TRIBUNAL IN THE CASE OF NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. VS. INCOME TAX OFFICER ( SUPRA), THE FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION. 4.1 THE LD. AR SUBMITTED THAT THE ASSESSEE IS MAINTAINING DETAILS OF MONTHLY ADVANCES IN ACCORDANCE WITH RULES 6ABA AND CBDT INSTRUCTION NO. 17/2008, DATED 26 - 11 - 2008. 5. W E HAVE HEARD TH E SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED THE DECISIONS AND CBDT INSTRUCTION ON WHICH BOTH THE SIDES HAVE PLACED RELIANCE. THE ONLY ISSUE IN PRESENT APPEAL IS TH E MANNER OF COMPUTATION OF DEDUCTION CLAIMED BY ASSESSEE U/S. 36(1)(VIIA) OF THE ACT. THE ASSESSEE HAS WORKED DEDUCTION ON AGGREGATE AVERAGE RURAL ADVANCES AT THE END OF EACH MONTH, WHEREAS , THE REVENUE INTENDS TO COMPUTE DEDUCTION U/S. 36(1)(VIIA) BY TAK ING THE AMOUNT OF ADVANCES GIVEN DURING THE MONTH. 6. THE MANNER IN WHICH AVERAGE ADVANCES MADE BY RURAL BRANCHES OF A SCHEDULED BANK ARE TO BE COMPUTED IS GIVEN IN RULE 6ABA OF THE INCOME TAX RULES. THE RELEVANT EXTRACT OF THE RULES ARE REPRODUCED HERE - IN - BELOW : FOR THE PURPOSES OF CLAUSE (VIIA) OF SUB - SECTION (1) OF SECTION 36, THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF A SCHEDULED BANK SHALL BE COMPUTED IN THE FOLLOWING MANNER, NAMELY: - 5 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 (A) THE AMOUNTS OF ADVANCES MADE BY EACH RURAL BRANCH AS OUTSTANDING AT THE END OF THE LAST DAY OF EACH MONTH COMPRISED IN THE PREVIOUS YEAR SHALL BE AGGREGATED SEPARATELY; (B) THE SUM SO ARRIVED AT IN THE CASE OF EACH SUCH BRANCH SHALL BE DIVIDED BY THE NUMBER OF MONTHS FOR WHICH THE OUTSTANDING ADVANCES HAVE BEEN TAKEN INTO ACCOUNT FOR THE PURPOSES OF CLAUSE (A) ; (C) THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESPECT OF EACH OF THE RURAL BRANCHES SHALL BE THE AGGREGATE AVERAGE ADVANCES MADE BY THE RU RAL BRANCHES OF THE SCHEDULED BANK. THE CBDT VIDE INSTRUCTION NO. 17/2008 DATED 26 - 11 - 2008 HAS FURTHER CLARIFIED THAT BENEFIT U/S. 36(1)(VIIA) HAS TO BE COMPUTED BY TAKING AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF BANK. THE RELEVANT EXTRAC T OF CBDT INSTRUCTION IN THIS REGARD READ AS UNDER : ( III) SECTION 36(2)(VIIA) (A) OF THE ACT PROVIDES THAT IN RESPECT OF ANY PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF THE TYPE REFERRED TO IN THAT SUB - CLAUSE MADE BY A BANK, AN AMOUNT NOT EXCEEDING 5 PERCEN T UPTO 31ST MARCH 2003 AND THEREAFTER 7.5. PERCENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA OF THE ACT) AND AN AMOUNT NOT EXCEEDING 10 PERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES' OF SUCH BANKS COMPUTED IN THE MANNER PRESCRIBED UNDER THE INCOME TAX RULES, 1962, SHALL BE ALLOWED AS DEDUCTION. FOR THIS PURPOSE (A) TOTAL INCOME OF THE YEAR SHOULD BE WORKED OUT AFTER ADJUSTING BROUGHT FORWARD LOSSES, IF ANY, BUT BEFORE MAKING ANY DEDUCTIONS UNDER CHAPTER VI A OF THE ACT. (B) THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PROVISION ACTUALLY CREATED IN THE BOOKS OF THE ASSESSEE IN THE RELEVANT YEAR OR THE AMOUNT CALCULATED AS PER PR OVISIONS OF SECTION 36(1)(VIIA), WHICHEVER IS LESS. (C) FOR WORKING OUT THE AGGREGATE AVERAGE ADVANCES BY RURAL BRANCHES, THE ASSESSING OFFICER SHOULD VERIFY WHETHER THE BRANCH (ES) IN QUESTION ACTUALLY QUALIFY TO BE CATEGORIZED AS RURAL BRANCHES' AS PER THE DEFINITION IN 6 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 EXPLANATION (IA) BELOW SECTION 36(1)(VIIA). THE AGGREGATE AVERAGE ADVANCES OF SUCH RURAL BRANCHES SHOULD THEREAFTER BE COMPUTED IN ACCORDANCE WITH RULE 6ABA OF IT. RULES, 1962. THUS, FROM A BARE PERUSAL OF RULE 6ABA AND CBDT INSTRUCTIONS IT IS UNAMBIGUOUSLY CLEAR THAT OUTSTANDING AMOUNT OF ADVANCES BY RURAL BRANCHES OF THE BANK AT THE END OF EACH MONTH HAS TO BE COMPUTED ON AGGREGATED AVERAGE ADVANCES AND NOT ADVANCES OF THE MO NTH. 7. WE FURTHER FIND SUPPORT FROM THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. VS. INCOME TAX OFFICER (SUPRA) WHEREIN IT HAS BEEN HELD THAT 10% OF AGGREGATE AVERAGE ADVANCES HAS TO BE WORKED ON ENTIRE OUTSTANDING ADVANCES AND NOT THE ADVANCES OF THAT MONTH ALONE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REPRODUCED RELEVANT EXTRACT OF THE SAID ORDER OF TRIBUNAL , F OR THE SAKE OF BREVITY AND TO AVOID REPETITION WE ARE NOT REPRODUCING THE SAME AGAIN. THE LD. DR HAS RELIED ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN OVERSEAS BANK VS. DY. COMMISSIONER OF INCOME TAX (SUPRA). WE FIND THAT THE ISSUE RAISED IN SAID APPEAL IS WITH RESPECT TO DEDUCTION AVAILABLE U/S . 36(1)(VII) VIS - - VIS SECTION 36(1)(VIIA). THUS, THE DECISION RENDERED IN THE SAID CASE WOULD NOT APPLY IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE LD. DR HAS NOT PLACED ON RECORD ANY OTHER JUDGMENT CONTRARY TO THE DECISION RENDERED IN THE C ASE OF NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. VS. INCOME TAX OFFICER (SUPRA). IT IS NOT THE CASE OF REVENUE THAT THE ASSESSEE WHILE COMPUTING AGGREGATE AVERAGE ADVANCES BY RURAL BRANCHES HAS INCLUDED ADVANCES BY THE BRANCHES WHICH DO NOT QUALIFY TO BE CATEGORIZED AS RURAL 7 ITA NO . 367/PUN/2015, A.Y. 2008 - 09 BRANCHES. THUS, IN VIEW OF THE FACTS OF THE CASE, WE FIND NO REASON TO INTERFERE WITH THE WELL REASONED FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 11 TH DAY OF OCTOBER, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 11 TH OCTOBER, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. / THE CIT - 2, NASHIK 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE