M/s The Mayurbhanj Central Co-operative Bank Ltd, Cuttack V. ACIT, Balasore

ITA 385/CTK/2012

• Counselvise Citation: 38522114 RSA 2012
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 26-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: A K MOHANTY
• Keywords: Bad and doubtful debts; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 385/CTK/2012 / ASSESSMENT YEAR 2008 - 09 M/S.THE MAYURBHANJ CENTRAL COOPERATIVE BANK LTD., AT/P.O.,BARIPADA PAN: AAAAM 7185 K - - - VERSUS - ASST.COMMISSINER OF INCOME - TAX,BA LASORE CIRCLE, BALASORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.K.MOHANTY, AR / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 23.09.2012 / DATE OF PRONO UNCEMENT: 30.10.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DT.28.3.2012 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09 RA ISING THE FOLLOWING GROUNDS. 1. THE LEARNED CIT(APPEALS) IS UNLAWFUL IN DISALLOWING PROVISION OF 2 , 26 ,255 FOR STANDARD ASSETS AS PER RESERVE BANK OF INDIA MANDATORY GUIDELINES APPLICABLE TO THE ASSESSEE WHICH IS CARRYING BANKING BUSINESS AND HAS COMPLE TELY IGNORED THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE HIM. HENCE THE ADDITION CONFIRMED BY THE CIT(APPEALS) NEED BE DELETED. 2. THE LEARNED CIT(APPEALS) HAS NOT PASSED ANY ORDER ON THE SUBMISSIONS OF THE ASSESSEE TO ALLOW THE DEDUCTION OF THE INCOME I N RESPECT OF WHICH THE TDS HAS BEEN DEDUCTED IN A.Y. 2008 - 09 BUT DEPOSITED DURING A.Y. 2009 - 10. DEFINITE ORDER BE PASSED AS ADMISSIBLE U/S 40(A)(IA) OF THE IT ACT. 2. AT THE TIME OF HEARING, THE LEARNED AR OF THE ASSESSEE DID NOT PRESS GROUND NO.2, AND A S SUCH, THE SAID GROUND IS DISMISSED AS NOT PRESSED. I.T.A.NO. 385/CTK/2012 2 3. APROPOS GROUND NO.1, THE RELEVANT FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 17.12.2008 DECLARING TOTAL INCOME OF 8,26,060. THE CASE WAS SELECTED FOR SCRUTINY AND AFTER ISSUANCE OF NOT ICES U/S.143(2) , THE AO COMPLETED THE ASSESSMENT U/S.143(3) MAKING VARIOUS ADDITIONS INCLUDING 2,26,255 BY WAY OF DISALLOWANCE OF THE CLAIM OF PROVISIONS FOR STANDARD ASSETS HOLDING THE SAME AS NOT PERMISSIBLE EXPENDITURE UNDER THE I.T.ACT MOREOVER THE S AME BEING IN NATURE OF CAPITAL EXPENDITURE. 4 . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A). IT WAS SUBMITTED BY THE ASSESSEE BEFORE HIM THAT THE TOTAL PROVISIONS TOWARDS BAD AND DOUBTFUL DEBTS AS DEBITED TO THE P & L ACCOUNT WAS 9,24,9 9,435 AND THE TOTAL PROVISIONS TOWARDS BAD AND DOUBTFUL DEBTS AS CREDITED TO THE P & L ACCOUNT WAS 10,16,15,892. THE ADDITIONAL PROVISION CREATED AND DEBITED TO THE P & L ACCOUNT UNDER THIS PARTICULAR HEAD IS FULLY ELIGIBLE FOR DEDUCTION IN TERMS OF SECTI ON 36(1)(VIIA) AND THEREFORE, THERE IS NO MERIT IN THE ADDITION OF 2,26,255. THE LEARNED CIT(A) ELABORATING THE MEANING OF PROVISION CITING THE DEFINITION GIVEN IN THE BOOK ACCOUNTANCY AUTHORED BY WILLIAM PICKLES AND FURTHER STATING THAT THE PROVISION S ARE MADE AGAINST ANTICIPATED LOSSES AND CONTINGENCIES AND RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF INDIAN MOLASSES & CO. V. CIT (1959) UPHELD THE DISALLOWANCE OF 2,26,255 AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. W E HAVE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO CONSIDERED THE MATERIAL PLACED ON RECORD. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE PROVISION FOR LOSS ON STANDARD ASSETS IS NOTHING BUT A PROVISION TOW ARDS BAD & DOUBTFUL DEBTS AS IS THE CASE OF SUBSTANDARD AND LOSS ASSETS. IN THE CASE, OF THE STANDARD ASSETS, PROVISION ALLOWED TO BE CREATED AS A PERCENTAGE OF THE OUTSTANDING LOANS & ADVANCES I.T.A.NO. 385/CTK/2012 3 IS MUCH LESS COMPARED TO THAT FOR THE OTHER TYPES OF LOANS & A DVANCES CLASSIFIED AS SUBSTANDARD OR LOSS ASSETS BY THE BANK AS PER THE GUIDELINES OF RBI. IT IS NOT A LIABILITY, MUCH LESS A CONTINGENT OR UNACCRUED ONE. IT IS ONLY A PROVISION FOR LOSS TOWARDS BAD & DOUBTFUL DEBTS, AS PER THE PRUDENTIAL NORMS PRESCRIBED BY RBI FOR THE BANKS, WHICH IS MANDATORY IN NATURE. IN VIEW THEREOF, THE DECISION OF HONBLE APEX COURT IN THE CASE OF INDIAN MOLASSES & CO. V. CIT (SUPRA) WHICH WAS ON DIFFERENT SET OF FACTS IS NOT APPLICABLE TO THE INSTANT CASE OF THE ASSESSEE. WE FIND T HAT IN THE SAID CASE IT HAS BEEN HELD THAT PROVISION FOR CONTINGENT OR UNACCRUED LIABILITY IS NOT ALLOWABLE AS DEDUCTION. THE LEARNED AR OF THE ASSESSEE RELIED ON THE DECISION OF ITAT, AMRITSAR BENCH IN THE CASE OF DCIT V. THE GURDASPUR CENTRAL CO - OP. CIRC LE, PATHANKOT BANK LTD IN ITA NO.99./ASR/2011 DT.7.5.2012 (COPY PLACED IN THE PAPER BOOK) , WHEREIN THE TRIBUNAL HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING DISALLOWANCE UNDER THE HEAD PROVISIONS ON STANDARD ASSETS . THE RELEVANT PORTION OF THAT ORDER I N PARAGRAPH 4 IS QUOTED HEREUNDER : 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED IN CIT(A)S ORDER IN PARA 5 ON PAGES 8 & 9. THE LD. CIT(A) VIDE PARA 7 OF HIS ORDER DELETED THE ADDITION OBSERVING THAT THE AO HA D GIVEN NO REASONS FOR THE DISALLOWANCE OF EXPENSE. THEREAFTER, THE LD. CIT(A) ON THE BASIS OF SUBMISSIONS MADE BEFORE HIM BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE EXPENSE IS DEBITED NOTIONALLY @ 0.1% TO 0.4% OF SUCH ASSETS TO MAINTAIN AND RETAIN ALL S TANDARD ASS ETS, AS PER MASTER CIRCULAR ON INCOME RECOGNITION ASSET CLASSIFICATION, PROVISIONING AND OTHER RELATED MATTERS ISSUED BY THE BANK OF INDIA. HE FURTHER MENTIONED THAT U/S 35A OF THE BANKING REGULATION ACT, 1949, THE RESERVE BANK OF INDIA HAS BEEN EMPOWERED TO ISSUE DIRECTIONS TO ALL THE BANKS AS TO REGULATE THE BANKING BUSINESS IN THE PUBLIC INTEREST OR IN THE INTEREST OF BANKING POLICY. AFTER DISCUSSING WHAT HAS BEEN SUBMITTED BY THE ASSESSEE BEFORE HIM, THE ID. CIT(A) OBSERVED THAT THE I.T.A.NO. 385/CTK/2012 4 ASSESSEE HAD NO OPTION BUT TO CLAIM THE SAME AND THE CLAIM, EVEN IF NOTIONAL, IS EXCLUSIVELY LAID OUT FOR THE PURPOSE OF SMOOTH RUNNING OF BANKING BUSINESS AND THERE IS NO REASON NOT TO ALLOW THE SAME TO THE ASSESSEE. IT IS A STATUTORY CLAIM ALLOWABLE ON THE ANALOG Y OF 30% DEDUCTION ALLOWED IN RESPECT OF INCOME UNDER THE HEAD HOUSE PROPERTY, WITHOUT MAKING IT NECESSARY TO SHOW THE EVIDENCE OF SUCH EXPENSE HAVING BEEN ACTUALLY INCURRED. THE AO HAD FAILED TO APPRECIATE THAT SECTION 36(1)(VIIA) IS AMENDED BY THE FINANCE ACT, 2007 TO INCLUDE CO - OPERATIVE BANKS FOR THE PURPOSE OF OF DEDUCTION UNDER THIS SECTION RETROSPECTIVELY FROM 1ST APRIL, 2007 AND SUBSEQUENT YEARS. THIS AMENDMENT WAS BROUGHT TO GIVE RELIEF TO THE CO - OPERATIVE BANKS WHICH HAVE B EEN WITHDRAWN AS A DEDUCTION UNDER SECTION 80P. REFERRING TO THE RULE 6ABA, IT WAS OBSERVED THAT DEDUCTION UNDER SECTION 36(1)(VIIA) IS A NOTIONAL DEDUCTION, WHICH IS WITHIN THE LIMITS OF THE SAID SECTION. ACCORDINGLY, THE LD. CIT(A) DELETED THE ADDITION. WE FIND THAT THE FACTS OF THE INSTANT CASE BEING SIMILAR WITH THAT OF THE THE GURDASPUR CENTRAL CO - OP. CIRCLE, PATHANKOT BANK LTD (SUPRA) AND FOLLOWING THE DECISION OF THE ITAT, AMIRTSAR, IT MUST BE HELD THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIR MING THE DISALLOWANCE MADE UNDER THE HEAD PROVISIONS ON STANDARD ASSETS AND THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE SUCH DISALLOWANCE AND ALLOW THE CLAIM OF THE ASSESSEE IN THIS REGARD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. S D/ - S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 30.10.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETA RY. I.T.A.NO. 385/CTK/2012 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.THE MAYURBHANJ CENTRAL COOPERATIVE BANK LTD., AT/P.O.,BARIPADA 2 / THE RESPONDENT: ASST.COMMISSINER OF INCOME - T AX,BALASORE CIRCLE, BALASORE 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 03.10.2012 . 2. DATE ON WH ICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03.10.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.10.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..