SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA, MUMBAI V. ADDL CIT RG 3(3), MUMBAI

ITA 4046/MUM/2011

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9711 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R MANJULATHA SWAMY
• Keywords: Maximum Marginal Rate; Earning of tax free income; Bad and doubtful debts; Procedural lapse; Revised return; Reassessment proceedings
• Section: 37(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 4046/M UM/20 11 ( ASSESSMENT YEAR : 2005 - 06 ) ITA NO. 5878/M UM/20 13 ( ASSESSMENT YEAR : 2009 - 10 ) ITA NO. 3292/M UM/20 14 ( ASSESSMENT YEAR : 2 010 - 11 ) ITA NO. 3379/M UM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA SIDBI, 4 TH FLOOR, CORPORATE ACCOUNTS DEPARTMENT, MSME DEVELOPMENT CENTRE C - 11, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 051 VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 3(3) MUMBAI PAN/GIR NO. AABCS3480N APPELLANT ) .. RESPONDENT ) ITA NO. 2342 /M UM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) ITA NO. 4218/M UM/20 11 ( ASSESSMENT YEAR : 2005 - 06 ) DCIT, CIR 3(3)(2) MUMBAI VS. M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA MSME DEVELOPMENT CENTRE C - 11, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 051 PAN/GIR NO. AABCS3480N APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RAKESH JOSHI REVENUE BY SHRI R. MANJULATHA SWAMY DATE OF HEARING 24 / 07 /201 8 DATE OF PRONOUNCEMENT 25/09 /201 8 ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 2 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 7, MUMBAI DATED 10/03/2011 F OR A.Y. 2005 - 06, 2009 - 10, 2010 - 11 & 2011 - 12 IN THE MATTER OF ORDER PASSED U/S. 143( 3) OF THE IT ACT. 2. AT THE OUTSET, LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2004 - 05, 2006 - 07, 2007 - 08 & 2008 - 09 DATED 2 3/03/2018, WHEREIN MOST OF THE ISSUES WERE EITHER COVERED IN FAVOUR OF THE ASSESSEE OR AGAINST ASSESSEE . 3. WE HAD CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER PASSED BY TRIBUNAL IN ASSESSEES OWN CASE . IN THE A.Y.200 5 - 0 6 , AO HAS DISALLOWED DEDUCTION OF BAD DEBTS WRITTEN OFF U/S 36(1)(VII) OVER AND ABOVE 108,38,37,780 / - CLAIMED BY THE ASSESSEE SINCE THE AGGREGATE AMOUNT OF BAD DEBTS WRITTEN OFF AS IRRECOVERABLE IN ACCOUNTS OF THE ASSESSEE IN THE PY 2004 - 05 WAS RS 240,77,67,89 7 / - 4. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE CLAIMED BAD DEBT OF RS. 108.38 ( RS.240.78 CR. - 132.39 CR) , HOWEVER AO IN PARA 3.7 ON PAGE 6 OF HIS ORDER DISALLOWED THE SAME ON THE PLEA THAT INCOME OF THE ASSESSEE WAS NOT TA XABLE UPTO A Y 2002 - 03 AND THE B AD DEBT CLAIMED PERTAINS TO INCOME OFFERED PRIOR TO A Y 2002 - 03, HENCE ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 3 DEDUCTION NOT ALLOWABLE. BEFORE C1T(A) ASSESSEE PLEADED THAT ENTIRE AMOUNT OF RS. 2 40.78 CR SHOU LD BE ALLOWED AS BAD DEBT WITHOUT REDUCING PROVISION ALLOWED U/S 36(1)(VIIA)(C) OF RS. 132.39 C RORE AS THERE IS NO OPENING CREDIT BALANCE IN THE PROVISION ACCOUNT. HOWEVER LD CIT (A) IN PARA 2 ON PAGE 1 DEALING WITH THIS ISSUE ALLOWED A SUM OF RS. 108.38 CR ORE ONLY AS CLAIMED BY THE ASSESSEE IN THE ROI . 6. WE FOUND THAT ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2004 - 05 IN ITA NO.7143/MUM/2008. RELEVANT FINDING ARE AT PARA 27 AND 28, PAGE 19 OF THE ORDER WHICH READS AS UNDER: - 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE MAIN GRIEVANCE OF THE LEARNED D.R. AS PROJECTED IN HIS ARGUMENT IS REGARDING OPPORTUNITY TO THE AO. IN THIS REGARD, WE FIND THAT THE GROUNDS OF APPEAL OF THE REVENUE PROJECT THE GRIEVANCE O F THE REVENUE ONLY WITH REGARD TO THE FACT THAT THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME AND THEREFORE CANNOT BE ENTERTAINED. IN THIS REGARD, WE FIND THAT THE CIT(A) HAS RELIED ON CIRCULAR NO. 14 OF 11.4.1955 OF CBDT WHICH SAYS THAT OFFICERS OF THE D EPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS AND GUIDE THE ASSESSEE OF ANY RIGHTS AVAILABLE TO HIM IN LAW. IN OUR VIEW IT IS ALSO IN CONSONANCE WITH THE PRINCIPLE THAT THERE SHALL BE NO TAX WITHOUT THE AUTHORITY OF LAW. IF IN LAW AN ASSESSEE IS NOT LIABLE TO BE TAXED ON A PARTICULAR INCOME, THE SAME CANNOT BE FOISTED ON THE ASSESSEE BECAUSE OF PROCEDURAL LAPSES. THE ASSESSMENT AND OTHER PROCEEDINGS UNDER THE ACT ARE FOR DETERMINATION OF CORRECT TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. KEEPING THE ABOVE SPIRIT IN MIND, IN OUR VIEW THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AND THE REASONS GIVEN BY THE CIT(A) FOR DOING SO, IN OUR VIEW ARE ACCEPTABLE AND WE AGREE WITH THE SAME. 28. EVEN ON MERITS OF T HE CLAIM OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE SAME DESERVES TO BE ACCEPTED. THE RELEVANT PROVISIONS UNDER WHICH THE DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE ARE AS FOLLOWS: 36. OTHER DEDUCTIONS. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING C LAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 4 (VII) SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR: PROVIDED THAT IN THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREO F EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE ; (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY - FA) A SCHEDULED BANK NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A CO UNTRY OUTSIDE INDIA OR A NON - SCHEDULED BANK, AN AMOUNT NOT EXCEEDING FIVE PER CENT, OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT, OF THE . AGGREGATE AVERAGE ADVANCES M ADE BY THE RURAL BRANCHES OF , SUCH BANK COMPUTED IN THE PRESCRIBED MANNER : FROM A READING OF THE AFORESAID PROVISIONS, IT WOULD BE CLEAR THAT THE ASSESSEE IS THUS ENTITLED TO CLAIM DEDUCTION BOTH UNDER SEC.36(L)(VII) AND SEC,36(L)(VIIA) OF THE ACT. TH E ONLY LIMITATION IS THAT THE AMOUNT OF DEDUCTION SHALL NOT EXCEED THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT. IN THE PRESENT CASE THERE IS NO DISPUTE THAT PROVISIONS OF SEC. 36(L)(VIIA) APPLIES TO THE ASSESSEE AND ALSO THE FACT THE AMOUNT OF DEDUCTION RELATING TO BAD DEBTS WRITTEN OFF IS LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT. IN T HE CASE OF THE ASSESSEE THERE IS NO DISPUTE THAT THERE WAS NO CREDIT BALANCE IN THE PROVISION ACCOUNT AND THEREFORE WHOLE OF THE BAD DEBTS WRITTEN OFF WOULD IN EFFECT BE IN EXCESS OF THE CREDIT BALANCE (WHICH IS NIL) IN PROVISIONS ACCOUNT. THEREFORE THE WH OLE OF THE BAD DEBTS WRITTEN OFF WOULD BE DEDUCTIBLE U/S.36(L)(VII) OF THE ACT. THE FACT THAT THIS SUM HAS BEEN OMITTED TO BE CLAIMED IN THE RETURN OF INCOME HAS BEEN AMPLY DEMONSTRATED BY THE ASSESSEE. EVEN IN THE REASSESSMENT PROCEEDINGS THE AO HAS NO AN SWER TO THE CLAIM OF THE ASSESSEE IN THIS REGARD AND HAS MERELY OBSERVED IN HIS ORDER THAT THERE IS NO EVIDENCE PRODUCED BY THE ASSESSEE. THE BOOK ENTRIES AND THE RETURN OF INCOME BEFORE THE AO ARE ENOUGH EVIDENCE TO COME TO THE CONCLUSION THAT THE AMOUNT IN QUESTION WAS NOT CLAIMED IN THE RETURN OF INCOME THOUGH THE ASSESSEE COULD HAVE CLAIMED IT LEGITIMATELY. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE GROUND RAISED BY THE REVENUE. CONSEQUENTLY, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED AND THE ORDER OF CIT(A) IN THIS REGARD IS UPHELD. ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 5 7. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. WE OBSERVE THAT THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, AS DISCUSSED BY THE TRIBUNAL IN ASS ESSEES OWN CASE FOR THE A.Y.2004 - 05, RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY MERIT IN THE ORDER OF CIT(A). 8 . NEXT GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF RS.7,38,28,855/ - U/S.14A. 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND TH AT ASSESSEE HAS DISALLOWED A SUM OF RS. 7.38 CRORE U/S 14A. AO FURTHER DISALLOWED PROPORTIONATE EXPENSES IN THE RATIO OF DIVIDEND AND INTEREST INCOME TO TOTAL RECEIPT OF RS. 5.21 CRORE AS MENTIONED IN PARA 4.5 ON PAGE 9 OF HIS OR DER. BEFORE CIT(A) A SSESSEE PLEADED THAT AMOUNT DISALLOWED BY ASSESSEE IN THE COMPUTATION AND FURTHER DISALLOWANCE BY AO IS NOT AS PER PROVISIONS OF LAW, HENCE DISALLOWANCE SHOULD BE RESTRICTED TO RS. 50 LAKHS AGAINST THE TOTAL EXEMPT INCOME OF RS. 22.37 CRORE. HOWEVER CIT (A) DELET ED FURTHER ADDITION BY THE AO ONLY IN PARA 3.2 ON PAGE 3 OF HIS ORDER AND NOT FOLLOWED HIS EARLIER ORDER. 10 . WE FOUND THAT ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE A.Y.2004 - 05, RELEVANT FINDING OF THE TRIBUNAL ARE AT PARA 9 PAGE 8. 1 1 . THE FA CTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2004 - 05 , WE DIRECT THE AO TO ESTIMATE 5% OF THE ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 6 DIVIDEND INCOME MADE AS EXPENDITURE TO BE DISALLOWED U/S .14A OF THE IT ACT. WE DIRECT ACCORDINGLY. 1 2 . IN THE RESULT, GROUND RAISED BY ASSESSEE IS ALLOWED IN PART. 13. NEXT GRIEVANCE OF ASSESSEE RELATES TO ACTION OF CIT(A) IN UPHOLDING DISALLOWANCE OF RS.60,79,783/ - BEING PROPORTIONATE AMOUNT OF LEASE PREMIUM P AID TO MMRDA. THIS ISSUE IS DEALT BY AO AT PARA 5.5 AND CIT(A) AT PARA 4. 14. WE FOUND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ITS ORDER FOR A.Y.2004 - 05 AFTER HAVING THE DETAILED OBSERVATION AT PARA 5 . HOWEVER IN A Y 2006 - 07 (I TA NO 4047 / MUM/2011 ) ITAT DIRECTED THE A O TO APPLY THE DE CISIO N OF HC AS IT REACHES FINALITY AS MENTIONED ON PARA 15 ON PAGE 12 OF THE ITAT ORDER FOR AY 2 006 - 07 . 15 . LEARNED AR SUBMITTED THAT ASSESSEE HAS FILED APPEAL IN THE HIGH COURT AGAINST THIS IS SUE. NECESSARY FORM U/S.158A HAS ALSO BEEN FILED. ACCORDINGLY, WE DIRECT THE AO TO FOLLOW THE DECISION OF THE HIGH COURT ON THIS ISSUE IN ALL THE YEARS UNDER CONSIDERATION. 16 . ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWING DEDUCTION FOR CONTRIBUTION TO CGTMS E AMOUNTING TO RS.49,07,25,000/ - . WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE HAS MADE CONTRIBUTION TO CREDIT GUARANTEE FUND TRUST FOR MICRO & SMALL ENTERPRISES. HOWEVER, THE SAID CLAIM WAS NOT MADE IN ROI AND THE ISSUE WAS FIRST RAISED BEFORE CIT(A), HENCE THERE IS NO FINDING IN AO ORDER. ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 7 17 . WE FOUND THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL FOR A.Y. 2004 - 05 WHEREIN THE MATTER WAS SET ASIDE TO THE AO WITH A DIRECTION TO VERIFY THE CLAIM OF THE A SSESSEE AFTER GIVING THE OPPORTUNITY . AO IN THE ORDER PASSED GIVING EFFECT HAS ALLOWED THE SAID CLAIM OF THE ASSESSEE. 1 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF ITAT FOR THE A.Y.2006 - 07 IN ITA NO.40 47/MUM/2011. THE PRECISE OBSERVATION OF THE TRIBUNAL AT PARA 20 AT PAGE 15 WHICH READS AS UNDER: - 20. INSOFAR AS GROUND OF APPEAL NO. 3 IS CONCERNED, THE SAME RELATES TO ASSESSEE'S CLAIM FOR DEDUCTION OF A SUM OF RS.50 CRORES REPRESENTING CONTRIBUTION TO CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES, WHICH HAS BEEN DISALLOWED BY THE LOWER AUTHORITIES. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE SAID CLAIM WAS NOT MADE IN THE RETURN OF INCOME, BUT IT WAS MADE IN THE COURSE OF ASSESSMEN T PROCEEDINGS THROUGH A REVISED COMPUTATION OF INCOME. THE ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN PARA 7 OF THE ASSESSMENT ORDER. FIRSTLY, THE ASSESSING OFFICER FOUND THAT THE AMOUNT WAS NOT DEBITED IN THE PROFIT & LOSS ACCOUNT; SECONDLY, HE NOTED TH AT THE CONTRIBUTION MADE TO CREDIT GUARANTEE FUND TRUST COULD NOT BE TAKEN AS AN EXPENDITURE INCURRED IN THE COURSE OF NORMAL BUSINESS ACTIVITY OF THE ASSESSEE BECAUSE THE IMPUGNED CONTRIBUTION WAS ON ACCOUNT OF DIRECTIONS FROM THE GOVERNMENT; THIRDLY, ACC ORDING TO HIM, THE CLAIM COULD NOT BE ENTERTAINED AT THIS STAGE INASMUCH AS THE SAME WAS NOT MADE BY WAY OF A REVISED RETURN OF INCOME. WHEN THE MATTER WAS CARRIED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A), IT WAS CANVASSED THAT IT WAS ONLY OUT OF INADVE RTENCE THAT THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME. ACCORDING TO THE ASSESSEE, IT WAS A FINANCIAL INSTITUTION SET - UP UNDER THE SIDBI ACT, 1989 FOR PROMOTION AND DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES AND IN PURSUANCE TO THAT, IT MADE CO NTRIBUTION TO THE IMPUGNED TRUST, WHICH WAS SET - UP BY THE GOVERNMENT OF INDIA AND THE ASSESSEE JOINTLY. THE ASSESSEE ALSO ASSERTED THAT IT WOULD MAKE NO DIFFERENCE TO THE CLAIM FOR DEDUCIBILITY U/S 37(1) OF THE ACT IF THE AMOUNT WAS NOT DEBITED TO THE PROF IT & LOSS ACCOUNT AND THAT, IN ANY CASE, THE SAID AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 AND IN SUCH A YEAR, NO DEDUCTION WAS CLAIMED BY THE ASSESSEE. ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 8 21. THE CIT(A) HAS PROCEEDED TO AF FIRM THE ACTION OF THE ASSESSING OFFICER PRIMARILY ON THE GROUND THAT IT WAS A FRESH CLAIM, NOT MADE THROUGH THE RETURN OF INCOME; AND, IT WAS ALSO NOT SHOWN AS AN EXPENDITURE BY WAY OF A DEBIT IN THE PROFIT & LOSS ACCOUNT. AGAINST SUCH A DECISION, ASSESSE E IS IN FURTHER APPEAL BEFORE US. 22. THE LEARNED REPRESENTATIVE POINTED OUT THAT SIMILAR CLAIM CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2004 - 05 VIDE ITA NOS. 7143 & 6771/MUM/2008 DATED 15.02.2012. IN ASSESSMENT YEAR 2004 - 05, THE S AID CLAIM WAS ADMITTED AS AN ADDITIONAL GROUND OF APPEAL AND THE MATTER WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE LEARNED REPRESENTATIVE POINTED OUT THAT IN THE ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL PASSED BY THE ASSESSING OFFI CER ON 01.06.2012, COPY OF WHICH HAS BEEN PLACED AT PAGE 277 OF THE PAPER BOOK, SUCH A CLAIM HAS BEEN ACCEPTED AND ALLOWED BY THE ASSESSING OFFICER. EVEN IN THE SUBSEQUENT YEARS FROM ASSESSMENT YEAR 2008 - 09 ONWARDS, THE SAID CLAIM IS BEING ALLOWED BY THE A SSESSING AUTHORITY ITSELF. IN THIS MANNER, THE ASSESSEE HAS SOUGHT TO JUSTIFY ITS CLAIM FOR DEDUCTION OF THE SAID EXPENDITURE. 23. ON THE OTHER HAND, THE ID. DR HAS DEFENDED THE ORDERS OF THE AUTHORITIES BELOW ON THIS ASPECT. 24. WE HAVE CAREFULLY CONSID ERED THE RIVAL SUBMISSIONS. OSTENSIBLY, THE CLAIM FOR DEDUCTION OF CONTRIBUTION MADE TO CREDIT GUARANTEE FUND TRUST WAS NOT MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED. SO, HOWEVER, IT IS NOT A CASE WHERE THE ASSESSING OFFICER WAS NOT AWARE OF THE C LAIM INASMUCH AS THE CLAIM WAS INDEED SET - UP IN THE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF. THUS, IT IS NOT A CASE WHERE THE ASSESSING OFFICER DID NOT HAVE AN OPPORTUNITY TO EXAMINE THE CLAIM PUT FORTH BY THE ASSESSEE. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE REFERRED TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS C/T, 284 ITR 323 (SC) TO POINT OUT THAT A FRESH CLAIM COULD NOT HAVE BEEN ENTERTAINED OTHERWISE THAN BY FILING A REVISED RETURN OF INCOME. PERTINE NTLY, THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. (SUPRA) DOES NOT SEEK TO DISENTITLE AN APPELLATE AUTHORITY TO ADMIT A FRESH CLAIM PROVIDED IT INVOLVES A POINT OF LAW, AND THE RELEVANT FACTS ARE AVAILABLE ON RECORD. CONSID ERED IN THIS LIGHT, SO FAR AS THE INSTANT CASE IS CONCERNED, NOT ONLY WERE THE RELEVANT FACTS AVAILABLE AT THE TIME OF THE APPELLATE PROCEEDINGS BEFORE THE GT(A), BUT WERE ALSO BEFORE THE ASSESSING OFFICER AT THE STAGE OF ASSESSMENT ITSELF. THEREFORE, IN O UR VIEW, THE LOWER AUTHORITIES HAVE ERRED IN NOT ENTERTAINING THE CLAIM OF THE ASSESSEE UNDER A MISCONCEPTION. BEFORE US, ASSESSEE HAS REFERRED TO THE POSITION IN ASSESSMENT YEAR 2004 - 05 WHERE SIMILAR CLAIM STANDS ACCEPTED BY THE ASSESSI NG OFFICER HIMSELF IN THE ORDER ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 9 PASSED U/S 250 OF THE ACT DATED 01.06.2012 (SUPRA). THEREFORE, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND ENOUGH JUSTIFICATION TO ACCEPT THE PLEA OF THE ASSESSEE FOR ALLOWING DEDUCTIO N OF RS.50 CRORES REPRESENTING CONTRIBUTION MADE TO CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES. ACCORDINGLY, ORDER OF THE CIT(A) IS SET - ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM, AS ABOVE. THUS, ASSESSEE SUCCEEDS ON T HIS ASPECT. 19 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT THE AO TO ALLOW DEDUCTION FOR CONTRIBUTION TO CGTMSE. WE DIRECT ACCORDINGLY. 2 0 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. 2 1. IN ITA NO.4218/MUM/2011, REVENUE IS AGGRIEVED FOR DELETING THE DISALLOWANCE TOWARDS BAD DEBTS OF RS.240,77,67,897/ - IN THE A.Y.2005 - 06. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT CI T(A) HAS DELETED THE ADDITION ON ACCOUNT OF BAD DEBTS BY FOLLOWING THE DECISION OF THE ITAT FOR A.Y.2002 - 03 & 2003 - 04, THE CIT(A) HAS ELABORATELY DEALT WITH THE ISSUE AT PAGE 2 PARA 2.1. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CA SE FOR THE A.Y.2002 - 03 AND 2003 - 04, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 22 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. A.Y.2009 - 10: 23. GROUND NO.1 RELATES TO UPHOLDING DISALLOWANCE OF RS.60,79,783/ - BEING PROPORTIONATE A MOUNT OF LEASE PREMIUM. SIMILAR ISSUE HAS BEEN ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 10 DEALT BY US HEREINABOVE IN THE A.Y.2005 - 06 IN PARA 10 & 11, FOLLOWING THE SAME REASONING WE DIRECT THE AO ACCORDINGLY. 24. GROUND NO.2 RELATES TO REDUCING THE PROVISION OF BAD AND DOUBTFUL DEBTS ALLOWABLE UNDE R THE PROVISO TO SECTION 36(1)(VIIA). AS DISCUSSED IN THE A.Y.2005 - 06 IN PARA 5,6 & 7, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL, FOLLOWING THE SAME REASONING AS GIVEN HEREINABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AU THORITIES. 25. GROUND NO.3 RELATES TO CONFIRMING THE DISALLOWANCE OF RS.3,20,55,569/ - BY INVOKING RULE 8D AS AGAINST RS.41,68,214/ - DETERMINED BY THE ASSESSEE. 26. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO WHICH ASSESSEE IS IN FURTHER A PPEAL BEFORE US. 27. IT WAS CONTENDED BY LEARNED AR THAT NECESSARY SATISFACTION CONTEMPLATED U/S.14A(2) OF THE ACT HAS NOT BEEN RECORDED BY THE AO BEFORE APPLYING RULE 8D(2)(III) OF THE RULES TO CALCULATE THE DISALLOWANCE U/S.14A OF THE ACT. AS PER LEARNED AR, RECORDING OF SATISFACTION U/S.14A(2) IS MANDATORY AND THAT APPLICATION OF RULE 8D(2)(III) IS NOT AUTOMATIC FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S.14A OF THE ACT. LEARNED AR ALSO RELIED ON THE ORDER OF THE TRIBUNAL FOR THE A.Y.2008 - 09 WHEREIN AD DITION SO MADE BY THE AO WAS DELETED BY THE TRIBUNAL AFTER RECORDING A FINDING TO THE EFFECT THAT NO SATISFACTION WAS RECORDED AS CONTEMPLATED U/S.14A(2). ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 11 28. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW AND FOUND THAT AO HAS NOT ACCEPTED THE DISALLOWANCE OFFERED BY THE ASSESSEE AND AFTER INVOKING RULE 8D COMPUT ED THE DISALLOWANCE. HOWEVER, THERE IS NO CLARITY WITH REGARD TO THE SATISFACTION OF AO AS TO THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RESPEC T OF SUCH EXPENDITURE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, VIS - - VIS, DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE A.Y.2008 - 09, WE RESTORE THIS MATTER BACK TO THE FILE OF THE CIT(A) FOR DECIDING AFRESH KEEPING IN VIEW THE ORDER OF THE TRIBUNAL IN A.Y.2008 - 09 VIS - - VIS FINDING OF AO WHILE INVOKING PROVISIONS OF SECTION 14A(2). WE DIRECT ACCORDINGLY. 29. GROUND NO.1, 4 & 5 RELATES TO MAKING ADDITION OF RS.92,22,90,905/ - BY IN VOKING PROVISIONS OF SECTION 41(1). 30. WE HAVE CONSIDERED RIVAL CONTENTIONS. GROUND NO 4 & 5 RELATES TO TAXABILITY OF WRITE BACK OF IRDF CLAIM U/S 41 OF THE I T ACT. FROM THE RECORD WE FOUND THAT AN AMOUNT OF RS. 236,48,93,308/ - BEING BALANCE IN INTERES T RATE DIFFERENTIAL FUND (IRDF) HAS BEEN WRITTEN BACK TO P & L ACCOUNT. OUT OF THE SAID AMOUNT AN AMOUNT OF RS. 92,22,90,9057 - PERTAINS TO INTEREST EXPENDITURE INCURRED PRIOR TO A Y 2002 - 03 FOR WHICH PERIOD THE ASSESSEE BANK WAS EXEMPT FROM PAYMENT OF TAXE S ON ITS INCOME IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF THE ASSESSEE VIDE ITA NO. 673 OF 2012 DATED 12.9.2012 WHERE IT WAS ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 12 HELD THAT THE INCOME OF THE ASSESSEE WAS EXEMPT UPTO ASSESSMENT YEAR 2002 - 03, THE SAME WAS CLAIMED AS DED UCTION FROM TAXABLE INCOME DURING THE YEAR UNDER CONSIDERATION. ASSESSMENT YEAR 2002 - 03 IN VIEW OF SECTION 50 OF SIDBI ACT. THIS AMOUNT BEING NOT BEEN CLAIMED AND ALLOWED AS DEDUCTION IN THE ASSESSMENT FOR ANY YEAR PRIOR TO ASSESSMENT YEAR 2002 - 03, THE SAM E WAS CLAIMED AS DEDUCTION FROM TAXABLE INCOME DURING THE YEAR UNDER CONSIDERATION. 31 . ITAT IN THE ASSESSEE'S OWN CASE FOR AY 2003 - 04 VIDE ORDER ITA NO. 4044/MUM/2011 DATED 15/09/2017 DEALING WITH THE SIMILAR SITUATION HELD AS UNDER: '9. WE HAVE CONSIDE RED THE RIVAL SUBMISSIONS. SEC. 41(4) OF THE ACT PRESCRIBES THAT WHERE A DEDUCTION HAS BEEN ALLOWED IN RESPECT OF A BAD DEBT OR PART THEREOF UNDER THE PROVISIONS OF SEC. 36(1)(VII) OF THE ACT, THEN, IF THE AMOUNT IS SUBSEQUENTLY RECOVERED, SUCH AMOUNT IS L IABLE TO BE TAXED AS INCOME OF THE YEAR IN WHICH IT IS RECOVERED. IN THE INSTANT CASE, THE ASSESSING OFFICER SOUGHT TO TAX A SUM OF RS.2,15,03,988/ - AS THE SAME REPRESENTED 'RECOVERY OF BAD DEBT'. IN THIS CONTEXT, AT THE TIME OF HEARING, THE LEARNED REPRES ENTATIVE FOR THE ASSESSEE HAD REFERRED TO NOTE NO. 33 ANNEXED TO THE RETURN OF INCOME ORIGINALLY FILED BY THE ASSESSEE U/S 139(1) OF THE ACT, WHICH READS AS UNDER : - '33. THE ASSESSEE COMPANY SUBMITS THAT THE BAD DEBTS RECOVERED AMOUNTING TO RS.2,15,03,988 PERTAINS TO CLAIMS WHICH WERE NOT CLAIMED AS DEDUCTION U/S 36(1)(VII). HENCE SAME ARE NOT LIABLE TO TAX U/S 41(4). ACCORDINGLY THE AMOUNT HAS BEEN REDUCED FROM THE INCOME' EVEN AT THE TIME OF THE REASSESSMENT PROCEEDINGS, THE ASSESSEE REITERATED THAT THE BAD DEBTS RECOVERED OF RS.2,15,03,9881 - WERE NOT CLAIMED AS DEDUCTION U/S 36(1)(VII) OF THE ACT IN THE PAST AND, THEREFORE, THE SAME COULD NOT BE TAXED U/S 41(4) OF THE ACT. FIE THAT AS IT MAY, AS OF NOW, THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT DATED 12.9.2012 IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2002 - 03 (SUPRA) SUBSISTS, WHICH HAS RULED THAT ANY INCOME, PROFITS AND GAINS RECEIVED BY THE ASSESSEE IS EXEMPT FROM INCOME TAX UPTO ASSESSMENT YEAR 2002 - 03. THE NECESSARY IMPLICATION IS THAT FOR T HE ASSESSMENT YEAR 2002 - 03, NO INCOME HAS BEEN COMPUTED UNDER CHAPTER IV - PART 1 D' PROFITS AND ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 13 GAINS OF BUSINESS OR PROFESSION'; WHICH, INTER - ALIA, CONTAINS SEC. 36(1)(VII) DEALING WITH BAD DEBTS. THUS, IT COULD NOT BE SAID THAT ASSESSEE HAS BEEN ALLOWE D ANY DEDUCTION U/S 36(1)(VII) OF THE ACT ON ACCOUNT OF BAD DEBTS UPTO THE ASSESSMENT YEAR 2002 - 03. THEREFORE, UNDER THESE CIRCUMSTANCES, THE PROVISIONS OF SEC. 41(4) OF THE ACT WOULD NOT BE TRIGGERED IN THIS YEAR QUA THE IMPUGNED SUM OF RS.2,15,03,988/ - IN ASMUCH AS THIS AMOUNT OF 'BAD DEBTS RECOVERED' CAN BE TAXED ONLY IF THE CORRESPONDING AMOUNT HAS BEEN ALLOWED AS DEDUCTION ON AN EARLIER OCCASION. OSTENSIBLY, THAT IS NOT THE CASE HEREIN. THEREFORE, IN OUR VIEW, THERE WAS NO JUSTIFICATION FOR THE INCOME TA X AUTHORITIES TO HAVE ADDED THE SUM OF RS.2,15,03,988/ - U / S 41(4) OF THE ACT. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS.' 3 2 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FOR A .Y.2002 - 03 DATED 15/09/2017. WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR INVOKING PROVISIONS OF SECTION. 41(4) OF THE ACT. WE DIRECT ACCORDINGLY. 3 3 . IN THE RESULT, APPEAL IS ALLOWED IN PART. A.Y.2010 - 11 34 . GROUND NO.1 RELATING TO COMMISSIONER OF INCOME TAX (APPEALS) ACTION IN CONFIRMING THAT THE DEDUCTION ALLOWED IN RESPECT OF PROVISION OF BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA)(C) FOR AY 09 - 10 AMOUNTING TO RS 36,07,44,658/ - HAS TO BE REDUCED FROM CLAIM OF BAD DEBTS WRITTEN OFT AND ALLOWED U.S 36( 1)(VII) FOR AY 2010 - 11 . AS DISCUSSED IN THE A.Y.2005 - 06, ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2004 - 05. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES. ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 14 35 . GROUND NO.2 IS SAME AS DISCUSSED IN THE A.Y.2005 - 06 IN PARA 10 & 11. RESPECTFULLY FOLLOWING THE SAME, AO IS DIRECTED TO FOLLOW DECISION OF HIGH COURT ON THIS ISSUE IN ALL THE YEARS UNDER CONSIDERATION. 36 . GROUND NO.3 RELATES TO DISALLOWANCE MADE UNDER RULE 8D R. W.S.14A(2) AMOUNTING TO RS.3,82,76,919/ - AS AGAINST RS.51,93,486/ - OFFERED BY THE ASSESSEE. WE HAVE ALREADY DISCUSSED THIS GROUND IN THE A.Y.2009 - 10, FOLLOWING THE SAME REASONING WE RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH SIMILAR DIRECTION. 3 7 . IN THE RESULT, APPEAL IS ALLOWED IN PART. A.Y.2011 - 12 38 . GROUND NO.1 RELATING TO DISALLOWANCE OF BAD DEBTS IS AS SAME DISCUSSED IN THE A.Y.2005 - 06 HAVING BEEN COVERED BY THE ORDER OF THE TRIBUNAL FOR A.Y.2004 - 05, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES. 39 . GROUND NO.2 RELATES TO DISALLOWANCE OF PROPORTIONATE LEASE PREMIUM. WE HAVE ALREADY DEALT WITH THIS ISSUE IN THE A.Y.2005 - 06 VIDE PARA NO.10 & 11. AO IS DIRECTED TO FOLLOW THE SAME. 40 . IN THE RESULT APPEAL IS ALLOWED IN PART. I TA NO.2342/MUM/2016 (DEPARTMENT APPEAL) 41 . ONLY GRIEVANCE OF REVENUE RELATES TO DELETING PART OF DISALLOWANCE MADE U/S.14A. IT WAS CONTENTION OF LEARNED AR THAT T HE ISSUES INVOLVED ARE IDENTICAL TO THAT CONSIDERED BY HONBLE MUMBAI TRIBUNAL IN ITA ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 15 NO.5878 /MUM/2013 PERTAINING TO A.Y.2009 - 10 AND THEREFORE , SHALL APPLY MUTATIS MUTANDIS TO THE SAID APPEAL. 42. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT IN THE RETURN OF INCOME, ASSESSEE HAS OFFERED DISALLOWANCE OF RS.46,52,688/ - U/S.14A, HOWEVER, THE A O HAS COMPUTED DISALLOWANCE AT RS.3,63,46,064/ - BY APPLYING RULE 8D. WE FOUND THAT CIT(A) HAS GIVEN AMBIGUOUS FINDING WITH REGARD TO THE DISALLOWANCE U/S.14A WHICH READS AS UNDER: - IN THE INSTANT CASE IT IS NOT THE CASE OF THE APPELLANT THAT IT HAS NOT IN CURRED ANY EXPENSE IN RELATION TO EXEMPT INCOME. IN FACT APPELLANT ITSELF HAS DISALLOWED PROPORTIONATE ESTABLIS HMENT EXPENSES OF RS.46,52,688/ - U/ S. 14A. IT IS THE CONTENTION OF THE APPELLANT THAT ALL THE INVESTMENTS ARE HANDLED FROM ITS HEAD OFFICE IN MUM BAI AND NO INVESTMENT ACTIVITY IS DONE AT ITS BRANCHES. THEY HAVE ACCORDINGLY ALLO C ATED PROPORTIONATE ESTABLIS HMENT EXPENSES OF RS. 46,52,688/ - OUT OF TOTAL ESTABLISHMENT EXPENSES OF RS. 94,41,82,105 / - BASED ON THE HEAD COUNT OF PERSONNEL IN THE INVESTMENT DEPARTMENT TO THE TOTAL NUMBER OF EMPLOYEES. THEREFORE, THE APPELLANT PRAYS THAT THE DISALLOWANCE MADE BY THE ID. AO U.R. 8D BEING EXORBITANTLY HIGH AND UNREASONABLE BE REJECTED. HENCE, THE DISALLOWANCE SHOULD BE RESTRICTED TO RS . 46,52,688/ - WHICH IS RE ASONABLE AND BASED ON SCIENTIFIC WORKING HAVING REGARD TO ITS ACCOUNTS. 43. IT IS NOT CLEAR FROM THE ABOVE FINDING OF CIT(A) THAT WHAT IS THE BASIS FOR DELETION OF ADDITION WORKED OUT BY AO AT RS.3,63,46,064/ - AS AGAINST THE DISALLOWANCE OFFERED BY THE A SSESSEE AT RS.46,52,688 / - . KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE ALSO BACK TO THE FILE OF THE CIT(A) FOR GIVING DEFINITE FINDING AND REASONING FOR DELETING ADDITION WORKED OUT BY AO AT RS.3,63,46,064/ - . WE D IRECT ACCORDINGLY. 44 . IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED IN PART. ITA NO. 4046/MUM/2011 AND OTHER APPEALS M/S. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 16 4 5 . IN THE RESULT, APPEAL S OF ASSESSEE AND REVENUE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 / 09 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 09 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDE NT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//