ACIT, Alwar V. THE ALWAR CENTRAL COOPERATIVE, Alwar

ITA 434/JPR/2012

• Counselvise Citation: 43423114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Keywords: Gift; Bad and doubtful debts

Judgement Text

ITA NO. 434/JP/2012 ACIT, CIRCLE- 2 VS. T HE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 434/JP/2012 ASSESSMENT YEAR: 2008-09 PAN : AABAT 4891 Q THE ACIT VS. THE ALWAR CENTRAL COOPERATIVE BANK LTD. CIRCLE- 4 HOPE CIRCUS ALWAR ALWAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL, C.A. DEPARTMENT BY: MRS. NEENA JEPH, JCIT DATE OF HEARING: 09-12-2014 DATE OF PRONOUNCEMENT: 09 -01-2015 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), ALWAR DATED 14-12-2012 WHEREIN FOLLOWING GROUNDS ARE RAISED: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL A S ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING DISALLOWANCE / ADDITION TO RS. 1294/- OUT OF TOTAL ADDITION OF RS. 30,00,000/- ON ACCOUNT OF DISALLOWANCE OF THE PROVISION OF THE PR OVISION OF NAP. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISAL LOWANCES / ADDITION OF RS. 2600/-ON ACCOUNT OF GIFT PAID TO T HE EMPLOYEE. ITA NO. 434/JP/2012 ACIT, CIRCLE- 2 VS. T HE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 2 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE DISAL LOWANCES/ ADDITION OF RS. 3,28,401/- ON ACCOUNT OF EXPENSES OF INCENTIVE PAID. 2.1 IN SUPPORT OF REVENUE APPEAL, LD. DR RELIED ON THE ORDER OF THE AO. 3.1 APROPOS GROUND NO. 1, THE LD. COUNSEL FOR THE A SSESSEE CONTENDS THAT THE AO WHILE MAKING THE DISALLOWANCE IN RESPECT OF NPA WAS UNDER MISTAKEN IMPRESSION THAT ITS CLAIM PERTAINED TO ALL OWANCE OF WRITING OFF BAD DEBTS U/S36(1)(VII). WHILE DOING SO, IT WAS NOT APP RECIATED THAT SECTION ASSESSEE BEING A BANK ITS CLAIM WAS NOT U/S 36(1)(V II) THE SAME WAS A CLAIM U/S 36(1)(VIIA). THE LD. CIT(A) AFTER CORRECTLY APP RECIATING THE LEGAL POSITION ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING OBSE RVATIONS. 4.3 I HAVE PERUSED HE ASSESSMENT ORDER AS WELL AS SUBMISSION MADE BY THE A.R. IT APPEARS THAT THE LD. AO HAD THE PROVISION OF SECTION 36(1)(VII) AT THE BACK OF HER MIND WHILE CONSIDERING THE DISALLOWANCE OF DEDUCTION IN RESPEC T OF PROVISION FOR BAD DEBT AND DOUBTFUL DEBTS U/S 36(1)(VIIA). SECTIO N 36(1)(VII) READS SUBJECT TO THE PROVISIONS OF SUB-SECTION 2, THE A MOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECO VERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA ) AND NOT FOR BAD DEBT OR PART THEREOF, U/S 36(1)(VII). FURTHER, THE ASSESSEE HAD CLAIMED DEDUCTION OF PROVISION FOR BAD AND DOUBTFUL DEBTS O NLY W.R.T. 7.5% OF TOTAL INCOME AND NOT WITH REFERENCE TO 10% OF AGGRE GATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. THEREFORE, THE AO WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE HAS FAILED TO PROVE THAT THESE ITA NO. 434/JP/2012 ACIT, CIRCLE- 2 VS. T HE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 3 ADVANCES WERE ACTUALLY MADE BY RURAL BRANCHES AND T HAT THE PROVISIONS OF SECTION 36(2) HAVE NOT BEEN FULFILLED . THE ASSESSEE HAS MADE A PROVISION OF RS. 30 LACS WHEREAS THE ALLOWABLE DEDUCTION AT 7.5% OF TOTAL IN COME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE [36(1 )(VIIA)] AND UNDER CHAPTER VI-A, IS ONLY RS. 29,98,706/-. THEREF ORE, THE DEDUCTION IS TO BE LIMITE4D TO RS. 29,98,706/-. THE AO IS DIR ECTED TO ALLOW DEDUCTION U/S 36(1)(VIIA) OF RS. 29,98,706/- AGAINS T THE CLAIM OF RS. 30 LACS MADE BY THE APPELLANT. AS A RESULT, THE ADDITI ON IS RESTRICTED TO RS. 1294/- 4.1 APROPOS SECOND GROUND, THE LD. AR CONTENDS THAT AMOUNT WAS PAID AS INCENTIVE TO THE WORKERS WHICH HAS BEEN WRONGLY ASS UMED BY THE AO AS GIFT. THE LD. CIT (A) AFTER DUE CONSIDERATION OF FACTS AN D REAL NATURE OF PAYMENTS DELETED THE SAME BY FOLLOWING OBSERVATIONS. 6.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL A S SUBMISSION MADE BY THE A.R. I AM INCLINED TO AGREE WITH SUBMISSION OF THE A.R. THAT THE ABOVE SAID EXPENSES RELATE TO ASS ESSEE'S BUSINESS EXPENSE. THE ADDITION OF RS. 2600/- BEING GIFT TO E MPLOYEES ON RETIREMENT AND PRIZE DISTRIBUTION EXPENSES IS HEREB Y DELETED. 5.1 APROPOS GROUND NO. 3, THE IMPUGNED AMOUNT WAS P AID EX-GRATIA TO THE ASSESSEES MANAGEMENT TO EMPLOYEES ACCORDING TO THEIR WORK IN CONFORMITY WITH GENERAL POLICY OF THE BANK. THE LD. CIT(A) VERIFIED THE FACTS AND FOUND THAT EXPENSES WERE DULY VOUCHED, ACCOUNTE D FOR AND IN CONFORMITY WITH THE GENERAL POLICY OF THE BANK BEI NG INCENTIVE TO INSPIRE THE WORKERS BY FOLLOWING OBSERVATIONS. ITA NO. 434/JP/2012 ACIT, CIRCLE- 2 VS. T HE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 4 7.2 THE A.R. CONTENDED THAT THE COOPERATIVE BANK AS ITS GENERALLY POLICY PAYS SOME AMOUNT AS INCENTIVE TO I TS EMPLOYEES AS TOKEN OF APPRECIATION OF THEIR SERVICES RENDERED TO THE BANK SINCERELY. THE PAYMENT OF RS. 3,28,401/- HAS BEEN MADE TO THE EMPLOYEES BY WAY OF INCENTIVE TO INSPIRE THEM TO PUT THEIR SERVICES MORE SINCERITY AND DILIGENTLY. THE ENTIRE EXPENSES IS FULLY VOUCHED AN D IT IS AN EX-GRATIA PAY TO EMPLOYEES ACCORDING TO THE DECISION TAKEN BY THE MANAGING DIRECTOR OF THE BANK. THE COUNSEL HAS SUBMITTED A C OPY OF ACCOUNT OF THE INCENTIVE TO THE STAFF FROM ITS LEDGER ACCOUNT WHICH SHOWS THAT THE PAYMENT HAS MADE DURING NOV. 2007 TO DEC. 2007. 6.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. APROPOS REVENUE GROUND NO. 1, SECTION 36(1)(VII) IS SUBJECT TO PROVISIONS OF SUB-SECTION 2 WHICH THE AO FAILED TO APPRECIATE AND MISTAKENLY TREATED THE ASSESSEE'S CLAIM AS FOR BAD DEBTS. THE LD. CIT(A) HAS CORRECTLY APPLIED THE LEGAL POSITION AND CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE 36(1)(VIIA) WHEREIN WE FIND NO INFIRMITY IN HIS ORDER AND THE S AME IS UPHELD. 7.1 APROPOS GROUND NO. 2 OF THE REVENUE, THE AMOUNT BEING IN THE NATURE OF INCENTIVE HAS BEEN WRONGLY TREATED AS GIFT BY TH E AO. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE WHICH IS UPHELD. 8.1 APROPOS GROUND NO. 3 OF THE REVENUE, THE AO WAS OF THE VIEW THAT THE EXPENSES DO NOT RELATE TO BANKING BUSINESS AND WAS ADDED TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A) AFTER VERIFICATION OF RECORD FOUND THAT THE AMOUNT IN QUESTION WAS GIVEN BY WAY OF INCENTIVE TO THE EMPLOYEES FOR ITA NO. 434/JP/2012 ACIT, CIRCLE- 2 VS. T HE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 5 PERFORMING THE DUTIES WITH MORE SINCERITY AND DILIG ENTLY DURING THE COURSE OF THE BANKING BUSINESS .IN OUR CONSIDERED VIEW, TH E EXPENDITURE INCURRED BY THE ASSESSEE BANK ON ITS EMPLOYEES IS ATTRIBUTABLE TO BANKING BUSINESS. THUS WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD ON THIS ISSUE. 9.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 -01-2015 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 9 TH JAN 2015 *MISHRA COPY FORWARDED TO:- 1.THE ACIT, CIRCLE- 2, ALWAR 2. THE ALWAR CENTRAL COOPERATIVE BANK LTD. ALWAR 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 434/JP/2012) AR ITAT, JAIPUR