M/s.The Thodupuzha Urban Co-op Bank Ltd, Thodupuzha V. The ITO, Thodupuzha

ITA 451/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96761 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: V SATYANARAYANAN
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NOS. 451 TO 454/COCH/2015 ASSESSMENT YEARS : 2007-08 TO 2010-11 M/S. THE THODUPUZHA URBAN CO- OPRATIVE BANK LTD., THODUPUZHA P.O., THODUPUZHA-685 584. [PAN: AAAAT 4225D] VS. THE INCOME TAX OFFICER, WARD-1, THODUPUZHA. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI V. SATYANARAYANAN, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 15/10/2015 DATE OF PRONOUNCEMENT 16/10/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THESE FOUR APPEALS OF THE ASSESSEE ARISE FROM THE DIFFERENT ORDERS OF THE LD. CIT(A) - III, KOCHI EACH DATED 30-06-2015 FOR THE ASSESSMENT YEARS 2007-08 TO 2010- 11 . 2. SINCE THE GROUNDS IN MOST OF THE APPEALS ARE COMMON, THEY ARE BEING TAKEN UP TOGETHER BY THIS COMMON CONSOLIDATED ORDER. I.T.A. NOS.451-454/COCH/2015 2 3. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTE D A CHART SHOWING IDENTICAL GROUNDS IN THE SAID APPEALS WHICH FOR THE SAKE OF C ONVENIENCE IS REPRODUCED HEREINBELOW: GROUND AY 2007-08 AY 2008-09 AY 2009-10 AY 2010-11 1. WHETHER CIT(A) IS RIGHT IN LAW IN RECKONING THE POPULATION OF RURAL AREA WITH REFERENCE TO A VILLAGE, FOR COMPUTING DEDUCTION UNDER SECTION 36(1)(VIIA) GROUND NO. 1 GROUND NO. 2 GROUND NO. 1 GROUND NO. 1 2. WHETHER CIT(A) IS RIGHT IN LAW IN NOT ALLOWING DEDUCTION OF EMPLOYERS CONTRIBUTION TO PENSION FUND GROUND NO.2 GROUND NO.1 GROUND NO.2 GROUND NO.2 3. WHETHER THE APPELLANT BANK HAS CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS - - - GROUND NO.3 4. WHETHER CIT(A) IS RIGHT IN NOT ALLOWING THE DEDUCTION UNDER SECTION 36(1)(VIII) - - GROUND NO.3 - 5. GENERAL GROUND NO.3 GROUND NO.3 GROUND NO.4 GROUND NO.4 4. AS REGARDS ISSUE NO. 1 RELATING TO GROUND N O.1, GROUND NO.2, GROUND NO. 1 AND GROUND NO. 1 FOR THE ASSESSMENT YEARS 2007-08 TO 20 10-11 RESPECTIVELY, THE ISSUE IN ALL THE APPEALS IS WHETHER THE CIT(A) IS RIGHT IN R ECKONING THE POPULATION OF RURAL AREA WITH REFERENCE TO A VILLAGE FOR COMPUTING DEDUCTION UNDER SECTION 36(1)(VIIA). I.T.A. NOS.451-454/COCH/2015 3 5. THE BRIEF FACTS OF THE CASE IN ALL THE APPEAL S ARE THAT THE ASSESSEE-BANK HAS FIVE BRANCHES AT KARIMANOOR, ELAMDESON, VANNAPURAM, MANAK AD AND MUTTAM GRAMA PANCHAYAT AREAS. THE ASSESSEE CLAIMED DEDUCTION UN DER SECTION 36(1)(VIIA) OF THE ACT WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND T HE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE CONCEDED T HAT THE ISSUE IS COVERED AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF LORD KRISHNA BANK LIMITED VS. CIT IN I.T.A. NO. 234 OF 2009 WHICH HAS BEEN CLEARLY DEALT WITH BY THE LD. CIT(A). HERE, WE CONSIDER IT FIT TO REPRODUCE THE FINDINGS OF THE LD. CIT(A) WHICH IS IDENTICAL TO ALL OTHER YEARS AS WELL FOR THE SAKE OF CONVENIENCE. 5.6 IN THE IMPUGNED ORDER, THE ASSESSING OFFICER HAS STATED THAT THE 5 BRANCHES AT KARIMANOOR, ELAMDESOM, VANNAPURAM, MANAKAD AND MU TTAM ARE AT GRAMA PANCHAYAT AREAS. HOWEVER IN THE REMAND REPORT DATE D 22/08/2011, THE ASSESSING OFFICER HAS REPORTED THAT THE POPULATION IN KARIMAN OOR, ELAMDESOM, VANNAPURAM, MANAKAD AND MUTTAM HAD EXCEEDED 10,000 AS PER 2001 CENSUS REPORT AND THEREFORE THE BRANCHES OF THE BANK IN THESE VILLAGE S CANNOT BE TREATED AS RURAL BRANCHES. COPY OF THE REMAND REPORT HAD BEEN PROVI DED TO THE APPELLANT AND IN THE REPLY TO THE REMAND REPORT DATED 29/05/2013, TH E APPELLANT HAS NOT OFFERED ANY EXPLANATION TO THE ASSESSING OFFICERS COMMENTS ON THE RURAL BRANCHES. HOWEVER, SUBSEQUENTLY IN THE ARGUMENT NOTE DATED 14 /10/2014, IT WAS ARGUED BY THE APPELLANT THAT THE POPULATION OF THE WARD OF PA NCHAYAT IN WHICH THE BRANCHES ARE SITUATED IS LESS THAN 10,000 AND THEREFORE THEY HAVE TO BE TREATED AS RURAL BRANCHES ONLY. THE RELEVANT PORTION OF THE ARGUMEN T NOT OF THE APPELLANT DATED 14/10/2014 IS REPRODUCED HEREIN FOR THE SAKE OF CLA RITY: I.T.A. NOS.451-454/COCH/2015 4 THE BANK HAS 8 BRANCHES AS ON 31.03.2010 AND THE B ANK CLASSIFIED FIVE BRANCHES AS RURAL VIZ. MANAKKAD, MUTTOM, KARIMANNOO R, VANNAPPURAM & ELAMDESOM. ALL THESE PLACES ARE FELLING UNDER PANCH AYAT ONLY. THE POPULATION OF THE WARD OF THE PANCHAYAT IN WHICH THE AFORESAID 5 BRANCHES ARE SITUATED IS LESS THAN 10,000 ACCORDING TO THE FIGURES PUBLISHED BY THE LATEST CENSUS. THE ACTIVITIES OF THESE BRANCHES ARE ALSO CONFINED TO T HE LOCAL LIMITS OF THE WARDS. ALL THESE PLACES ARE RURAL INDEED WITHOUT ANY SIGNS OR TRACES OF URBANIZATION. EACH PANCHAYAT CONSISTS OF MANY PLACES SPREAD OVER A VAS T GEOGRAPHICAL AREA AND HENCE SOME MEANINGFUL INTERPRETATION OF THE WORD P LACE IS TO BE ADOPTED FOR THE PURPOSE OF THIS SECTION. 5.7 THE DEFINITION OF RURAL BRANCHES HAS ALREADY B EEN CLARIFIED BY THE DECISIONS OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF LOR D KRISHNA BANK LIMITED IN I.T.A. 234 OF 2009 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT: THE RURAL BRANCH HAS TO BE ALWAYS IN RURAL AREAS A ND THE PLACE REFERRED CAN EASILY BE TAKEN AS A VILLAGE. SEVERAL WARDS MAY CO ME WITHIN VILLAGE WHERE IT CAN BE IN CORPORATION, MUNICIPALITY OR PANCHAYAT. THER E CAN BE NO VILLAGE IN A MUNICIPALITY OR CORPORATION AREA WHERE THE POPULATI ON IS LESS THAN 10,000. SO MUCH SO, RURAL BRANCHES ARE SUCH OF THE BRANCHES LO CATED IN A VILLAGE WHERE THE POPULATION IN THE VILLAGE IS LESS THAN 10,000. THEREFORE THE AFORESAID FIVE BRANCHES CANNOT B E TREATED AS RURAL BRANCHES FOR THE PURPOSE OF DEDUCTION U/S. 36(1)(VIIA) OF THE I. T. ACT. 5.8 THE ISSUE REGARDING THE ELIGIBILITY TO CLAIM D EDUCTION U/S. 36(1)(VIIA) IN RESPECT OF RURAL BRANCHES HAS BEEN DECIDED IN FAVOUR OF THE DEPARTMENT BY THE HONBLE ITAT, COCHIN BENCH IN THE CASE OF KANNUR DISTRICT C O-OPERATIVE BANK VS. ACIT IN I.T.A. NO.323/COCH/2010 DATED 23/03/2012. THIS DEC ISION HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT OF KERALA IN THE SAME CASE. 5.9 IN THE ABOVE CIRCUMSTANCES AND ALSO RELYING O N THE DECISIONS OF HONBLE ITAT COCHIN BENCH AND THE HIGH COURT OF KERALA, IT IS HE LD THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S. 36(1)(VIIA) WITH REGARD TO THE 10% OF AGGREGATE AVERAGE ADVANCES OF RURAL BRANCHES CLAIMED BY THE APPELLANT . 5.10. HOWEVER, THE APPELLANT IS ELIGIBLE FOR DEDUCT ION OF 7.5% OF THE TOTAL INCOME AS PER THE PROVISIONS OF SECTION 36(1)(VIIA). THER EFORE, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED THE DEDUCTION U/S. 36(1)(VII A) AND THE SAME HAS TO BE RESTRICTED TO THE EXTENT OF PROVISIONS CREATED AS P ER RBI GUIDELINES AND DEBITED TO THE P&L ACCOUNT. FOR THE PURPOSE OF DEDUCTION U/S . 36(1)(VIIA), THE ENTIRE SUM OF PROVISIONS DEBITED TO THE PROFIT AND LOSS A/C HAS T O BE TAKEN INTO CONSIDERATION. I.T.A. NOS.451-454/COCH/2015 5 THE ASSESSING OFFICERS VIEWS OF CONSIDERING ONLY T HE INCREMENTAL VALUE AND ALSO RESTRICTING TO 50% OF THE INCREMENTAL VALUE OF RS.2 2,27,236/- ARE NOT ACCEPTED. 7. IN VIEW OF THE ABOVE FINDINGS OF THE LD. CI T(A), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR THE SAID ASSESSMENT YEARS WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER AND HAS RIGHTLY REJECTED T HE CLAIM OF THE ASSESSEE. THUS, ISSUE NO. 1 AS DISCUSSED HEREINABOVE IS DISMISSED F OR ALL THE ASSESSMENT YEARS, I.E., 2007-08 TO 2010-11 RESPECTIVELY. 8. AS REGARDS ISSUE NO. 2 RELATING TO GROUND NO . 2, GROUND NO. 1, GROUND NO. 2 AND GROUND NO. 2 FOR THE ASSESSMENT YEARS 2007-08 T O 2010-11 RESPECTIVELY, THE ISSUE IN ALL THE APPEALS IS WHETHER THE LD. CIT(A) IS RIGHT IN LAW IN NOT ALLOWING DEDUCTION OF EMPLOYERS CONTRIBUTION TO PENSION FUN D. 9. THE BRIEF FACTS OF THE CASE IN ALL THE YEARS IS THAT THE ASSESSEE HAS MADE CONTRIBUTION TO PENSION FUND WHICH IS COVERED BY TH E PROVISIONS OF SECTION 36(1)(IV) OF THE ACT. THE CONTRIBUTION MADE BY THE EMPLOYER TO THE PENSION FUND CANNOT BE ELIGIBLE FOR DEDUCTION. THE RELEVANT PORTION OF 36 (1)(IV) IS REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: (IV) ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER B Y WAY OF CONTRIBUTION TOWARDS A RECOGNIZED PROVIDENT FUND OR AN APPROVED SUPERANNUATION FUND, SUBJECT TO SUCH LIMITS AS MAY BE PRESCRIBED FOR THE PURPOSE OF RECOGNIZING THE PROVIDENT FUND OR APPROVING THE SUPERANNUATION FUND , AS THE CASE MAY BE, AND SUBJECT TO SUCH CONDITIONS AS THE BOARD MAY THINK F IT TO SPECIFY IN CASES WHERE THE CONTRIBUTIONS ARE NOT IN THE NATURE OF ANNUAL C ONTRIBUTION OF FIXED AMOUNTS OR ANNUAL CONTRIBUTION FIXED ON SOME DEFINITE BASIS BY REFERENCE TO THE INCOME I.T.A. NOS.451-454/COCH/2015 6 CHARGEABLE UNDER THE HEAD SALARIES OR TO THE CONT RIBUTIONS OR TO THE NUMBER OF MEMBERS OF THE FUND; 10. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BR OUGHT ON RECORD EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(A) OR EVEN BEFORE US WHETHER THE SAID CONTRIBUTION HAS BEEN MADE TO APPROVED SUPERANNUATI ON FUND OR PENSION FUND. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE SAME I S TREATED TO HAVE BEEN CONTRIBUTED TO THE NON-APPROVED SUPERANNUATION FUND OR PENSION FUND AND THEREFORE, THE ASSESSEE IS NOT ENTITLED TO THE SAID DEDUCTION. AC CORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY CONFIRMED T HE ACTION OF THE ASSESSING OFFICER. THUS, ISSUE NO. 2 AS DISCUSSED HEREINABOVE IS DISMI SSED FOR ALL THE ASSESSMENT YEARS, I.E., 2007-08 TO 2010-11. 11 . AS REGARDS ISSUE NO. 3 RELATING TO GROUND NO. 2, GR OUND NO. 1, GROUND NO. 2 AND GROUND NO. 3 FOR THE ASSESSMENT YEARS 2007-08 T O 2010-11 RESPECTIVELY, THE ISSUE WHETHER THE ASSESSEE-BANK HAS CREATED PROVISI ON FOR BAD AND DOUBTFUL DEBTS, HAS BEEN WITHDRAWN BY THE LD. COUNSEL FOR THE ASSES SEE AND NOT PRESSED AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED FOR ALL THE ASSESSMENT YEARS, I.E., 2007-08 TO 2010-11. 12. AS REGARDS ISSUE NO. 4 RELATING TO GROUND N O. 2, GROUND NO.1, GROUND NO.3 AND GROUND NO. 3 FOR THE ASSESSMENT YEARS 2007-08 T O 2010-11 RESPECTIVELY , THE I.T.A. NOS.451-454/COCH/2015 7 ISSUE IS WHETHER THE LD. CIT(A) IS RIGHT IN NOT ALL OWING THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. 13. THE LD. COUNSEL FOR THE ASSESSEE ARGUED TH AT IT IS WITH REGARD TO DEDUCTION OF INFRASTRUCTURAL ADVANCES. HE FAIRLY CONCEDED THAT HE DID NOT CLAIM THE SAME BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) HAD DISMIS SED THE SAME SINCE IT WAS NOT RAISED BEFORE THE LD. CIT(A). 14. HOWEVER, THE LD. DR INVITED OUR ATTENTION TO THE OR DER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2009-10 AND SUBMITTED THAT THIS NOT THE FACT OF THE CASE. THE LD. CIT(A) HAS DECIDED THE ISSUE ON MERITS. THE ARGU MENTS OF THE LD. AR ARE AGAINST THE FACTS OF THE CASE AS EVIDENT FROM PARA 10.2 OF THE ORDER OF THE LD. CIT(A). 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE FACTS OF THE CASE. PARA 10.2 OF THE ORDER OF THE LD. CIT(A) FOR THE ASSESSM ENT YEAR 2009-10 IS VERY RELEVANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHICH IS REPRODUCED HEREINBELOW FOR THE SAKE OF CONVENIENCE: 10.2 ON PERUSAL OF THE ASSESSMENT ORDER U/S. 143 (3) FOR THE A.Y. 2009-10, IT IS OBSERVED THAT THE ASSESSING OFFICER HAS NOT MADE AN Y MENTION ABOUT THE DISALLOWANCE OF THE DEDUCTION U/S. 36(1)(VIII) AS C LAIMED BY THE APPELLANT. MOREOVER, IN THE WRITTEN SUBMISSIONS FURNISHED ON V ARIOUS DATES DURING THE APPEAL PROCEEDINGS, THE APPELLANT HAS NOT MENTIONED ANYTHI NG ABOUT THE DISALLOWANCE OF DEDUCTION U/S. 36(1)(VIII) OF THE I.T. ACT NOR ANY OTHER DETAIL WAS FURNISHED WITH REGARD TO THE DISALLOWANCE OF SECTION 36(1)(VIII). IN THE ABOVE CIRCUMSTANCES, THE I.T.A. NOS.451-454/COCH/2015 8 CLAIM OF THE APPELLANT IS NOT APPRECIATED AND THIS GROUND OF THE APPELLANT IS HEREBY DISMISSED. 16. FROM THE FACTS AND CIRCUMSTANCES OF THE CAS E AND ARGUMENTS OF THE PARTIES, IT IS CLEAR THAT THERE IS NO CLAIM MADE BEFORE THE ASS ESSING OFFICER. THE LD. CIT(A) HAS DISPOSED OF THE MATTER ON MERITS. IN SUCH CIRCUMST ANCES AND FACTS OF THE CASE, THE PRAYER BY THE LD. COUNSEL FOR THE ASSESSEE TO REMAN D THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH CA NNOT BE ACCEPTABLE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A) WHO HAS RIGHTLY DECIDED THE ISSUE ON MERITS. THUS, ISSUE NO. 4 FOR THE ASSESSM ENT YEARS 2007-08-2010-11 IS DISMISSED. 17. AS REGARDS ISSUE NO. 5 RELATING TO GROUND NO. 3, GROUND NO. 3, GROUND NO.4 AND GROUND NO. 4 FOR THE ASSESSMENT YEARS 2007-08 T O 2010-11 RESPECTIVELY, THEY ARE GENERAL IN NATURE AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 18. IN THE RESULT, APPEALS FILED BY THE ASSES SEE IN I.T.A. NOS. 451-454/COCH/2015 FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-11 RESPECTIVELY ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 16 -10-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 16TH OCTOBER, 2015 I.T.A. NOS.451-454/COCH/2015 9 GJ COPY TO: 1. M/S. THE THODUPUZHA URBAN CO-OPRATIVE BANK LTD. , THODUPUZHA P.O., THODUPUZHA-685 584. 2. THE INCOME TAX OFFICER, WARD-1, THODUPUZHA. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX (EXEMPTION), KOCHI 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN