ASSTT. C.I.T Amravati CIR-, AMRAVATI V. THE AMRAVATI DISTRICT CENTRAL CO OPERATICE BANK LTD., AMRAVATI

ITA 472/NAG/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1538 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Keywords: Bad and doubtful debts

Judgement Text

1 ITA NO. 472/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 472 /NAG/201 4 ASSESSMENT YEAR : 20 11 - 12. ASSTT. COMMISSIONER OF INCOME - TAX, THE AMRAVATI DISTRICT CENTRAL AMRAVATI CIRCLE, AMRAVATI. VS. COOPERATIVE BANK LTD., AMRAVATI. PAN AAAJTO726C APPELLANT. RESPONDENT. APPELLANT BY : SHRI D. RAVI KUMAR. RESPONDENT BY : SHRI K.P. DEWANI. DATE OF HEARING : 28 - 12 - 2015 DATE OF PRONOUNCEMENT : 31 ST DEC., 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 29 - 08 - 2014 AND THE GROUNDS RAISED ARE REPRODUCED BELOW : 1. W HETHER O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(APPEAL) - II, NAGPUR HAS ERRED IN LAW IN TREAT I NG THE PROVISIONS ON NPA OF RS.5,86,64,599J - ALLOWABLE UJS.36(I)(VIIA) OF THE LT . ACT, AS THE PROVISIONS MADE IN THE BOOKS ARE NOT ALLOWABLE AS HELD IN VIEW OF THE DECISION OF SOUTHERN TECHNOLOGIES LTD., VS . JCIT, 187 TAXMAN 346(SC) . 2. WHETHER ON THE F ACTS AND CIRCUMSTANCES OF THE CASE , THE HON ' BLE CIT(A) - II HAS ERRED IN LAW IN TREATING THE PROVISIONS ON NPA OF RS.5,86,64,599 J - ALLOWABLE UJS . 36(I)(VIIA), 10 % OF THE AGGREGATE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANK THOUGH THE ASSESSEE BANK IS NOT A SCHEDULE BANK OR A NON SCHEDULE BANK ELIGIBLE FOR THE SAID DEDUCTION AS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH 2 ITA NO. 472/NAG/2014 RULE 6ABA OF LT. RULES , 1962 . 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HON'BLE CIT(A) - II HAS ERRED IN LAW IN NOT APPRECIATING THE FACT , THAT AS PER CLAUSE (III)(C) OF INSTRUCTION NO.17 OF 2008 , THE DEDUCTION UJ S . 36(I)(VIIA) OF FIRST PROVISO , 10% OF AGGREGATE AVERAGE ADVANCES OF SUCH RURAL BRANCHES OF BANK SHOULD BE IN ACCORDANCE WITH RULE 6ABA , OF LT . RULES , 1962. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HON ' BLE CIT(A) - II HAS ERRED IN LAW IN TREATING TO INCLUDE THE PROVISIONS ON STANDARD ASSETS OF RS.22,41,000J - ALLOWABLE UJS.36(I)(VIIA) OF T HE LT . ACT , AS IT IS NOT AKIN TO BAD AND DOUBTFUL DEBTS AS H ELD IN THE DECIS I ON I N THE CASES OF BHARAT OVERSEAS BANK LTD. VS. CIT(2012) 26 TA X MAN 330 (CHENNAI) AND BHARUCH (2013) 36 TAXMAN 517 (AHMEDABAD - TRIB.) 2. AT THE OUTSET WE HAVE BEEN INFORMED THAT THE ISSUE RAISED NOW STOOD COVERED BY A DECISION OF ITAT, NAGPUR BENCH PRONOUNCED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 TO ASSESSMENT YEAR 2010 - 11 BEARING ITA NOS. 316. 317 & 318/NAG/2014 ORDER DATED 24 TH SEPT., 2015 TITLED AS DCIT VS. AMRAVATI DISTRICT CENTRAL COOPERAT IVE BANK LTD. RELEVANT PORTION IS REPRODUCED BELOW : 2. AT THE OUTSET WE HAVE BEEN INFORMED THAT THE ISSUE AS RAISED BY THE REVENUE DEPARTMENT IN THE ABOVE GROUNDS NOW STOOD COVERED BY A DECISION OF ITAT, NAGPUR PRONOUNCED IN THE CASE OF THE GONDIA DISTRI CT CENTRAL COOPERATIVE BANK LTD. BEARING ITA NOS. 341,342,343&344/NAG/2014 PERTAINING TO THE ASSESSMENT YEARS 2007 - TO 2010 11 ORDER DATED 11 09 2014. 2.1 WE HAVE BEEN INFORMED THAT IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA) T HE CIT(APPEALS) HAS PASSED AN IDENTICALLY WORDED ORDER AS IT WAS PASSED IN THE CASE OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE THE ISSUE OF DISALLOWANCE UNDER SECTION 36(1)(VIIA) WAS DISCUSSED VIDE PARA 8. IT WAS MENTIONED THAT THE ASSESSEE IS A COOPERA TIVE BANK CARRYING ON THE BUSINESS OF BANKING WITHIN THE DISTRICT OF AMRAVATI, MAHARASHTRA. THE ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBT UNDER SECTION 36(1)(VIIA). UNDOUBTEDLY THE SAID PROVISION WAS MADE BY THE ASSESSEE WITHIN THE PRESCRIBE D MONITORY LIMIT AS PER SECTION 36(1)(VIIA) I.E. 7.5% OF THE TOTAL INCOME BEFORE MAKING ANY 3 ITA NO. 472/NAG/2014 DEDUCTION UNDER CHAPTER VI A OF THE ACT AND 10% OF THE AGGREGATE ADVANCES MADE BY THE RURAL BRANCHES COMPUTED IN THE PRESCRIBED MANNER. THE OBJECTION OF THE ASSESS ING OFFICER WAS THAT THE ASSESSEE BANK BEING NEITHER A STATE COOPERATIVE BANK OR A CENTRAL COOPERATIVE BANK OR A PRIMARY COOPERATIVE BANK, THEREFORE, THERE WAS NO QUESTION OF EXTENDING ANY BENEFIT PERTAINING TO THE PROVISION FOR A BAD AND DOUBTFUL DEBT. 3 . WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, VIDE PARA 10 LEARNED CIT(APPEALS) HAD DISCUSSED THE ISSUE AT LENGTH AND AFTER DISCUSSING THE FEW CASE LAWS, CAME TO THE CONCLUSION THAT IN THE LIGHT OF SEVERAL PRECEDENTS A COOPERATIVE BAN K CAN BE SAID TO BE A NON SCHEDULE BANK AND, THEREFORE, ENTITLED FOR THE CLAIM OF BENEFIT UNDER SECTION 36(1)(VIIA). A FINDING WAS RECORDED THAT THE ASSESSEE HAD USED THE TERMINOLOGY RESERVE FOR NPA IN ACCORDANCE WITH THE RBI DIRECTIONS FOR CLAIMING THE BENEFIT UNDER SECTION 36(1)(VIIA). SINCE THE LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA), THEREFORE, THE REVENUE IS IN APPEAL BEFORE US FOR ALL THE YEARS. 4. AN IMPORTANT FACT HAS BEEN BROUGHT TO OUR NOTICE THAT IN A PARALLEL CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. LEARNED CIT(APPEALS) II, NAGPUR VIDE AN ORDER DATED 11 TH MARCH, 2014 IN APPEAL NO. CIT(A) II/502/12 13 HAS VERBATIM FOLLOWED THE ORDER OF THE ASSESSEE PASSED BY LEARNED CIT(APPEALS) AND F INALLY HELD THAT DUE TO THE REASON THAT THE FACTS AND CIRCUMSTANCES WERE IDENTICAL IN THAT CASE WITH THE FACTS OF THE CASE OF THE APPELLANT NOW BEFORE US RELATING TO THE PROVISION MADE FOR BAD AND DOUBTFUL DEBT AND ONCE A VIEW HAS BEEN TAKEN IN FAVOUR O F THE ASSESSEE IN THE CASE OF AMRAVATI DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA), HENCE TO BE ALLOWED ON THE SAME LINES. IN THE PAPER BOOK FILED BEFORE US THE SAID DECISION OF CIT(APPEALS) II, NAGPUR (SUPRA) IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. IS FILED FOR REFERENCE AND WE HAVE NOTED THAT VIDE PARA 8 ON PAGE 13 IT WAS SPECIFICALLY MENTIONED THAT ON IDENTICAL ISSUE A VIEW HAD ALREADY BEEN TAKEN IN THE CASE OF AMRAVATI DISTRICT CENTRAL COOPERATIVE BANK FOR ASSESSMENT YEAR 2008 09 VIDE ORDER DATED 03 03 2004 BY CIT(APPEALS) II, NAGPUR IN APPEAL NO. (CIT(A) II/767/11 12). THEREFORE, BEFORE US IT HAS BEEN DEMONSTRATED THAT THE IMPUGNED ORDER PASSED BY LEARNED CIT(APPEALS), NOW CHALLENGED BEFORE US, WAS REPRODUCED BY AN ANOTH ER FIRST APPELLATE AUTHORITY IN THE CASE OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. 4 ITA NO. 472/NAG/2014 5. FURTHER IT IS NOW DEMONSTRATED THAT THE SAID ORDER OF THE GONDIA DISTRICT CENTRAL COOPERATIVE BANK LTD. WAS CHALLENGED BEFORE THE ITAT, NAGPUR AND THE VIEW TAK EN BY CIT(APPEALS) WAS CONFIRMED. IT IS WORTH TO MENTION THAT WHILE CONFIRMING THE RELIEF GRANTED BY CIT(APPEALS), THE RESPECTED COORDINATE BENCH HAS ALSO REFERRED THE CBDT CIRCULAR AND THEREAFTER ALLOWED THE CLAIM IN THE FOLLOWING MANNER : 13. . . . ' . ;~ . . .. . . . ~ . - ; . .. . . F . \ ., 13 WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. THE ISSUE IS ENTIRELY BASED . ON WHETHER THE ASSESSEE FALLS IN THE AMENDED PROVISION OF SECTION 36( 1 )(VIIA) OR NOT. THIS ISSUE HAS BEEN ANSWERED BY THE BOARD IN THE NOTES & CLAUSES, WHICH READS AS UNDER, SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUB SECTION (1) OF THE SAID SECTION PROVI DES FOR DEDUCTION OF AN AMOUNT NOT EXCEEDING SEVEN AND ONE HALF PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THE SAID CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF A SCHEDULED BANK AS SPECIFIED OR A NON SCHEDULED BANK IN THE COMPUTATION OF INCOME OF SUCH BANKS. THE PROPOSED AMENDMENT SEEKS TO EXTEND THE SAME DEDUCTIONS WHICH ARE AVAILABLE TO A SCHEDULED BANK AND NON SCHEDULED BANK TO A CO OPERATI VE BANK NOT BEING A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE BOARD HAS ALSO ISSUED CIRCULAR NO. 3 OF 2008, WHICH READS AS UNDER: 21.5 THE PROVISIONS HAS ALSO BEEN RESTRUCTURED TO PROVID E FOR DIFFERENT CATEGORIES OF ENTRIES (WHICH NOW ALSO INCLUDES CO OPERATIVE BANKS) AND THEIR RESPECTIVE ACTIVITIES FOR ELIGIBILITY OF THE DEDUCTION UNDER THE SAID CLAUSES. FOR CLAIMING DEDUCTION UNDER THE SAID CLAUSE, (I) A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT OR A FINANCIAL CORPORATION WHICH IS A PUBLIC SECTOR COMPANY OR A BANKING COMPANY OR A CO OPERATIBE BANK (OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK) HAS TO BE ENGAGED TO THE BUSINESS OF PROVIDING LONG TERM FINANCE 5 ITA NO. 472/NAG/2014 IN INDIA FOR INDUSTRIAL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILITY, (II) A HOUSING FINANCE COMPANY HAS TO BE ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR THE CONSTRUCTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES AND (III) ANY OTHER FINANCIAL CORPORATION INCLUDING A PUBLIC COMPANY, HAS TO BE ENGAGED IN THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY I N INDIA. IT MAY BE CLARIFIED THAT A FINANCIAL CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT SHALL INCLUDE SUCH CORPORATION SPECIFIED IN SECTION 4A OF THE COMPANIES ACT SHALL INCLUDE SUCH CORPORATIONS SPECIFIED UNDER SUB SECTION (1) AND UNDER SUB SECTION (2) OF SECTION 4A OF THE COMPANIES ACT. 21.6 THE AMENDMENT MADE BY THE FINANCE ACT, 2007 ALSO PROVIDES DEFINITIONS OF THE EXPRESSIONS BANKING COMPANY, CO OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY, PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, HOUSING FINANCE COMPANY, PUBLIC COMPANY, INFRASTRUCTURE FACILITY AND LONG TERM FINANCE. 21.7 APPLICABILITY THIS AMENDMENT WILL TAKE EFFECT FROM 1 4 2008 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2 008 09 AND SUBSEQUENT ASSESSMENT YEARS. . . . ~ 13. IT IS OBVIOUS THAT ONCE THE CIRCULAR IS ISSUED FOR THE BENEFIT OF THE DEPARTMENT . IT IS BINDING ON ALL AUTHORITIES UNDER THE INCOME TAX ACT, 1961, AS PROVIDED IN SECTION 116, AS HELD BY THE CONSTITUTION BENCH OF . THE HON 'BLE SUPREME COURT OF INDIA IN THE CASE OF ANJUIN MOHAMMAD GHASSWALA, REPORTED IN 252 ITR 1 . . ' T.' 14. IN SUCH A SCENARIO, WHEN THEBOARDDTSELF HAS ' CLARMED I THAT THE ' . ' . . . . : ., ' ': - ';: - . :' '':''. :. - , \ . . .. . COOPERATIVE BANKS SHALLALSO ENJOY THE SAMEBENEFITSAS ' THAT OF. SCHED U LED BANKS, THE ISSUE AND CONTROVERSY GETS ECLIPSED . 15 . WE , THEREFORE , . SUSTAIN THE ORDER OF THE CIT(A) AND CONSEQUENTIALLY REJECT THE GROUND TAKEN BY THE DEPARTMENT . 6 ITA NO. 472/NAG/2014 6. HAVING PERUSED THE ORDERS AS REFERRED HEREIN ABOVE AND AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES, WE HEREBY HOLD THAT IN A SITUATION WHEN THE RESPECTED COORDINATE BENCH HAS APPROVED THE VERDICT OF LEARNED CIT(APPEALS) IN A PARALLEL CASE (SUPRA) IN WHICH THE IMPUGNED ORDERS OF LEARNED CIT(APPEALS) NOW BEFORE US WAS VERBATIM REPRODUCED AND THE RELIEF WAS GRANTED, THEREFORE, WE F IND NO OCCASION OR REASON TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE VIEW EXPRESSED BY THE COORDINATE BENCH. FINALLY THE OUTCOME OF THE ABOVE DISCUSSION IS THAT THE ORDER PASSED BY THE LEARNED CIT(APPEALS) IS HEREBY SUSTAINED AND THE GROUNDS RAISED BY THE RE VENUE ARE DISMISSED. 3. SINCE THE VIEW HAS ALREADY BEEN TAKEN FAVOURING THE CLAIM OF THE ASSESSEE, THEREFORE, ON THE SAME LINES THIS APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. WE HOLD ACCORDINGLY. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF DEC., 2015. SD/ - SD/ - ( SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 31 ST DEC., 2015. COPY FORWARDED TO : 1. THE AMRAVATI DISTRICT CENTRAL COOPERATIVE BANK LTD., IRWIN SQUARE, MORSHI ROAD, AMRAVATI. 2. A.C.I.T., AMRAVATI CIRCLE , AMRAVATI. 3. C.I.T. - NAGPUR. 4. CIT(APPEALS) - II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSI STANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE