DCIT 1(3)(2), MUMBAI V. THE KAPOL COOP BANK LTD, MUMBAI

ITA 487/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6776 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 21-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH SINGH
• Keywords: Bad and doubtful debts; Corroborative evidences; Revenue expenditure
• Section: 43B

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL H BENCH MUMB AI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 487/MUM/2015 (ASSESSMENT YEAR 2011-12 ) DCIT-1(3)(2) ROOM NO. 564, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS. M/S THE KAPOL CO-OP. BANK LTD. 19/21 KAPOL BANK BUILDING, FIRST FLOOR, PICKET CROSS ROAD, KALBADEVI, MUMBAI-400002 . PAN: AAAAT0142M APPELLANT RESPONDE NT APPELLANT BY : SHRI MANISH SINGH (DR) RESPONDENT BY : SHRI MANDAR VAIDYA (AR) DATE OF HEARING : 21.06.2019 DATE OF PRONOUNCEMEN T : 10.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2 [THE LD. CIT (A)], MUMBAI DATED 20 TH OCTOBER 2014 FOR ASSESSMENT YEAR 2011-12 RAISING T HE FOLLOWING GROUNDS OF APPEAL: I. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING DISALLOWANCE OF RS.6,66,52,645/ - BEING BAD DEBT WRITTEN OFF IGNORING THE FACT THAT PROVISO TO SECTION 36(1)(VII) WAS ATTRACTED TO THE FACTS OF THE CASE, ASSESSEE BEING ELIGIBLE TO DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT?' II. 'WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD.CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION OF R S.6,66,52,645/- BEING BAD DEBT WRITTEN OFF BECAUSE CREDIT BALANCE IN. PRO VISION FOR BAD AND ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 2 DOUBTFUL DEBT ACCOUNT WAS HIGHER AT RS.11,40,24,442 / - WARRANTING DISALLOWANCE OF BAD DEBT UNDER PROVISO TO SECTION 3 6(1)(VII).' III.' 'WHETHER ON FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION OF R S.3,26,86,648/- ON ACCOUNT OF GRATUITY PAYMENT MADE AFTER CLOSE OF THE PREVIOUS YEAR WHEN THE SAID GRATUITY AMOUNT WAS NOT DEBITED TO P&L AI C OF THE PREVIOUS YEAR AND THEREFORE COULD HAVE ONLY BEEN ALLOWED DEDUCTION ON PAYMENT BASIS IN THE SUBSEQUENT ASSESSMENT YEAR.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MULTI-STATE SCHEDULED CO-OP. BANK, FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2011-12 ON 29.09.2011 DECLARING LOSS AT RS. 4,18,452/-. THE RETURN OF INCOME WAS REVISED ON 07.10.2011, DECLARING NIL INCOME. TH E ASSESSING OFFICER WHILE PASSED THE ASSESSMENT ORDER BESIDES T HE OTHER DISALLOWANCES DISALLOWED BAD-DEBTS WRITTEN OFF RS. 7,79,92,836/- AND GRATUITY PAYMENT OF RS. 3,26,86,648/- ON APPEAL BEF ORE THE LD. CIT(A), BOTH THE DISALLOWANCES//ADDITIONS WERE DELETED. THE REFORE, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED T HE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTAT IVE (AR) OF THE ASSESSEE AND GONE THROUGH THE ORDERS OF LOWER AUTHO RITIES WITH THE ASSISTANCE OF REPRESENTATIVE OF THE PARTIES. GROUND NO.1 RELATES TO DISALLOWANCE OF BAD-DEBT WRITTEN OFF. THE LD. DR FO R THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. D R FOR THE REVENUE ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 3 RELIED UPON THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBMITS THAT ASSESSEE HAS DIRECTLY CLAIMED RS. 7,79,92,836/ - AS BAD-DEBT IN THE COMPUTATION OF INCOME. THE ASSESSEE HAS NOT WRITTEN OFF THE SAID AMOUNT IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE N OT CLARIFIED UNDER WHICH PROVISION, THE BAD-DEBT WAS CLAIMED. AS BAD-D EBT WAS NOT WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT, THE SAME WAS NOT ALLOWABLE. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT ASS ESSEE HAS NO RURAL BRANCH AND THE LOGIC ADOPTED BY ASSESSING OFFICER I S NOT APPLICABLE. THE BAD-DEBT WRITTEN OFF CONSISTS OF RS. 6.66 CRORE ADVANCED TO MADHAVPURA MERCANTILE COOPERATIVE BANK LTD. AND OTH ER/ SECOND COMPONENT PERTAINS TO WRITTEN OF 47 INDIVIDUAL DEBT ORS AGGREGATING TO RS. 1.13 CRORE. THE ASSESSEE ADEQUATELY EXPLAINED B EFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LD. CIT(A) ALONG WITH DOCUMENTARY AND SUPPORTING EVIDENCE SHOWING THE STATEMENT OF COMPUT ATION OF INCOME IN ALL EARLIER YEARS PARTICULARLY FROM ASSESSMENT Y EAR 2007-08 ONWARDS. THE ASSESSING OFFICER HAS NOT EXAMINED THE ACCOUNTS OF 47 DEBTORS DESPITE FURNISHING THE COMPLETE DETAILS. AL L THE WRITTEN OFF HAS BEEN DEBITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSEE HAS NO R URAL BRANCH. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 4 DECISION OF HONBLE SUPREME COURT IN CATHOLIC SYRIA N BANK LTD. VS. CIT [2012] 343 ITR 270(SC). 5. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND LD. AR OF THE ASSESSEE AND GONE THROUGH THE ORDERS OF A UTHORITIES BELOW.THE RELEVANT PARTS OF THE SECTIONS 36(1)(VII) AND 36(1)(VIIA) HAVE BEEN REPRODUCED. THE SAID SECTIONS PROVIDE AS UNDER : ' SECTION 36(1)(VII) :- SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), T HE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF A S IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR: [ PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (V IIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT O R PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE]' 6. SECTION 36(1)(VII) OF THE ACT ALLOWS DEDUCTION IN R ESPECT OF ANY BAD DEBT OR PART THEREOF, WHICH IS WRITTEN OFF AS IRREC OVERABLE IN THE ACCOUNTS OF THE ASSESSEE DURING THE PREVIOUS YEAR. THE DEDUCTION IS ONLY SUBJECT TO THE PROVISION OF SECTION 36(2). SEC TION 36(1)(VIIA)(A) OF THE ACT ALLOWS DEDUCTION IN RESPECT OF PROVISION MA DE FOR BAD AND DOUBTFUL DEBTS IN RELATION TO RURAL ADVANCES UP TO THE SPECIFIED LIMIT. 7. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD- DEBT BY TAKING VIEW THAT ENTIRE LIABILITY WORKED OUT BY THE ASSESS EE. THE ASSESSEE HAS NOT CLARIFIED THE ISSUE BUT MERELY CLAIMED THAT ENT IRE AMOUNT HAS BEEN PAID IN APRIL 2011. THE SUBMISSION OF ASSESSEE WAS NOT REPUDIATED BY ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 5 ASSESSING OFFICER IN EXPRESS MANNER. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED WRITTEN SUBMISSION DATED 16.10.2 014 EXPLAINING THE BAD-DEBT WRITTEN OFF OF RS. 1.13 CRORE IN RESPECT O F 47 BORROWED ACCOUNTS AS WELL AS IN RESPECT OF AMOUNT OF RS. 6.6 6 CRORE ADVANCED TO MADHAVPURA MERCANTILE COOPERATIVE BANK LTD. 8. THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION AND THE SUBMISSION OF ASSESSEE PASSED THE FOLLOWING ORDER: 3.5 THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.O. IN THE ASSESSMENT ORDER AND THE CONTENTIONS RAISED BY THE LEARNED AUT HORIZED REPRESENTATIVE OF THE APPELLANT COMPANY DURING THE APPELLATE PROCE EDINGS AS WELL AS THE WRITTEN SUBMISSIONS MADE ARE CONSIDERED. THE CLAIM FOR DEDUCTION MADE BY THE APPELLANT U/S. 36(1)(VII) OF THE ACT, ON ACCOUNT OF BAD DEBTS WRITTEN OFF, HAS TWO C OMPONENTS. THE FIRST ONE IS WITH REGARD TO THE RS. 6,66,52,645/- IN RESP ECT OF AMOUNT ADVANCED TO MADHAVPURA MERCANTILE CO-OP. BANK LTD. THE SECON D COMPONENT PERTAINS TO THE WRITE OFF OF INDIVIDUAL ACCOUNTS OF 47 DEBTORS, AGGREGATING TO RS. 1,13,40,191/-. BOTH THE ISSUES ARE DEALT WIT H AS FOLLOWS: MADHAVPURA MERCANTILE CO-OP. BANK LTD. 3.6. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE PRINCIPAL AMOUNT AND THE OUTSTANDING INTEREST WAS FOUND TO BE IRRECOVERA BLE FROM, MADHAVPURA MERCANTILE CO-OP. BANK LTD. IT IS NOT IN DISPUTE TH AT THE RBI HAD ALSO ADVISED, THE' BANK TO MAKE A FULL PROVISION TOWARDS THE IRRECOVERABLE PRINCIPAL AND INTEREST .AMOUNTS FROM MADHAVPURA MER CANTILE CO-OP. BANK LTD. CONSEQUENTLY, THE APPELLANT HAD TAKEN A DECISI ON TO WRITE OFF THE ENTIRE PRINCIPAL AMOUNT 'AND THE OUTSTANDING INTERE ST AMOUNT WHICH AGGREGATED TO RS. 6,66,52,645/-.IT IS EVIDENT FROM THE AUDITED ACCOUNTS THAT THE WRITE OFF HAS BEEN REFLECTED IN THE P&L ACCOUNT . IT IS ALSO SEEN THAT THE APPELLANT HAS PROVIDED AN EXPLANATORY NOTE TO THE A CCOUNTS WHEREIN SUCH AN EXCEPTIONAL ITEM OF WRITE OFF IS HIGHLIGHTED. TH E CONTENTION OF THE AO ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 6 THAT THE APPELLANT OUGHT TO HAVE DEBITED THE SAID B AD DEBTS WRITTEN OFF TO THE RESERVE FOR BAD & DOUBTFUL DEBTS ACCOUNT IS CON SIDERED. THE APPELLANT BAS 'ADEQUATELY EXPLAINED WITH THE SUPPOR TING DOCUMENTS SUCH AS ANNUAL AUDITED ACCOUNTS AND STATEMENTS OF COMPUTATI ONS OF INCOME THAT IN ALL THE EARLIER YEARS, SPECIFICALLY FROM THE AY 200 7-08 ONWARDS, ANY PROVISIONS 'TOWARDS BAD DEBTS DEBITED IN THE P&L A/ C. HAVE BEEN ADDED BACK IN THE STATEMENT OF COMPUTATION OF INCOME. THE APPELLANT HAS FURTHER EXPLAINED THAT THE RESERVE FOR BAD & DOUBTFUL DEBTS ALC. REFLECTS THE CREDIT BALANCE, ONLY ON ACCOUNT OF THE PROVISION FO R NPAS REQUIRED TO BE MADE IN ACCORDANCE WITH THE GUIDELINES OF THE RBI. IT. IS FURTHER CLARIFIED THAT SUCH A RESERVE HAS NOT BEEN CREATED BY WAY OF ANY DEDUCTION CLAIMED UNDER THE INCOME-TAX ACT. SINCE THE RESERVE FOR BAD & DOUBTFUL DEBTS. A/C DOES NOT INCLUDE ANY AMOUNTS, WHICH WERE CLAIME D 'AS DEDUCTIONS UNDER THE INCOME-TAX ACT, ANY WRITE OFF OF THE BAD DEBTS HAVE TO BE ALLOWED AS A DEDUCTION U/S. 36(1)(VII) OF THE ACT, INDEPENDENT OF THE CREDIT BALANCE IN THE RESERVE FOR BAD & DOUBTFUL DEBTS A/C . I FIND THAT THE EXPLANATION OFFERED BY THE APPELLANT ADEQUATELY SUP PORT THE ALLOWABILITY OF THE CLAIM U/S. 36(1)(VII) OF THE ACT. AND ACCORDING LY THE ADDITION IS HEREBY DELETED. WRITE OFF OF INDIVIDUAL ACCOUNTS OF 47 DEBTORS, AGG REGATING TO RS. 1,13,40,191/- 3.7. THE AO HAS NOT EXAMINED AND DISCUSSED THIS ISS UE AT ALL IN THE ASSESSMENT ORDER. HE HAS MERELY INCLUDED THIS AMOUN T AS A PART OF THE 'TOTAL DISALLOWANCE OF BAD DEBTS. DECISION: 3.8. IT IS EVIDENT FROM THE WRITTEN SUBMISSIONS AND PAPER BOOK-FILED DURING THE APPELLATE PROCEEDINGS THAT THE APPELLANT HAD FI LED A DETAILED REPLY WITH ENCLOSURES BEFORE THE AO ON 30.08.2013 SO AS TO EXP LAIN THE ADMISSIBILITY OF THE CLAIM OF BAD DEBTS WRITTEN OFF. IT IS SEEN F ROM THE PAPER BOOK THAT THE APPELLANT HAD SUBMITTED COPY OF THE LIST OF 47 ACCOUNTS THAT WERE WRITTEN OFF; WHICH CONTAINED FURTHER DETAILS SUCH A S THE OUTSTANDING ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 7 AMOUNTS, BEFORE THE AO ON 30.08.2013. THE PAPER BOO K ALSO STATES THAT THE STATUTORY AUDITOR'S CERTIFICATE AND A COPY OF THE B OARD RESOLUTION WERE ALSO FILED BEFORE THE AO IN SUPPORT OF THE CLAIM OF WRIT E OFF OF BAD DEBTS AGGREGATING TO RS. 1,13,40,191/-. HOWEVER, THE AO H AS NOT EXAMINED THIS ISSUE AND PASSED A SPEAKING ORDER, JUSTIFYING THE D ISALLOWANCE, ON THIS ISSUE. 3.9. IN THIS CASE, THE WRITE OFF IS NOT REFLECTED I N THE P&L ACCOUNT. AS EXPLAINED BY THE APPELLANT, THE WRITE OFF HAS BEEN DEBITED TO RESERVE FOR BAD & DOUBTFUL DEBTS A/C. THE ENTRIES PASSED BY THE APPELLANT ARE EXPLAINED AS UNDER: (I) BAD DEBTS WRITTEN OFF AC. DR. 1,13,4,0,191/- TO INDIVIDUAL BORROWERS' ACCOUNTS CR. 1, 13,40,191/- (BAD DEBTS WRITTEN OFF DURING THE YEAR) (II). P & L ACCOUNT DR. 1,13,40,191/- TO BAD DEBTS WRITTEN OFF ALC. CR. 1,13,40,191/- (III) RESERVE OF BAD & DOUBTFUL DEBTS ALE. DR. 1,13,40,191/- TO P & L ACCOUNT CR. 1,13,40,191/- (AMOUNT, EQUAL TO BAD DEBTS WRITTEN OFF DURING THE YEAR BY DEBIT TO P & L ACCOUNT, NOW TRANSFERRED FROM RBDD TO P & L A/C.) 3.10. AS OBSERVED, THE APPELLANT HAD NOT CREATED RE SERVE OF BAD & DOUBTFUL DEBTS A/C, BY CLAIMING DEDUCTIONS U/S. 36( 1)(VIIA) OF THE ACT AND THEREFORE, ANY DEBITS TO RESERVE FOR BAD & DOUBTFUL DEBTS A/E., ON ACCOUNT OF THE BAD DEBTS WRITTEN OFF WOULD NOT RESU LT IN ANY DEDUCTION U/S. 36(1)(VII) OF THE ACT. SINCE THE APPELLANT HAS NOT CREATED ANY PROVISION U/S. 36(1)(VIIA) OF THE ACT, THE SAME HAS TO BE TREATED AS NIL. ACCORDINGLY, THE APPELLANT IS ENTITLED TO FULL DEDUCTION U/S. 36(1)( VII) OF THE ACT TO THE EXTENT OF ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNTS. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE APPELLANT HAS ACTUALLY WRITTEN OF F THE BAD DEBTS IN 47 DEBTORS ACCOUNTS.' THE OTHER ISSUE IS OF PROCEDURAL IN NATURE, IMPLYING THAT WHETHER OR NOT THE METHODOLOGY FOLLOWED BY THE APPE LLANT IS IN CONFORMITY WITH THE PROVISIONS OF THE ACT. IN THIS CONTEXT, TH E APPELLANT HAS RELIED ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 8 UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF VIJAYA BANK V/S CIT (2010) 323 ITR 166 SC. I FIND THAT THE ' METHODOLOGY FOLLOWED BY THE APPELLANT IS ONE OF THE ACCEPTABLE METHODS OF WRITE OFF, SEEN IN THE CONTEXT OF ACTUAL WRITE OFF OF THE 47 D EBTORS ACCOUNTS. IT IS SEEN FROM THE ITEM NO. 5 OF THE NOTES ON ACCOUNTS THAT T HE APPELLANT HAD EXPLAINED THE METHODOLOGY OF WRITE OFF. ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE, I HEREBY HOLD THAT THE W RITE OFF OF BAD DEBTS, AS PER THE METHODOLOGY FOLLOWED BY THE APPELLANT, ALSO QUALIFIES FOR A DEDUCTION U/S. 36(L)(VII) OF THE ACT, ACCORDINGLY T HE DISALLOWANCE IS HEREBY DELETED. 9. THE HONBLE SUPREME COURT IN CATHOLIC SYRIAN BANK L TD. VS. CIT (SUPRA) HELD THAT THE LANGUAGE OF SECTION 36(1)(VII ) OF THE ACT IS UNAMBIGUOUS AND DOES NOT ADMIT OF TWO INTERPRETATIO NS. IT APPLIES TO ALL BANKS, COMMERCIAL OR RURAL, SCHEDULED OR UNSCHEDULE D. IT GIVES A BENEFIT TO THE ASSESSEE TO CLAIM A DEDUCTION ON ANY BAD DEBT OR PART THEREOF, WHICH IS WRITTEN OFF AS IRRECOVERABLE IN T HE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THIS BENEFIT IS SUB JECT ONLY TO SECTION 36(2) OF THE ACT. IT IS OBLIGATORY UPON THE ASSESSE E TO PROVE TO THE ASSESSING OFFICER THAT THE CASE SATISFIES THE INGRE DIENTS OF SECTION 36(1)(VII) ON THE ONE HAND AND THAT IT SATISFIES TH E REQUIREMENTS STATED IN SECTION 36(2) OF THE ACT ON THE OTHER. THE PROVI SO TO SECTION 36(1)(VII) DOES NOT, IN ABSOLUTE TERMS, CONTROL THE APPLICATION OF THIS PROVISION AS IT COMES INTO OPERATION ONLY WHEN THE CASE OF THE ASSESSEE IS ONE WHICH FALLS SQUARELY UNDER SECTION 36(1)(VII A) OF THE ACT. WE MAY ALSO NOTICE THAT THE EXPLANATION TO SECTION 36( 1)(VII), INTRODUCED ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 9 BY THE FINANCE ACT, 2001, HAS TO BE EXAMINED IN CON JUNCTION WITH THE PRINCIPAL SECTION. THE EXPLANATION SPECIFICALLY EXC LUDED ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN THE ACCOUNT OF T HE ASSESSEE FROM THE AMBIT AND SCOPE OF 'ANY BAD DEBT, OR PART THEREOF, WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE'. THU S, THE CONCEPT OF MAKING A PROVISION FOR BAD AND DOUBTFUL DEBTS WILL FALL OUTSIDE THE SCOPE OF SECTION 36(1)(VII) SIMPLICITOR. THE PROVIS O, AS ALREADY NOTICED, WILL HAVE TO BE READ WITH THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. ONCE THE BAD DEBT IS ACTUALLY WRITTEN OFF AS I RRECOVERABLE AND THE REQUIREMENTS OF SECTION 36(2) SATISFIED, THEN, IT W ILL NOT BE PERMISSIBLE TO DENY SUCH DEDUCTION ON THE APPREHENSION OF DOUBL E DEDUCTION UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) AND PROVISO T O SECTION 36(1)(VII). THIS DOES NOT APPEAR TO BE THE INTENTION OF THE FRA MERS OF LAW. THE SCHEDULED AND NON-SCHEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF WRITE OFF OF THE IRRECOVERABLE DEBTS UNDER SECTION 36(1)(VII) IN ADDITION TO THE BENEFIT OF DEDUCTION OF BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA). 10. CONSIDERING THE DECISION OF APEX COURT, THERE IS NO DOUBLE DEDUCTION CLAIMED BY ASSESSEE IN THE COMPUTATION OF TOTAL INC OME. PROVISO TO SECTION 36(1)(VII) ENSURE THAT DOUBLE DEDUCTION WIL L NOT BE ALLOWED, THE SAID PROVISO PROVIDES THAT IN CASES WHERE CLAUSE (V IIA) APPLIES, THE ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 10 AMOUNT OF DEDUCTION RELATING TO BAD-DEBT UNDER SECT ION 36(1)VII) SHALL BE LIMITED TO THE AMOUNT BY WHICH DEBT OR PART THER EOF EXCEED THE CREDIT BALANCE IN THE PROVISION OF BAD AND DOUBTFUL DEBTS. IN OUR VIEW, THE LD. CIT(A) HAS CORRECTLY ALLOWED THE DEDUCTION UNDER SECTION 36(1)(VII), WHICH WE AFFIRMED. HENCE, THIS GROUND O F APPEAL IS DISMISSED. 11. GROUND NO.2 RELATES TO DELETING THE DISALLOWANCE OF GRATUITY PAYMENT AFTER CLOSE OF PREVIOUS YEAR. THE LD. DR FOR THE RE VENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBM ITS THAT THE ASSESSEE CLAIMED RS. 81,71,662/- BEING ONE FIFTH OF RS. 4.08 CRORE AND RS. 3.26 CRORE HAS BEEN TREATED AS DEFERRED REVENUE EXPENSES. THE ASSESSEE CLAIMED THE REMAINING AMOUNT OF RS. 3.26 C RORE IN THE COMPUTATION OF INCOME. IN THE NOTES TO THE AUDIT RE PORT, THE ASSESSEE MENTIONED THAT DUE TO ENHANCEMENT OF GRATUITY LIMIT FROM RS. 3.50 LAKHS TO RS. 10 LAKHS FOLLOWING THE AMENDMENT TO TH E PAYMENT OF GRATUITY ACT, 1972, THE GRATUITY LIABILITY AS PER A CTUARIAL VALUATION OF BOOK IS RS. 447.42 LAKHS. HOWEVER, AS PER RBI CIRCU LAR DATED 24.05.2011, BANK HAS BEEN ALLOWED TO BANK GRATUITY LIABILITY OVER A PERIOD OF FIVE YEARS IN FIVE EQUAL INSTALLMENTS STA RTING FROM YEAR ENDING 31.03.2011. ACCORDINGLY, THE BANK HAS PROVIDED RS. 81,71,662/- TOWARDS GRATUITY LIABILITY BEING FIRST INSTALLMENT OF AMORTIZATION AND ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 11 BALANCE OF RS. 3.26 CRORE IS SHOWN UNDER THE HEAD BANK REVENUE EXPENDITURE UNDER THE HEAD OTHER ASSETS. THE ASS ESSING OFFICER CORRECTLY TREATED THE AS BANK EXPENSES. 12. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. CIT(A). THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT DISALLOWED TH E CLAIM OF GRATUITY. THE ENTIRE PAYMENT IS ALLOWABLE AS DEDUCTION IN THE RELEVANT PREVIOUS YEAR IN WHICH IT WAS PAID. IN SUPPORT OF HIS SUBMIS SION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE SU PREME COURT IN TAPARIA TOOLS LTD. VS. JCIT [2015] 372 ITR 605 (SC) . 13. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE DEC ISION CITED BY LD. AR OF THE ASSESSEE. DURING THE ASSESSMENT, THE ASSE SSING OFFICER DISALLOWED THE DEDUCTION OF RS. 3.26 CRORE BY TAKIN G HIS VIEW THAT THE AMOUNT PAID PERTAINS TO THE VARIOUS EARLIER YEARS A ND ONE FIFTH OF SUCH EXPENSES WERE ALLOWED AND REST FOR TREATING AS DEFE RRED EXPENSES AND ADDED TO THE INCOME OF ASSESSEE. BEFORE THE LD. CIT (A), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION DATED 29.05.2014 EXPLAINING THAT THE ASSESSEE PROVIDED ITS STAFF GRATUITY LIABILITY OF R S. 4,08,58,310/- IN FINANCIAL YEAR 2010-11 BASED ON ACTUARIAL VALUATION AS ON 31.03.2011. THE GRATUITY WAS PROVIDED AS PER THE PROVISIONS OF PAYMENT OF GRATUITY ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 12 ACT 1972, WHEREIN THE UPPER AGE LIMIT OF GRATUITY P AYMENT TO AN EMPLOYEE WAS RAISED FROM RS. 3.50 LAKHS TO RS. 10 L AKHS. THE ENTIRE LIABILITY PROVIDED WAS PAID TO LIC ON MAY 2011 I.E. BEFORE DUE DATE OF FILING RETURN OF INCOME AND THE ENTIRE EXPENDITURE WAS RIGHTLY ALLOWABLE TO THE ASSESSEE IN ASSESSMENT YEAR 2011-12. IT WAS FURTHER EXPLAINED THAT WITH THE APPROVAL OF RBI, ONE FIFTH OF THIS EX PENDITURE IS A CHARGE TO P&L ACCOUNT OF EACH YEAR FROM ASSESSMENT YEAR 20 11-12 TO 2015- 16. THE ASSESSING OFFICER DISALLOWED RS. 3.26 CRORE AND ONLY ALLOWED ONE FIFTH I.E. RS. 81,71,662/- (1/5 OF 4.08 CRORE) TREATING IT FOR THE CURRENT YEAR AND REMAINING AMOUNT OF RS. 3.26 CRORE TO EARLIER YEARS. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CONCLUDED THAT THE QUANTUM GRATUITY LIABILITY WAS R S. 4.08 CRORE. THE LIABILITY WAS PAYABLE ON 31.03.2011 AND ACTUAL PAYM ENT WAS MADE DURING MAY 2011, PRIOR TO DUE DATE OF FILING OF RET URN OF INCOME. THE ASSESSEE TREATED THE EXPENDITURE AS DEFERRED REVENU E EXPENDITURE AND ONLY ONE FIFTH OF ITS IS DEBITED IN THE BOOKS OF A CCOUNT. WHILE THE ASSESSEE TREATED THE EXPENDITURE AS DEFERRED REVENU E EXPENDITURE AS DEFERRED REVENUE EXPENDITURE FOR THE PURPOSE OF BOO KS OF ACCOUNT, THE ASSESSEE CLAIMED ENTIRE EXPENDITURE AS DEDUCTION ON THE BASIS OF ACTUAL PAYMENT. THE LD. CIT(A) CONCLUDED THAT PAYMENT IS A LLOWABLE DEDUCTION BEING REVENUE EXPENDITURE CRYSTALLIZED DU RING THE RELEVANT ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 13 PREVIOUS YEAR. SECTION 43B ALSO MAKES IT CLEAR THAT SUCH GRATUITY PAYMENT ARE ALLOWABLE AS DEDUCTION ON THE BASIS OF ACTUAL PAYMENT MADE PRIOR TO DATE OF FILING OF RETURN OF INCOME. T HE HONBLE SUPREME COURT IN TAPARIA TOOLS LTD. VS. JCIT (SUPRA) HELD T HAT AS A GENERAL RULE, REVENUE EXPENDITURE TO BE ALLOWED IN THE YEAR IN WH ICH INCURRED. WE HAVE NOTED THAT THE ASSESSING OFFICER INSTEAD OF EX AMINING THE LIABILITY AND THE ACTUAL PAYMENT OF GRATUITY DISALLOWED IT HO LDING THAT IT PERTAINS TO EARLIER YEARS. AS WE HAVE NOTED THAT REVENUE EXP ENDITURE TO BE ALLOWED IN THE YEAR IN WHICH INCURRED. THE LD CIT(A ) ALLOWED IT BY FOLLOWING THE SAME PRINCIPLE.WE HAVE NOTED THAT THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING THAT ACTUAL PAYMENT WAS M ADE DURING MAY 2011 I.E. PRIOR TO DATE OF FILING OF RETURN. THEREF ORE, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER PASSED BY LD. CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE. THEREFORE, W E DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENUE. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/2019. SD/- SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 10.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT ITA NO . 487 MUM 2015-M/S THE KAPOL CO-OP. BANK LTD. 14 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI