THE BHARAT CO OPERATIVE BANK (MUMBAI) LTD, MUMBAI V. DCIT 1(3)(2), MUMBAI

ITA 5682/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4945 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 18-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTIKEYAN
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5682/M/2015 ASSESSMENT YEAR: 2012-13 M/S. THE BHARAT CO- OPERATIVE BANK (MUMBAI) LTD., 64/72, MODY STREET, MUMBAI 400 001 PAN: AAAAT0030E VS. DCIT 1(3)(2), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI ABHIRAMA KARTIKEYAN, D.R. DATE OF HEARING : 10.07.2019 DATE OF PRONOUNCEMENT : 13.08.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 21.11.2015 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.1,30,73,424/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF BAD DEBTS. 3. THE FACTS IN BRIEF ARE THAT THE AO OBSERVED DURI NG THE ASSESSMENT PROCEEDINGS THAT ASSESSEE HAS DEBITED A SUM OF RS.1,30,73,424/- AS BAD DEBTS WRITTEN OFF IN THE P &L ACCOUNT AND HAS ALSO SHOWN THE SAME ON CREDIT SIDE AS PROVI SION FOR BAD AND DOUBTFUL DEBTS WRITTEN BACK. THE AO FURTHER O BSERVED THAT ITA NO.5682/M/2015 M/S. THE BHARAT CO-OPERATIVE BANK (MUMBAI) LTD. 2 IN THE COMPUTATION OF INCOME ,THE ASSESSEE HAS ONCE AGAIN REDUCED RS.1,30,73,424/- FROM THE TOTAL INCOME AGAI NST THE NET PROFITS. ACCORDING TO THE AO, THE PROVISION FOR BA D AND DOUBTFUL DEBTS UP TO 2011-12 WERE RS.11,36,84,789/- AND AFTE R ADDING THE PROVISIONS OF RS.3,50,00,000/- CREDITED DURING THE YEAR, THE CREDIT BALANCE AT THE END OF THE YEAR STOOD AT RS.1 4,86,84,789/- WHICH IS MORE THAN THE AMOUNT OF BAD DEBTS CLAIMED OF RS.1,30,73,424/- AND CONSEQUENTLY DISALLOWED THESE BAD DEBTS AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESS EE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CON FIRMED THE ADDITION BY HOLDING THAT THE ASSESSEE HAS SUFFICIEN T ACCUMULATED CREDIT BALANCE UNDER THE HEAD BDDR WHICH IS MORE TH AN THE AMOUNT OF BAD DEBTS WRITTEN OFF RS.1,30,73,425/- A ND THUS JUSTIFIED THE ADDITION MADE BY THE AO. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE AUTHORITIES BELOW HAVE NOT UNDERSTOOD THE PROVISIONS OF SECTION 36(1)(VII) AND 36(VIIA) OF THE ACT. THE PROVISIONS OF THESE TWO SECTIONS PROVIDE FOR CLAIMING OF DEDUCTION ON TWO DIFFERENT ACCOUNTS. SECTION 36(1) (VII) PROVIDES FOR CLAIMING ACTUAL BAD DEBTS WHICH ARE SUBJECT TO THE PROVISION OF SECTION 36(2) OF THE ACT WHEREAS SECTION 36(1)(V IIA) PROVIDES FOR CREATION OF PROVISION @ 7.25% OF THE DEPOSITS OF TH E BANK AND THUS HAVE NO INTERACTION OR ANY INTERPLAY. IN OTHE R WORDS BOTH THESE SECTIONS ARE MUTUALLY EXCLUSIVE AND DEDUCTION CLAIMED BY THE ASSESSEE UNDER BOTH THESE HEADS ARE ADMISSIBLE AND ALLOWABLE TO THE BANK. THE ISSUE HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. CATHOLIC SYRIAN B ANK LTD. (2012) 343 ITR 270 (SC) WHEREIN THE HONBLE COURT H AS HELD THAT ITA NO.5682/M/2015 M/S. THE BHARAT CO-OPERATIVE BANK (MUMBAI) LTD. 3 THE DEDUCTIONS CLAIMED UNDER BOTH THESE SECTIONS AR E TO BE ALLOWED INDEPENDENTLY. THE ISSUE ALSO STANDS SETTL ED IN THE ASSESSEES OWN CASE IN ITA NO.7313/M/2011 A.Y. 2008 -09 VIDE ORDER DATED 15.03.2013 WHEREIN IT HAS BEEN HELD AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. THE COMPUTATION OF INCOME IS EXHIBITED AT PAG E-44 AND A PERUSAL OF THIS COMPUTATION SHOW THAT THE ASSESSEE HAS ADDED BACK S TANDARD ASSET RESERVE AMOUNTING TO RS. 1.25 CRORES TO ITS INCOME. WE FURT HER FIND IN THE SAME COMPUTATION OF INCOME, THE ASSESSEE HAS DEDUCTED PR OVISION FOR BAD AND DOUBTFUL DEBTS ALLOWABLE U/S. 36(VIIA) AT RS.3,79,05,255/-. HOWEVER, A PERUSAL OF THE STATEMENT OF ACCOUNTS OF THE ASSESSEE SHOW THAT ALT HOUGH THE ASSESSEE HAS CREATED A PROVISION OF RS.1.25 CRORES IN ITS BOOKS OF ACCOU NT BUT HAS NOT CREATED ANY PROVISION OF RS. 3.79 CRORES. CONSIDERING THE PROV ISIONS OF SEC. 36(VII) AND (VIIA), NO DOUBT IN THE CASE OF A BANKING COMPANY, A SCHEDULED BANK AS IN THE CASE OF THE ASSESSEE TWO DEDUCTIONS ARE ALLOWED TO THE ASSESSEE , FIRST BEING PROVISION FOR BAD AND DOUBTFUL DEBTS AT THE RATE OF 7.5% NOT EXCEEDIN G 10% OF RURAL DEBT AND SECOND PROVISION FOR BAD AND DOUBTFUL DEBT ACTUALLY WRITTE N OFF DURING THE YEAR. THE ACTUAL PROVISION WRITTEN OFF DURING THE YEAR AS FOUND FROM THE STATEMENT OF ACCOUNT IS ONLY RS. 1.25 CRORES, ALTHOUGH THE SAME HAS BEEN ADDED B ACK WHILE COMPUTING THE INCOME AS THE ASSESSEE WANTED TO CLAIM RS. 3.79 CRO RES. IN OUR CONSIDERATE VIEW AND IN ALL FAIRNESS 10 THE ASSESSEE, SINCE THE ASSE SSEE HAS ACTUALLY WRITTEN OF RS.1.25 CRORES IN ITS BOOKS, WE DIRECT THE AO TO ALLOW THE CLAIM FOR THE PROVISIONS OF BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.1.25 CRORES ONLY . 6. WE, THEREFORE, RESPECTFULLY FOLLOWING THE HONBL E SUPREME COURT DECISION AND THE CO-ORDINATE BENCH OF THE TRI BUNAL, SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF BAD DEBTS TO THE ASSESSEE OF RS.1,30,73,424/-. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.08.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13.08.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.5682/M/2015 M/S. THE BHARAT CO-OPERATIVE BANK (MUMBAI) LTD. 4 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.