Sunderlal Sawji Urban Co.op. Bank Ltd., Parbhani V. Assistant Commissioner of Income-tax,

ITA 586/PUN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1161 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Revised return
• Section: 234B; 28

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.586 /PN/2015 % % / ASSESSMENT YEARS : 2010-11 SUNDERLAL SAWJI URBAN COOPERATIVE BANK LTD., APMC MARKET YARD, YELDARI ROAD, MONDHA JINTUR, DIST. PARBHANI PAN NO. AABAS4590H . / APPELLANT V/S ACIT, AURANGABAD . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI ANIL CHAWARE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29-10-2014 OF THE CIT(A), AURANGABAD RELATING TO ASSESSMENT YEAR 2010-11. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD.CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF DEDUCTION CLAIMED U/S.36(1)(VIII) OF THE ACT OF RS.27,62,548/- VIDE PAR A 7 OF THE APPEAL ORDER. THE ASSESSEE BANK IS LEGALLY ENTITLED TO SUCH CL AIM AND IT BE ALLOWED TO IT. / DATE OF HEARING :02.08.2016 / DATE OF PRONOUNCEMENT: 05.08.2016 2 ITA NO.586/PN/2015 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED U/S.9(1) OF MAHARASHTRA COO PERATIVE SOCIETIES ACT, 1960. IT FILED ITS RETURN OF INCOME ON 17-09- 2010 DECLARING TOTAL INCOME OF RS.7,03,48,650/-. SUBSEQUENTLY, THE ASSESSEE FILED REVISED RETURN ON 15-12-2011 DECLARING TOT AL INCOME OF RS.7,92,06,640/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO ON VERIFICATION OF COMPUTATION OF INCOME, NOTED THAT THE ASSESSEE BANK HAS CLAIMED DEDUCTION U/S.36(1)(VIII) ON ACCOUNT OF SPECIAL RESERVE FUND AMOUNTING TO RS.1,15,08,015/- IN THE O RIGINAL RETURN OF INCOME WHICH WAS RESTRICTED TO RS.27,62,548/- IN THE COMPUTATION OF INCOME FILED ALONG WITH THE REVISED RETURN AN D THE BALANCE AMOUNT OF RS.87,45,467/- WAS ADDED TO THE TOTAL IN COME IN THE REVISED RETURN. ON PERUSAL OF THE SAME THE AO NOTE D THAT THE SAID SPECIAL RESERVE HAS NOT BEEN CREATED BY THE ASSES SEE IN THE BOOKS OF ACCOUNT AND THE BALANCE SHEET FOR THE YEAR EN DED 31-03- 2010 DOES NOT REFLECT ANY FUND UNDER THIS HEAD. HE, THER EFORE, ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF DEDUCTION U/S.3 6(1)(VIII) OF THE ACT AMOUNTING TO RS.27,62,548/-. 4. THE ASSESSEE IN RESPONSE TO THE SAME SUBMITTED AS UNDER : THE ASSESSEE HAS DURING A Y.2010-11, CLAIM DEDUCTION U/S.36(1)(III) OF RS. 27,62,548/-. YOUR HONOUR HAVE POINTED OUT THAT T HE SPECIAL RESERVE IS NOT REFLECTED IN THE AUDITED BALANCE-SHEET. IN THI S REGARD WE HAVE TO SUBMIT THAT THE BANK HAS MADE A PROVISION OF RS.1,15,08 ,015/- DURING THE YEAR ENDING MAR,10 BY DR. TO THE P AND L A/C., THE DETAILS OF WHICH HAVE ALREADY BEEN SUBMITTED TO YOUR GOOD OFFICE VIDE LETTER DATED 13.02.2013. THE BANK BEING A CO-OP BANK IS GOVERNED BY THE PROVISIONS OF MAHARASHTRA CO-OP. ACT, 1960, WHICH REQUIRES THE B ANK TO ACCOUNT FOR THE APPROPRIATION OF PROFITS ONLY AFTER APPROVAL OF THE AGM. THE AGM OF THE BANK FOR THE YEAR ENDING MAR-2010, WAS HE LD ON 08.08.2010, WHEREIN THE RESOLUTION WAS PASSED FOR APPR OPRIATION OF PROFIT. THUS, THE ACCOUNTING FOR SPECIAL RESERVE HAS BE EN PROPERLY DONE THE BANK. BASED ON THE ABOVE, IT CAN BE CONCLUDED THAT THE BAN K HAS COMPLIED WITH THE REQUIREMENTS OF SEC. 36(1)(III) AND HENCE I S ELIGIBLE FOR A DEDUCTION OF RS.27,62,548/-. 3 ITA NO.586/PN/2015 THOUGH THE RESERVE CREATED IN A.Y.2010-11, IS OF RS.1, 15,08,015/-, BUT THE CLAIM OF DEDUCTION U/S.36(1)(VIII) IS OF RS.27,62, 548/-, DURING THE YEAR. THE BALANCE AMOUNT OF RESERVE CREATED IN A.Y. 2010-11 PERTAINING TO A.Y. 2009-10, WHICH WAS DISALLOWED AND ADDED TO TH E INCOME BY THE AO. IN SUPPORT OF THE ABOVE SUBMISSIONS, THE ASSESSEE HAS ALSO SUBMITTED A COPY OF RESOLUTION PASSED BY AGM AND THE AC COUNTING ENTRIES DONE IN THE LEDGER OF SPECIAL RESERVE FUND. 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE ANALYSED THE PROVISIONS OF SECTION 36(1)(VIII) AND CAME TO THE CONCLUSION THAT DEDUCTION UNDER THIS SE CTION IS AVAILABLE IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MA INTAINED BY A SPECIFIED ENTITY FOR AN AMOUNT NOT EXCEEDING 20% OF T HE PROFITS DERIVED FROM ELIGIBLE BUSINESS, COMPUTED UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS OR PROFESSION, BEFORE MAKING ANY D EDUCTION UNDER THIS CLAUSE, CARRIED TO SUCH RESERVE ACCOUNT. IT FU RTHER PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS CAR RIED TO SUCH RESERVE ACCOUNT FROM TIME TO TIME EXCEEDS TWICE THE AMO UNT OF THE PAID UP SHARE CAPITAL AND OF THE GENERAL RESERVES OF THE SPECIFIED ENTRY, NO ALLOWANCE UNDER THIS CLAUSE SHALL BE MADE IN RESP ECT OF SUCH EXCESS. THE AO ALSO REFERRED TO THE SUBSEQUENT A MENDMENTS TO THE SAID PROVISION BY THE FINANCE ACT, 1997 W.E.F. 01-04-1998. 6. IN THE LIGHT OF ABOVE FACTS, HE CONCLUDED THAT FOR CLAIMIN G DEDUCTION U/S.36(1)(VIII) OF THE ACT, THE FIRST AND FOREMOST CON DITION IS THAT THE ASSESSEE SHOULD NOT ONLY CREATE SPECIAL RES ERVE BUT ALSO MAINTAIN IT. IN THE PRESENT CASE THE ASSESSEE HAS NOT CREATED AND MAINTAINED ANY SPECIAL RESERVE IN HIS BOOKS OF ACCOUNTS FO R THE PURPOSE OF SECTION 36(1)(VIII) OF THE ACT. FURTHER, ON VERIFICAT ION COPY OF LEDGER ACCOUNT SUBMITTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS, HE NOTICED THAT THE ASSESSEE CO-OPERATIVE BANK HAS 4 ITA NO.586/PN/2015 CREATED SPECIAL RESERVE FUND ON 09-08-2010 AFTER APPROV AL OF AGM DATED 08-08-2010 WHICH FALLS IN A.Y. 2011-12. HE THEREFORE HELD THAT THE BASIC CONDITION OF CREATING AND MAINTAINING OF SPE CIAL RESERVE FUND IS NOT FULFILLED DURING THE YEAR UNDER CONSIDER ATION BY THE ASSESSEE. 7. THE AO FURTHER NOTED THAT THE CIT(A) IN ASSESSEES O WN CASE FOR A.Y. 2009-10 HAS ALSO UPHELD THE DISALLOWANCE OF DEDUCTIO N U/S.36(1)(VIII). IN VIEW OF THE ABOVE THE AO HELD THAT ASSESSE E IS NOT ENTITLED TO CLAIM DEDUCTION U/S.36(1)(VIII) OF THE I.T. ACT AMOUNT ING TO RS.27,62,548/- ON ACCOUNT OF SPECIAL RESERVE FUND. 8. BEFORE CIT(A) THE ASSESSEE MORE OR LESS REITERATED TH E SAME SUBMISSIONS. IT WAS FURTHER SUBMITTED THAT THERE WAS NO SUCH RESERVE CREATED IN F,.Y. 2008-09 RELATING TO A.Y. 2009-10. THEREFORE, THERE IS NO CASE FOR DISALLOWANCE U/S.36(1)(VIII) FOR A.Y . 2010-11. IT WAS ARGUED THAT ASSESSEE FULFILS ALL THE CONDIT IONS LAID DOWN IN THE PROVISIONS IN THIS RESPECT AND THEREFORE IS LEG ALLY ENTITLED FOR THE SAID DEDUCTION. 9. HOWEVER, THE CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. IN ORDER TO DECIDE THE ISSUE UNDER APPE AL, THE PROVISIONS OF SECTION 36(1)(VIII) ARE RELEVANT AND HENCE THE RE LEVANT PORTION OF THE SAID SECTION IS REPRODUCED BELOW : 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWIN G CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 [(VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED BY A SPECIFIED ENTITY, AN AMOUNT NOT EXCEEDING TWENT Y PER CENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (B EFORE 5 ITA NO.586/PN/2015 MAKING ANY DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUC H RESERVE ACCOUNT: PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS CAR RIED TO SUCH RESERVE ACCOUNT FROM TIME TO TIME EXCEEDS TWICE T HE AMOUNT OF THE PAID UP SHARE CAPITAL AND OF THE GENER AL RESERVES OF THE SPECIFIED ENTITY, NO ALLOWANCE UNDER THIS CLAU SE SHALL BE MADE IN RESPECT OF SUCH EXCESS. ON PERUSAL OF THE ABOVE PROVISION, IT HAS BEEN NOTICE D THAT THE DEDUCTION IS TO BE COMPUTED @20% OF THE PROFIT FROM ELIGIBLE BUSINESS WHICH IS TO BE TRANSFERRED TO RESERVE ACCOUNT. THE E LIGIBLE BUSINESS HAS ALSO BEEN CLARIFIED AS PER EXPLANATION (B) TO SECTI ON36(1)(VIII). IT HAS ALSO BEEN NOTICED THAT THE APPELLANT HAS NOT FILED RELEVANT DETAILS ABOUT THE ELIGIBLE BUSINESS AND THE PROFIT OF THE ELIG IBLE BUSINESS IN RESPECT OF WHICH DEDUCTION U/S.36(1)(VIII) IS TO BE AL LOWED EITHER BEFORE THE AO OR BEFORE THE UNDERSIGNED. IN VIEW OF THE ABOVE FACTS, THE AO IS JUSTIFIED IN MAKING ADDITION OF RS.27,62,548 /- ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S.36(1)(VIII) OF THE ACT. GROUND NO.3 IS DISMISSED. 10. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 11. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE AO AND CIT(A). WE FIND THE LD .CIT(A), WHILE DISMISSING THE GROUND RAISED BY THE ASSESSEE ON THI S ISSUE, HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS NOT FILED RELEVANT DETAILS ABOUT THE ELIGIBLE BUSINESS AND THE PROFIT OF THE ELIGIBLE BUSINESS IN RESPECT OF WHICH DEDUCTION U/S.36(1)(VIII) IS TO BE ALLOWED EITHER BEFORE THE AO OR BEFORE HIM. NO DETAILS WERE ALSO FILED BEFORE US DURING THE COURSE OF HEARING SINCE NONE AP PEARED. UNDER THESE CIRCUMSTANCES AND IN ABSENCE OF ANY DETAILS EITHER BEFORE THE AO OR THE CIT(A) OR EVEN BEFORE US REGARDING THE ALLOWABILITY OF CLAIM OF DEDUCTION U/S.36(1)(VIII) OF THE I.T. ACT, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE ASSESSEE ON THIS IS SUE IS DISMISSED. 6 ITA NO.586/PN/2015 12. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S.234A, 234B AND 234C IS NOT JUSTIFIED. 13. AFTER HEARING BOTH THE SIDES, WE ARE OF THE OPINION THA T CHARGING OF INTEREST UNDER THE ABOVE PROVISIONS OF SECTION 234A, 234B AND 234C ARE MANDATORY AND CONSEQUENTIAL IN NATUR E. ACCORDINGLY, THIS GROUND BY THE ASSESSEE IS DISMISSED. 14. GROUND OF APPEAL NO.3 BEING GENERAL IN NATURE IS DISMISSED. 15. IT MAY FURTHER BE POINTED OUT THAT DESPITE ISSUE OF NOTICE, THE ASSESSEE HAS NOT REMOVED THE DEFECTS POINTED OUT BY T HE REGISTRY. THEREFORE, THE APPEAL IS ALSO NOT MAINTAINABLE ON THIS GROUND. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-08-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 05 TH AUGUST , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A), AURANGABAD 4. % S / THE CIT-AURANGABAD 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , ( + //TRUE COPY// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE