The ACIT, Ratlam V. M/s Mandsaur Commercial Co-Operative Bank Ltd., Mandsaur

ITA 594/IND/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54036 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: SUNIL MEHTA
• Keywords: Bad and doubtful debts
• Section: 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 594/IND/2010 A.Y. 2007-084 ASSTT. COMMISSIONER OF INCOME TAX RATLAM ... APPELLANT VS MANDSAUR COMMERCIAL CO.OP. BANK LIMITED MANDSAUR PAN AAAAN-4936A ... RESPONDENT APPELLANT BY : SHRI KESHAV SAXENA RESPONDENT BY : SHRI SUNIL MEHTA DATE OF HEARING : 05.12.2011 DATE OF PRONOUNCEMENT : 05.12.2011 O R D E R PER JOGINDER SINGH THIS APPEAL HAS BEEN FILED BY THE REVENUE ON THE O NLY GROUND THAT LEARNED COMMISSIONER OF INCOME TAX (APP EALS) 2 WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 27,79,484/- ON ACCOUNT OF DISALLOWANCE OF ENTIRE PROVISIONS MADE BY THE ASSESSEE FOR BAD AND DOUBTFUL DEBTS. 2. DURING HEARING, SHRI KESHAV SAXENA, LEARNED CIT DR, STRONGLY OPPOSED THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) AND RELIED UPON THE ASSESSMENT ORDER WHEREAS SHRI SUNIL MEHTA, LEARNED COUNSEL FOR THE A SSESSEE, DEFENDED THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN BANKING B USINESS. THE ASSESSEE FILED RETURN OF INCOME AT RS. 37,44,72 0/- AND THE ASSESSMENT WAS COMPLETED AT RS. 65,24,205/-. BY OB SERVING THAT THE ASSESSEE BANK HAS NOT INCURRED ANY EXPENDI TURE ON ACCOUNT OF BAD DEBTS DURING THE PERIOD UNDER CONSID ERATION, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 27,79,484 /-. ON APPEAL, AFTER CONSIDERING THE MATTER AT LENGTH LEAR NED 3 COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT ARE AP PLICABLE AND THE ASSESSEE HAS RIGHTLY MADE THE PROVISIONS FOR BA D AND DOUBTFUL DEBTS. WE WOULD LIKE TO QUOTE SECTION 36(V IIA) OF THE ACT IN ORDER TO APPRECIATE THE MATTER PROPERLY :- OTHER DEDUCTIONS. 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THE REIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 [( VIIA ) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING 99 [* * *] A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON- SCHE DULED BANK 1 [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK], AN AMOUNT 2 [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING 3 [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER IF THE LANGUAGE USED IN THE AFORESAID SECTION IS AN ALYSED, WE FIND THAT SECTION 36(VIIA) OF THE ACT SPECIFICALLY PROVIDES FOR PROVISION FOR BAD AND DOUBTFUL DEBTS WITH SPECIFIED LIMIT AND IS ALLOWABLE WITHIN SUCH LIMIT, MEANING THEREBY THE BA NKS ARE ALLOWED TO MAKE PROVISION FOR BAD AND DOUBTFUL DEBT S. THE SECTION NOWHERE SPEAKS ABOUT INCURRING OF EXPENSES. IF A PROVISION IS MADE, IT IS ALLOWABLE WHEN IT IS EXPEN DED OR ADJUSTED AGAINST THE BAD DEBT, WHICH IS THE INTENTI ON OF THE 4 LEGISLATURE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE . WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE S TAND OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT IS UPHELD. FINALLY, THE APPEAL OF THE REVENUE IS HAVING NO MERIT, THEREFORE, DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5.12.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE