Asstt. Commissioner of Income Tax, Jalandhar V. M/s Punjab Gramin Bank, Kapurthala

ITA 648/ASR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5767 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 23-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Assessee Lawyers: RANJAN SEHGAL
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 648/(ASR)/2016 ASSESSMENT YEAR: 2013-14 PAN: AAALP0309F ASST. C. I. T., CIRCLE-IV, JALANDHAR. VS. M/S. PUNJAB GRAMIN BANK JALANDHAR ROAD, KAPURTHALA. (APPELLANT) (RESPONDENT) I.T.A NO. 655/(ASR)/2016 ASSESSMENT YEAR: 2013-14 PAN: AAALP0309F M/S. PUNJAB GRAMIN BANK JALANDHAR ROAD, KAPURTHALA. VS. ASST. C. I. T., CIRCLE-IV, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S. S. KANWAL (D.R .) RESPONDENT BY: SH. RANJAN SEHGAL (C.A.) DATE OF HEARING: 21.11.2017 DATE OF PRONOUNCEMENT: 03.01.201 8 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY ASSESSEE AS WELL A S BY REVENUE AGAINST THE ORDER OF LD. CIT(A), JALANDHAR DATED 17 .10.2016 FOR ASST. YEAR: 2013-14. 2. AT THE TIME OF HEARING, IT WAS OBSERVED THAT DEP ARTMENT HAD SOUGHT ADJOURNMENT, HOWEVER THE LD. AR OBJECTED TO THE ADJ OURNMENT APPLICATION AND SUBMITTED THAT THESE CASES WERE COV ERED IN FAVOUR OF ASSESSEE BY THE ORDER OF HON'BLE TRIBUNAL ITSELF IN THE CASE OF ASSESSEE ITA NOS.648&655(ASR)/2016 ASSESSMENT YEAR: 2013-14 2 AND OUR ATTENTION WAS INVITED TO THE ORDER OF THE T RIBUNAL AT P.B. PAGE 1, 2, 6 AND 1, 2, 10 RESPECTIVELY AND RELEVANT FINDING S OF THE TRIBUNAL WERE READ. 3. THE LD. DR FAIRLY AGREED THAT THE ISSUES WERE CO VERED IN FAVOUR OF ASSESSEE, THEREFORE THE ADJOURNMENT APPLICATION WAS REJECTED AND THE CASES WERE TAKEN AS HEARD. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH OUGH THE MATERIAL PLACED ON RECORD. IN THE APPEAL FILED BY ASSESSEE, THE ONLY ISSUE RAISED BY IT IS THAT THE AUTHORITIES BELOW HAD NOT ALLOWED PA YMENT OF PREMIUM PAID TO LIC FOR COVERING LEAVE ENCASHMENT OF ITS EMPLOYE ES. WE FIND THAT THIS ISSUE WAS ALREADY ADJUDICATED BY HON'BLE TRIBUNAL I N THE CASE OF ASSESSEE ITSELF BY ORDER DATED 15.03.2017 IN ITA NO S. 583 &584/ASR/2015. THE FINDINGS OF THE HON'BLE TRIBUNAL ARE CONTAINED IN PARA 14 WHEREIN THE HON'BLE TRIBUNAL HAD REMITTED T HE ISSUE BACK TO THE OFFICE OF LD. CIT(A). THE RELEVANT FINDINGS OF THE TRIBUNAL AS CONTAINED IN 14 ARE REPRODUCED BELOW: 14. NOW COMING TO THE APPEALS FILED BY ASSESSEE, W E FIND THAT ASSESSING OFFICER HAD DISALLOWED THE PAYMENT MADE T O LIC AND BAJAJ ALIANZE U/S 37(1) OF THE ACT, HOLDING THE SAME TO B E NOT EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE LD. CIT(A) WHILE CONFIRMING THE DISALLOWANCE HAS NOT CONSIDERED THE CLAIM OF THE ASSESSEE U/S 37(1) OF THE ACT AND HAS CONFIRMED THE ADDITION BY HOLDING THAT THE PROVISIONS OF SECTION 43B(F) WERE APPLICABLE TO THE ASSESSEE. HOWEVER, THE CLAIM OF THE ASSESSEE IN ITS WRITTEN SUBMISSIONS IS THAT ASSESSEE HAD NOT CREATED THE PROVISIONS AND IN FACT HAD MADE THE PAY MENT AND THEREFORE THE PROVISIONS OF SECTION 43B(F) OF THE ACT WERE NOT AP PLICABLE, IT WAS ALSO REQUIRED THAT LD. CIT(A) HAD CONFIRMED THE DISALLOW ANCE U/S 43B (F) WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE. THE REFORE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE TO THE OFFICE OF LD . CIT(A) WHO SHOULD EXAMINE THE CLAIM OF THE ASSESSEE U/S 37(1) OF THE ACT AS THE ASSESSING ITA NOS.648&655(ASR)/2016 ASSESSMENT YEAR: 2013-14 3 OFFICER HAD MADE THE DISALLOWANCE U/S 37(1) OF THE ACT. THE LD. CIT(A) SHOULD ALSO HEAR THE ASSESSEE ON THE APPLICABILITY OF PROVISIONS OF SECTION 43B(F) OF THE ACT. IN VIEW OF THE ABOVE, THE APPEAL S FILED BY ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE PRECEDENT WE SET ASIDE THE AP PEAL OF THE ASSESSEE TO LD. CIT(A) WHO SHOULD EXAMINE THE CLAIM OF ASSESSEE U/S 37(1) OF THE ACT AND SHOULD ALSO HEAR THE ASSESSEE ON THE APPLICABILITY OF PROVISIONS OF 43B(F) OF THE ACT. NOW COMING TO THE APPEAL FILED BY REVENUE, WE FIND THAT THE ONLY ISSUE RAISED BY REVENUE IS THE ACTION OF LD. CIT(A) BY WHICH HE HAS ALLOWED RELIEF OF RS.80,85,000/- ON ACCOUNT OF THE PROVISIONS FOR BAD & DOUBTFUL DEBTS ON STANDARD ASSETS. THIS ISSUE IS AL SO COVERED IN FAVOUR OF ASSESSEE BY THE ORDER DATED 22.06.2016. THE FINDING S OF THE HON'BLE TRIBUNAL ARE CONTAINED IN PARA 8 ONWARDS, FOR THE S AKE OF COMPLETENESS, THE FINDINGS OF THE HON'BLE TRIBUNAL ARE REPRODUCED BELOW: 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAD CREATED A PROVISION OF RS.50,00,000/- WHICH INCLUDED A SUM OF RS.13,25,000 /- AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND THE BALANCE AMOUNT OF RS .36,75,000/- WAS PROVISION AGAINST STANDARD ASSETS AND THE ENTIRE AM OUNT WAS CLAIMED AS DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE PROVISIONS MADE BY THE ASSESSE E AGAINST STANDARD ASSETS WAS A CONTINGENT LIABILITY AND WHICH WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE. THE LD. CIT(A), HOWEVER, ALLOWED RELIE F TO THE ASSESSEE BY HOLDING THAT THE CLAIM OF THE ASSESSEE FALL INTO TH E MAIN PROVISIONS OF SECTION 36(1)(VIIA). TO RESOLVE THE DISPUTE IT IS IMPORTANT TO VISIT THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND WH ICH FOR THE SAKE OF CONVENIENCE ARE REPRODUCED BELOW. 36(1)(VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A)A SCHEDULED BANK [NOT BEING A BANK INCOR PORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON -SCHEDULED BANK OR A CO-OPERATIVE BANK OUTSIDE INDIA] OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF PERCENT OF THE TOTAL INCOME (COM PUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND AN ITA NOS.648&655(ASR)/2016 ASSESSMENT YEAR: 2013-14 4 AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGREGATE A VERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK CO MPUTED IN THE PRESCRIBED MANNER. PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS DEDUCTION IN RESP ECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY T HE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCOR DANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF, FOR AN AMOU NT NOT EXCEEDING FIVE PERCENT OF THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR: PROVIDED FURTHER THAT FOR THE RELEVANT ASSESSMENT Y EARS COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL,2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2005, THE PROVISIONS OF THE FIRST PROVISO SH ALL HAVE EFFECT AS IF FOR THE WORDS FIVE PERCENT, THE WORDS TEN PERCEN T HAD BEEN SUBSTITUTED: PROVIDED ALSO THAT A SCHEDULED BANK OR A NON-SCHEDU LED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPECIFIED IN THE FOREGOING PROVISIONS, FOR AN AMOUNT NOT EXCEEDING THE INCOME DERIVED FROM REDEMPTION OF SECURITIES IN ACCORDANCE WITH A SCHEM E FRAMED BY THE CENTRAL GOVERNMENT: PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UN DER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN TH E RETURN OF INCOME UNDER THE HEAD PROFITS AND GAINS BUSINESS O R PROFESSION. FROM THE ABOVE PROVISIONS IT CAN BE SEEN THAT DEDUC TION U/S 36(1)(VIIA) OF THE ACT IS ALLOWED IN RESPECT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS THIS SECTION DOES NOT DIFFERENTIATE BETWEEN PROVISION ON BAD ASSETS AND PROVISION ON STANDARD ASSETS. THIS DEDUCTION EXCLUS IVELY ALLOWS DEDUCTION IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT MENTIONED IN THE VARIOUS CLAUSES OF SUB-SECTION(1) OF SECTION 36 OF THE ACT. THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS A LLOWED ONLY IN RESPECT OF CERTAIN SPECIFIC CATEGORIES OF ASSESSEE MENTIONED I N THE CLAUSE LIKE BANKS, FINANCIAL INSTITUTIONS, ETC. WHO ARE IN BUSINESS OF LENDING MONEY. IT IS NOT ALLOWED EVEN TO NON-BANKING FINANCIAL INSTITUTIONS SINCE THEY ARE NOT INCLUDED IN THIS CLAUSE. IT IS SEEN THAT THOUGH SEC TION 36(1)(VII) STATES THAT DEDUCTION FOR PROVISION IS ALLOWABLE IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, THE COMPUTATION OF SUCH DEDUCTION I S MADE WITH REFERENCE TO TOTAL INCOME OF THE SPECIFIED BANKS BASED UPON QUANTUM OF AVERAGE ADVANCES. THE DEDUCTION OF THE PROVISIONS IS NEITHE R LIMITED TO THE QUANTUM OF BAD DEBTS IN THE BOOKS NOR IS COMPUTED WITH REFE RENCE TO THE QUANTUM OF STANDARD ASSETS. THE DEDUCTION IN THIS CLAUSE REFER S TO ALLOWABLE PROVISIONS OF ANTICIPATED DEFAULT ON THE LOANS AND ADVANCES MADE IN RESPECT OF TOTAL ASSETS INCLUDING STANDARD ASSETS A ND THE CLAIM OF THE ASSESSEE DOES NOT FALL INTO THE PROVISO TO SECTION 36(1)(VIIA) AS THE PROVISO DEALS WITH FURTHER DEDUCTION FOR PROVISIONS ON BAD AND DOUBTFUL DEBTS. THE CLAIM OF THE ASSESSEE IS COVERED IN THE MAIN PROVIS IONS OF SECTION ITA NOS.648&655(ASR)/2016 ASSESSMENT YEAR: 2013-14 5 36(1)(VIIA) OF THE ACT. THE LEARNED CIT(A) HAS PASS ED A VERY EXHAUSTIVE AND SPEAKING ORDER AND WE DO NOT FIND ANY INFIRMITY IN THE SAME. THEREFORE, FOLLOWING THE ABOVE WE DISMISS THE APPE AL FILED BY REVENUE. 5. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES AND WHEREAS THE APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.01.2018 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03.01.2018. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER