THE BHARAT COOPERATIVE BANK (MUMBAI ) LTD, MUMBAI V. ACIT 1(1), MUMBAI

ITA 6617/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMAIR TEKRIWALDR
• Keywords: Opportunity of being heard; Bad and doubtful debts

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6617/MUM/2013 ASSESSMENT YEAR 2007-08 THE BHARAT COOPERATIVE BANK (MUMBAI) LTD., 64/72, MODY STREET FORT, MUMBAI-400001 / VS. ACIT-1(1), 579, AAYAKAR BHAVAN, MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. AAAAT0030E !' # / ASSESSEE BY SHRI BHUPENDRA SHAH $ / REVENUE BY SHRI SMAIR TEKRIWAL-DR $% & # ' / DATE OF HEARING : 12/10/2015 & # ' / DATE OF ORDER: 21/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 23/09/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND PRESSED IN THIS APPEAL PERTAINS TO ADDITION OF RS.2,63,69,005/- OUT OF THE PROVISION FOR BAD AND D OUBTFUL DEBTS, EVEN THOUGH THE STANDARD ASSET RESERVE IS CR EATED AS PER RBI NORMS, DISREGARDING THE DECISION FROM HONB LE THE BHARAT COOPERATIVE BANK (MUMBAI) LTD.. ITA NO.6617/MUM/2013 2 SUPREME COURT IN THE CASE OF KARNATAKA BANK LTD (25 TAXMAN 235)(SC) AND DECISION OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF (A.Y. 2008-09) (ITA NO.7313/MUM/201 1). 2. DURING HEARING OF THIS GROUND, THE LD. COUNSEL FOR THE ASSESSEE ADVANCED HIS ARGUMENTS WHICH ARE IDENT ICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. DR, DID NOT CONTROVERT THE ASSERTION OF THE LD. AR AND THE ORDE R OF THE TRIBUNAL. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER IN ITA NO.7313/MUM/2011, O RDER DATED 15/03/2013 FOR READY REFERENCE:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-L, MUMBAI DT.14.7.2011 PERTAINING TO A.Y. 200 8-09. 2. THE SHORT GRIEVANCE OF THE ASSESSEE IS THAT, THE A SSESSING OFFICER ERRED IN ADDING RS. 3,79,05,255/- OUT OF PROVISION FOR BAD AND DOUBTFUL DEBTS EVEN THOUGH THE STANDARD ASSET RESERVE IS CREATED AS PER REI NORMS. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCT ION OF RS. 3,79,05,255/- ON ACCOUNT OF PROVISION FOR BAD AND DOU BTFUL DEBTS ALLOWABLE U/S. 36 OF THE ACT. THE AO FURTHER OBSERVED THAT THE SAID CLAIM HAS BEEN MADE BY THE ASSESSEE IN THE COMPUTAT ION OF INCOME. ALTHOUGH THE ASSESSEE HAS NOT SPECIFIED THE SUB- SECTION/CLAUSE OF THE ACT UNDER WHICH IT HAS CLAIMED THE DEDUCTION. THE AO WAS OF THE OPINION THAT PROVISIONS OF SEC. 36 (1)(VIIA) OF THE ACT SQUARELY APPLY. THE AO FURTHER OBSERVED THAT U/S. 3 6(1 )(VII) OF THE ACT, DEDUCTION IS ALLOWED IN RESPECT OF BAD DEBT S ACTUALLY WRITTEN OFF DURING THE YEAR. HOWEVER; IN THE CASE OF B ANKING COMPANIES IN PARTICULAR SCHEDULED BANK, CLAUSE (VIIA) SECTION 36(1) THE BHARAT COOPERATIVE BANK (MUMBAI) LTD.. ITA NO.6617/MUM/2013 3 APPLIES WHERE THERE CAN BE TWO DEDUCTIONS, (1). ON AC COUNT OF PROVISION FOR BAD DEBTS AND (2) ON ACCOUNT OF BAD DEB TS ACTUALLY WRITTEN OFF. IN ANY CASE, THE DEDUCTION TO SUCH ASSE SSEE CANNOT EXCEED THE BAD DEBTS ACTUALLY WRITTEN OFF IN THE BOO KS OF ACCOUNT. THE AO FURTHER OBSERVED THAT SINCE THE ASSESSEE HAS CL AIMED THE DEDUCTION IN ITS COMPUTATION OF INCOME AND HAS NOT DEBITED BY 'WAY OF PROVISION TO ITS PROFIT AND LOSS ACCOUNT, THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. VIDE AFTER DT. 19.11.201 0, THE ASSESSEE EXPLAINED THAT IT HAS MADE A PROVISION TOWARDS STANDA RD ASSET RESERVE AT RS. 1.25 CRORES BY DEBITING THE SAME IN P&L ACCOUNT. THIS WAS DONE AS PER PRUDENTIAL NORMS PRESCRIBED BY RESERVE B ANK OF INDIA. HOWEVER, THE AD OBSERVED THAT THE PROVISION SO DEBITED HAS BEEN ADDED BACK BY THE ASSESSEE IN ITS COMPUTATION OF INCOME. FURTHER, NO EXPLANATION HAS BEEN GIVEN IN RESPECT OF THE CLAIM FOR DEDUCTION OF PROVISION OF RS. 3,79,05,255/- AND ADDE D BACK THE PROVISION OF RS. 3,79,05,255/- TO THE RETURNED INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A ) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FILED A DETAILED CHART EXPLAINING THE CALCULATION OF DEDUCTION CLAIMED U/S 36(VIIA) OF THE ACT AND REITERATED THAT THE PROVISIONS OF SEC. 36(VIIA ) SQUARELY APPLY IN THE CASE OF THE ASSESSEE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORT ED THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENC E BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. THE' COMPUTATION O F INCOME, IS EXHIBITED AT PAGE- 44 AND, A PERUSAL' OF THIS COM PUTATION SHOW THAT THE ASSESSEE HAS ADDED BACK STANDARD ASSET RESERV E AMOUNTING TO RS. 1.25 CRORES TO ITS INCOME. WE FURTHER FIND IN THE SAME COMPUTATION OF INCOME, THE ASSESSEE HAS DEDUCT ED PROVISION FOR BAD AND DOUBTFUL DEBTS ALLOWABLE U/S. 36(VIIA) A T RS.3,79,05,255/-. HOWEVER, A PERUSAL OF THE STATEMEN T OF ACCOUNTS OF THE ASSESSEE SHOW THAT ALTHOUGH THE ASSESSEE HAS CREATED A PROVISION OF RS. RS.25 CRORES IN ITS BOOKS OF ACCOUNT BUT HAS NOT CREATED ANY PROVISION OF RS.3.79 CRORES. CONSIDERING TH E PROVISIONS OF SEC. 36(VII) AND (VIIA), NO DOUBT IN THE CASE OF A BANKING COMPANY, A SCHEDULED BANK AS IN THE CASE OF THE ASS ESSEE TWO DEDUCTIONS ARE ALLOWED, TO THE ASSESSEE, FIRST BEING PROVISION FOR BAD AND DOUBTFUL DEBTS AT THE RATE OF 7.5% NOT EXCEE DING 10% OF THE BHARAT COOPERATIVE BANK (MUMBAI) LTD.. ITA NO.6617/MUM/2013 4 RURAL DEBT AND SECOND PROVISION FOR BAD AND DOUBTFUL DE BT ACTUALLY WRITTEN OFF DURING THE YEAR. THE ACTUAL PROVISION WRITTE N OFFERING THE YEAR AS FOUND FROM THE STATEMENT OF ACCOUNT IS ON LY RS.1.25 CRORES, ALTHOUGH THE SAME HAS BEEN ADDED BACK WHILE C OMPUTING THE INCOME AS THE ASSESSEE WANTED TO CLAIM RS. 3.79 CRORES. IN OUR CONSIDERATE VIEW AND IN ALL FAIRNESS TO THE ASSESSEE, SINCE THE ASSESSEE HAS ACTUALLY WRITTEN OF RS.1.25 CRORES IN BO OKS, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM FOR THE PROVI SIONS OF BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.1.25 CRORES O NLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THE ONLY G RIEVANCE OF THE ASSESSEE IS THAT THE ADDITION OF RS.3,79,05,255 /- WAS WRONGLY MADE BY THE ASSESSING OFFICER OUT OF THE PR OVISION FOR BAD AND DOUBTFUL DEBTS, MORE SPECIFICALLY WHEN THE STANDARD ASSET RESERVE IS CREATED AS PER RBI NORMS. WE FIND THAT THE TRIBUNAL FOR A.Y. 2008-09 (ITA NO.7313/MUM/2011), I N THE CASE OF ASSESSEE ITSELF, VIDE ORDER DATED 15/03/201 3, IDENTICALLY CONCLUDED THAT SINCE THE ASSESSEE IS AC TUALLY WRITTEN OFF THE IMPUGNED AMOUNT IN ITS BOOKS, THE A SSESSING OFFICER WAS DIRECTED TO ALLOW THE CLAIM FOR THE PRO VISION OF BAD AND DOUBTFUL DEBTS. THUS, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AS THE DEDUCTION CLAIMED IS AT THE RATE OF 7.5%, THEREFORE, WE FIND FORCE IN TH E CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE, CONSEQUENTLY, THE ASSESSING OFFICER IS TO DECIDE THE CASE OF THE ASSESSEE IN TH E LIGHT OF THE THE BHARAT COOPERATIVE BANK (MUMBAI) LTD.. ITA NO.6617/MUM/2013 5 AFORESAID DECISION OF THE TRIBUNAL, THUS, THE APPEA L OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE A SSESSEE BE GIVEN OPPORTUNITY OF BEING HEARD WITH FURTHER LIBER TY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 12/10/2015. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % MUMBAI; ( DATED : 21/10/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 1# ( *+ ) / THE CIT, MUMBAI. 4. 0 0 1# / CIT(A)- , MUMBAI 5. 3$4 .# , 0 *+' * 5 , % / DR, ITAT, MUMBAI 6. 6! 7% / GUARD FILE. / BY ORDER, /3+# .# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI.