VASAI JANTA SAHAKARI CO OP BANK LTD, THANE V. ACIT CIR 4, THANE

ITA 6863/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1418 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6863/M/2016 ASSESSMENT YEAR: 2011-12 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD., MRUDHGANDH, AZAD ROAD, PARNAKA, VASAI ROAD, THANE-401202 PAN: AACFV 5222D VS. DCIT CIRCLE-4, THANE A-WING, 6 TH FLOOR, ASHAR I.T. PARK, WAGLE INDL. ESTATE, THANE 400 604 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 18.09.2018 DATE OF PRONOUNCEMENT : 14.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 01.08.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.2,79,1 5,899/- BEING THE DISALLOWANCE AS MADE BY THE AO BY DENYING DEDUC TION CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT. ITA NO.6863/M/2016 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD. 2 3. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS MADE PRO VISIONS FOR BAD AND DOUBTFUL DEBTS TO THE TUNE OF RS.64,00,000/ - IN THE P & L ACCOUNT WHEREAS THE DEDUCTION CLAIMED UNDER SECTI ON 36(1)(VIIA) WAS OF RS.68,89,103/- AND UNDER SECTION 36(1)(VII) RS.2,74,26,796/- AGGREGATING TO RS.3,43,15,900/-. ACCORDING TO THE AO THE ASSESSEE HAS CLAIMED EXCESSIVE DEDUCTION TO THE TUNE OF RS.2,79,15,899/- WHICH IS OVER AND ABOVE THE PRO VISIONS MADE IN THE BOOKS OF ACCOUNTS WHICH IS NOT ALLOWABL E UNDER THE ACT. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED T O THE ASSESSEE AS TO WHY THE EXCESSIVE DEDUCTION CLAIMED UNDER SECTION 36(1)(VIIA) AND 36(1)(VII) OF THE ACT SHOUL D NOT BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 24.01.201 4 AND 04.03.14. THE AO WHILE BRUSHING ASIDE THE SUBMISSI ONS OF THE ASSESSEE CAME TO THE CONCLUSION THAT ASSESSEE CAN C LAIM DEDUCTION UNDER SECTION 36(1)(VIIA) UP TO 7.5% OF T HE NET INCOME AS CALCULATED ACCORDING TO RULES OR 10% OF THE AGGR EGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES BUT THE SAID DE DUCTION IS LIMITED TO THE PROVISIONS MADE IN THE BOOKS OF ACCO UNTS. ACCORDING TO THE AO DEDUCTION UNDER SECTION 36(1)(V II) CAN BE CLAIMED UP TO THE PROVISIONS MADE IN THE BOOKS OF A CCOUNTS. THE ASSESSEE HAS ONLY CREDITED PROVISIONS FOR BAD A ND DOUBTFUL RESERVES OF RS.64 LAKHS AND THEREFORE EXCESS CLAIM OF RS.2,79,15,899/- IS NOT ALLOWABLE AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER OF TH E AO. ITA NO.6863/M/2016 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD. 3 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION UNDER B OTH SECTIONS I.E. UNDER SECTION 36(1)(VII) AND ALSO UNDER SECTIO N 36(1)(VIIA) OF THE ACT. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF RS.2,74,26,796/- UNDER SECTION 36(1)(VII) BY RE FERRING TO PAGE NO.81 TO 85 WHICH CONTAINED COMPREHENSIVE DETAILS A S TO THE INDIVIDUAL BORROWER, AMOUNT OF LOAN, PRINCIPLE AND INTEREST OUTSTANDING, DATE OF CREATING PROVISIONS, AMOUNT OF PROVISIONS AND AMOUNTS WRITTEN OFF. THE LD. A.R. POINTED OUT THAT ASSESSEE HAS IN FACT CREATED PROVISIONS OF THE EQUAL AMOUNT IN THE EARLIER YEARS EQUAL TO RS.2,74,26,796/- AS IS APPARENT AND CLEAR FROM THE PAGE NO.81 TO 85, ANNEXURE A TO ANNEXURE E. TH E ASSESSEE ALSO REFERRED TO PAGE NO.30 OF THE PAPER BOOK BY PO INTING OUT THAT THE TOTAL BAD AND DOUBTFUL DEBTS RESERVED AS O N 31.03.2011 WERE RS.20,80,50,448/-. THE LD. A.R. SUBMITTED THA T THE PROVISIONS OF SECTION 36(1)(VII) AND SECTION 36(1)( VIIA) ARE DIFFERENT AND INDEPENDENT TO EACH OTHER. PROVISION OF SECTIO N 36(1)(VII) PROVIDES/PRE-SUPPOSES THAT THAT AMOUNT WHICH HAS BE COME BAD HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS WHERE AS THE DEDUCTION UNDER SECTION 36(1)(VIIA) IS AVAILABLE ON THE BASIS OF PROVISIONS MADE IN THE BOOKS OF ACCOUNTS SUBJECT TO THE LIMIT SPECIFIED IN THE SAID SECTION. THE LD. A.R. SUBMIT TED THAT THE ASSESSEE HAS CLAIMED RS.2,74,26,796/- UNDER SECTION 36(1)(VII) OF THE ACT AS AMOUNT ACTUALLY WRITTEN OFF AND NOT U NDER SECTION 36(1)(VIIA) OF THE ACT. SIMILARLY, RS.4,89,103/- W AS CLAIMED UNDER SECTION 36(1)(VIIA) IN THE CURRENT YEAR AGAIN ST THE PROVISIONS MADE IN THE EARLIER YEARS AGAINST THE B ALANCE OF BAD AND DOUBTFUL RESERVED ACCOUNT WHICH AT THE YEAR END WAS RS.20,80,50,448/-. THE LD. A.R. RELIED ON THE DECI SION OF ITA NO.6863/M/2016 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD. 4 HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIA N BANK LTD. VS. CIT (343 ITR 270)(SC) IN DEFENSE OF HIS ARGUMEN TS CLAIMING THAT THE ASSESSEE REVISED ITS RETURN OF INCOME AND CLAIMED DEDUCTION OF RS.2,74,26,796/-THEREIN. THE LD. A.R. STATED THAT THE APEX COURT HAS HELD THAT SECTION 36(1)(VII) AND SECTION 36(1)(VIIA) ARE TWO INDEPENDENT PROVISIONS AND COND ITIONALITIES SPECIFIED UNDER SECTION 36(1)(VII) AND SECTION 36(1 )(VIIA) ARE COMPLETELY DIFFERENT. THEREFORE, THE ACTION OF THE LD. CIT(A) IN AFFIRMING THE ORDER OF THE AO DISALLOWING THE CLAIM OF DEDUCTION OF RS.2,74,26,796/- ON THE GROUND THAT NO PROVISION S OF THE SAID AMOUNT WAS MADE IN THE BOOKS OF ACCOUNTS IS TOTALLY WRONG AND AGAINST THE PROVISION OF THE ACT. FINALLY, THE LD. A.R. PRAYED BEFORE THE BENCH THAT IN VIEW OF THE SAID PROVISION S, THE DEDUCTIONS OF RS. 2,74,26,796/- U/S 36(1)(VII) AND RS. 4,89,103/- U/S 36(1)(VIIA) AS CLAIMED BY THE ASSESS EE SHOULD DIRECTED TO BE ALLOWED BY REVERSING THE ORDER OF LD . CIT(A). 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE D ECISION OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISIONS CITED BY THE LD. A.R. THE DISPUTE IS WITH REGARD TO THE CLAIM OF DEDUCTIONS UNDER SECTION 36(1)(VII) AND SECTION 36( 1)(VIIA) OF THE ACT . ACCORDING TO THE AO, THE ASSESSEE SHOULD CRE ATE PROVISIONS FOR BAD AND DOUBTFUL DEBTS ONLY THEN THE DEDUCTION COULD BE ALLOWED UNDER SECTION 36(1)(VII) AND SECTION 36(1)( VIIA) OF THE ACT. THE ORDER OF THE AO IS ALSO AFFIRMED BY THE LD. CIT (A) GIVING THE SAME REASONING. WE HAVE PERUSED THE FACTS OF THE C ASE CAREFULLY IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN ITA NO.6863/M/2016 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD. 5 THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT (SUPR A) AND AFTER READING THE PROVISIONS OF THE ACT VIS--VIS THE RAT IO LAID DOWN, THERE IS NO IOTA OF DOUBT AS TO THE AMBIT AND SCOPE OF PROVISIONS OF SECTION 36(1)(VII) AND SECTION 36(1)(VIIA) OF TH E ACT. THE HONBLE APEX COURT HAS HELD THAT CONDITIONALITY FO R CLAIM OF DEDUCTION UNDER SECTION 36(1)(VII) AND SECTION 36(1 )(VIIA) OF THE ACT ARE DIFFERENT AND BOTH ARE INDEPENDENT SECTIONS OF EACH OTHER. THEREFORE THERE IS MERIT IN THE CONTENTIONS AND ARGUMENTS OF THE LD DR THAT BAD DEBTS ACTUALLY WRI TTEN OFF OF RS. 2,74,26,796/- SHOULD BE ALLOWED U/S 36(1)(VII) AND RS. 4,89,103/- SHOULD BE ALLOWED U/S 36(1)(VIIA) AGAINS T THE B.D.D.R. WHICH IS MORE THAN 20.00 CR. SO RESPECTFUL LY FOLLOWING THE RATIO LAID DOWN IN THE HONBLE APEX COURT IN TH E ABOVE DECISION, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTIONS TO THE ASSESSEE OF RS.2,74, 26,796/- UNDER SECTION 36(1)(VII) AS ACTUALLY WRITTEN OFF AN D SECTION 36(1)(VIIA) QUA WHICH THE PROVISION WAS CREATED IN THE EARLIER YEARS. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.11.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI ITA NO.6863/M/2016 M/S. THE VASAI JANTA SAHAKARI CO-OP BANK LTD. 6 THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.