GOPINATH PATIL PARSIK JANATA SAHAKARI BANK, THANE V. ACIT CIR 3, THANE

ITA 7134/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1776 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 29-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H M WANARE
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Bad and doubtful debts; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7134/M/2012 ASSESSMENT YEAR: 2009-10 M/S. GOPINATH PATIL PARSIK JANATA SAHAKARI BANK LTD., SAHAKARMURTI GOPINATH SHIVRAM PATIL BHAWAN, PARSIK NAGAR, KHAREGAON, KALWA, THANE 400 605 PAN: AAAAP 0267H VS. ACIT CIRCLE-3, VARDHAN BUILDING, M.I.D.C. WAGLE INDL. ESTATE, THANE (APPELLANT) (RESPONDENT) ITA NO.7515/M/2012 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME- TAX, CIRCLE -3 ROOM NO.2, B-WING, 6 TH FLOOR, ASHAR IT PARK, RD. NO.16Z, WAGLE ESTATE, THANE (W) VS. M/S. GOPINATH PATIL PARSHIK JANATA SAHAKARI BANK LTD., SAHAKARMURTI GOPINATH PATIL BHAWAN, PARSIK NAGAR, KALWA, THANE 400 605 PAN: AAAAP 0267H (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ASHOK J. PATIL, A.R. REVENUE BY : SHRI H.M. WANARE, D.R. DATE OF HEARING : 29.09.2015 DATE OF PRONOUNCEMENT : 31.12.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED ARE CROSS APPEALS ONE BY THE A SSESSEE AND THE OTHER BY THE REVENUE AGAINST THE ORDER DATED 28.09.2012 O F THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ITA NO.7134/M/2012 ITA NO.7515/M/2012 M/S. GOPINATH PATIL PARSHIK JANATA SAHAKARI BANK LTD . 2 ASSESSMENT YEAR 2009-10. FIRST WE TAKE UP THE ASSE SSEES APPEAL I.E. ITA NO.7134/M/2012 ITA NO.7134/M/2012 2. THE ASSESSEE IN ITS APPEAL HAS AGITATED THE ACTI ON OF THE LOWER AUTHORITIES IN DISALLOWANCE OF DEDUCTION ON ACCOUNT OF PROVISIO N FOR BAD AND DOUBTFUL DEBTS AS PER SECTION 36(1)(VIIA) AMOUNTING TO RS.2, 44,82,235/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CO-OPERATIVE BANK AND ENGAGED IN THE BUSINESS OF BANKING. FROM THE D ETAILS SUBMITTED BY THE BANK, THE ASSESSING OFFICER (HEREINAFTER REFERRED T O AS THE AO) OBSERVED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AS PER SECTION 36(1)(VIIA) AT RS.2,5 1,08,683/- ON THE BASIS OF 7.5% OF THE TOTAL INCOME AND FURTHER 10% OF THE AGG REGATE AVERAGE ADVANCES OF THE RURAL BRANCHES AMOUNTING TO RS.2,93,14,152/-. THE TOTAL DEDUCTION CLAIMED IN THIS RESPECT WAS, THUS, AT RS.5,44,82,235/-. TH E AO, HOWEVER, OBSERVED THAT THE ASSESSEE BANK HAD CLAIMED THE RURAL BRANCHES OF THE BANK AT THREE BUT AFTER THE DETAILS IN THIS RESPECT WERE VERIFIED, THE ASSE SSEE ACCEPTED THAT ONE BRANCH OF THE BANK WAS NOT THE RURAL BRANCH AS OBSERVED FR OM THE POPULATION CERTIFICATES ISSUED BY THE VARIOUS AUTHORITIES IN T HIS REGARD. HE THEREFORE OBSERVED THAT THE AGGREGATE AVERAGE ADVANCES MADE B Y RURAL BRANCHES, THUS, CAME TO RS.18,81,99,000/- AND THE 10% OF THE AGGREG ATE AVERAGE ADVANCES OF THE RURAL BRANCHES WOULD COME AT RS.18,81,99,000/-A ND NOT AT RS.2,93,14,152/- AS CLAIMED BY THE ASSESSEE. THE AO FURTHER OBSERVE D THAT THE ASSESSEE HAD ONLY MADE A PROVISION OF BAD AND DOUBTFUL DEBTS TO THE TUNE OF RS.3,00,00,000/- WHICH HAS BEEN DEBITED TO PROFIT & LOSS ACCOUNT AND SUBSEQUENTLY ADDED BACK IN THE COMPUTATION OF INCOM E. HOWEVER, AGAINST THIS, THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.5,44,82, 235/- UNDER SECTION 36(1)(VIIA). THE AO OBSERVED THAT AS PER THE RELEV ANT PROVISIONS, THE DEDUCTION CLAIMED IN THIS SECTION IS LIMITED BY THE QUANTUM OF PROVISION OF BAD ITA NO.7134/M/2012 ITA NO.7515/M/2012 M/S. GOPINATH PATIL PARSHIK JANATA SAHAKARI BANK LTD . 3 AND DOUBTFUL DEBTS MADE. HE THEREFORE DISALLOWED T HE EXCESS DEDUCTION OF RS.2,44,82,235/- AND RESTRICTED THE DEDUCTION TO RS .3,00,00,000/-. 4. IN APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOW ANCE SO MADE BY THE AO HOLDING THAT THE DEDUCTION UNDER SECTION 36(1)(V IIA) CAN ONLY BE ALLOWED TO THE EXTENT OF PROVISION OF BAD AND DOUBTFUL DEBTS T O THE BOOKS OF ACCOUNT AND DEBITED TO THE PROFIT & LOSS ACCOUNT. THE LD. CIT( A) ALSO REJECTED THE ALTERNATE PLEA THAT THE PROVISIONS MADE UNDER THE BAD AND DOU BTFUL DEBTS IN THE PROFIT & LOSS ACCOUNT IS TO THE EXTENT OF RS.35,00,00,000/- WHICH SHOULD BE ALLOWED ON THE GROUND THAT EXCEPT THE PROVISION FOR BAD AND DO UBTFUL DEBTS AT RS.3,00,00,000/-, OTHER PROVISION SUCH AS STANDARD ASSET PROVISION AMOUNTING TO RS.50,00,000/- WAS NOT OF THE NATURE SPECIFIED I N SECTION 36(1)(VIIA). 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS FAIR LY ADMITTED THAT THE ABOVE ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL IS SQUAR ELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE PUNE BENCH OF THE T RIBUNAL IN THE CASE OF SHRI WARANA SAH. BANK LTD. VS. ACIT IN ITA NO.2508/PN/2 012 AND ITA NO.347/PN/2013 VIDE ORDER DATED 16.04.14 WHEREIN TH E TRIBUNAL, AFTER ANALYZING THE PROVISIONS OF SECTION 36(1)(VIIA) AND RELYING UPON ANOTHER DECISION OF THE TRIBUNAL IN THE CASE OF SHRI MAHAL AXMI CO-OP BANK LTD. VS. ITO VIDE ITA NO.1658/PN/2011 DATED 29.10.13, HAS H ELD THAT THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PROVISION ACTUALLY CREDITED IN THE BOOKS OF TH E ASSESSEE IN THE RELEVANT YEAR. 6. SO FAR AS THE ALTERNATE PLEA OF THE ASSESSEE IS CONCERNED, THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE MUMBAI BENC H OF THE TRIBUNAL IN THE CASE OF STATE BANK OF INDIA VS. DCIT (2014) 148 I TD 71 WHEREIN THE TRIBUNAL HAS HELD THAT WHEN THE CLAIM OF DEDUCTION HAS BEEN SPECIFICALLY PROVIDED UNDER SECTION 36(1)(VIIA), THEN MERELY PRO VISION MADE ON THE BASIS OF ITA NO.7134/M/2012 ITA NO.7515/M/2012 M/S. GOPINATH PATIL PARSHIK JANATA SAHAKARI BANK LTD . 4 RBI GUIDELINES DOES NOT BECOME ALLOWABLE. IN VIEW OF THE ABOVE, THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE AND THE SAME IS ACCORDINGLY DISMISSED. 7. NOW COMING TO THE APPEAL OF THE REVENUE I.E. ITA NO.7515/M/2012. ITA NO.7515/M/2012 8. THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS RELATING TO THE AMORTIZATION OF LOSS ON ACCOUNT OF PREMIUM PAID ON HTM (HELD TO MATURITY) INVESTMENTS. AT THE OUTSET, THE LD. A.R. OF THE AS SESSEE HAS STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF HDFC BANK LTD. VS. DCIT I N ITA NO.375/M/2012 & OTHERS VIDE ORDER DATED 12.11.14. 9. WE HAVE GONE THROUGH THE CASE LAW RELIED UPON BY THE ASSESSEE. IN THE CASE OF HDFC BANK LTD. (SUPRA), THE TRIBUNAL HAS AL LOWED THE AMORTIZATION OF LOSS ARISEN ON ACCOUNT OF PREMIUM PAID ON INVESTME NTS HELD TO MATURITY AS DEDUCTABLE FOLLOWING THE DECISION OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 . THE LD. D.R. HAS FAIRLY AGREED THAT THE ISSUE IS SQ UARELY COVERED BY THE ABOVE DECISION. FURTHER, THE LD. A.R. OF THE ASSESSEE HAS BROUGHT O UR ATTENTION TO THE ANOTHER DECISION OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF CIT VS. THANE BHARAT SAHAKARI BANK LTD. IN ITA NO.1117 OF 2 013 DECIDED ON 17.03.15 WHEREIN THE HONBLE BOMBAY HIGH COURT HAS UPHELD TH E FINDING OF THE TRIBUNAL HOLDING THAT THE EXPENDITURE ON ACCOUNT OF RECLASSIFICATION OF HELD TO MATURITY, SECURITIES REPRESENT REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE AND IS THUS REQUIRED TO BE SPREAD OVER THE LIFE OF THE SECURITY AND IS PROPORTIONATELY ALLOWABLE AS RIGHT OFF FROM YEAR TO YEAR AS PER THE GUIDELINES ISSUED BY RBI. ITA NO.7134/M/2012 ITA NO.7515/M/2012 M/S. GOPINATH PATIL PARSHIK JANATA SAHAKARI BANK LTD . 5 10. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WE LL AS OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2015. SD/- SD/- (N.K. BILLAIYA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.12.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.