Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 4689 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
12 year(s) 4 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-06-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
06-04-2016
Assessment Year
2000-2001
Appeal Filed On
16-01-2004
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 1691 / KOL / 200 2 & ITA NO. 77/KOL/2004 ASSESSMENT YEARS :1998-99 & 1999-00 ALLAHABAD BANK, C/O SHRI G.P.BOSE, ASSTT. GENERAL MANAGER, FINANCE & ACCOUNTS, ALLAHABAD BANK, HEAD OFFICE, 2, N.S. BOSE, ROAD, KOLKATA 700 001 [ PAN NO.AACCA 8464 F ] V/S . DCIT, CIRCLE-7, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI PIJUSH DEY, FCA /BY RESPONDENT SHRI G.MALLIKARJUNA, CIT-DR /DATE OF HEARING 06-04-2016 /DATE OF PRONOUNCEMENT 08-06-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- BOTH APPEALS BY ASSESSEE ARE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-VII, KOLKATA DATED 31.05.2002 AND 01.11.2003. ASSESSMENTS WERE FRAMED BY ADDL. CIT, SPECIAL RANGE -3/DCIT, CIRCLE-7, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE THEIR ORDERS DATED 30.03.2011 AND 26.03. 2002 FOR ASSESSMENT YEARS 1998-99 & 1999-00 RESPECTIVELY. 2. BOTH THE APPEALS ARE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 2 SHRI PIJUSH DEY, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI G.MALLIKARJUNA, LD. DEPARTMENTAL REPRESENT ATIVE APPEARED ON BEHALF OF REVENUE. FIRST WE TAKE UP ITA NO.1691/KOL/2002 FOR AY 98-99 . 3. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1.0 THAT THE LD. CIT(A) WAS WRONG IN DISALLOWING T HE APPELLANTS CLAIM FOR DEDUCTION OF RS.2,63,42,926/- BEING EXCESS RECEIPT OF INTEREST SHOWN BY THE APPELLANT AND ASSESSED IN EARLIER YEARS. 1.1 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT E XCESS INTEREST OF RS.2,63,42,926/- ASSESSED TO TAX IN EARLIER YEARS W AS ON ACCOUNT OF NON- PERFORMING ASSETS (NPAS) AND ACCORDING TO RBI GUIDE LINES, NO INTEREST ON SUCH NPAS CAN BE CHARGED AND IF ALREADY CHARGED, SU CH INTEREST IS TO BE REVERSED IN THE ACCOUNTS AND IT WAS THIS EXCESS INT EREST CHARGED IN EARLIER YEAR WHICH WAS CLAIMED AS DEDUCTION. 1.2 THAT THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF RS.2,63,42,92,926/- ON THE GROUND THAT SUCH DEDUCTI ON CANNOT BE ALLOWED UNDER SECTION 29, 37, 30 TO 42D OF THE INCOME TAX A CT, 1961 2.0 THAT THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF RS.1,08,86,71,010/- BEING PROVISION FOR BAD DEBTS, ON THE GROUND OF INSERTION OF AN EXPLANATION IN SECTION 36(1)(VII) BY FINANCE ACT , 2001 WITH RETROSPECTIVE EFFECT FROM 01.04.1989. 2.1 THAT THE LD. CIT(A) WHILE CONFIRMING THE DISALL OWANCE OF RS.1,08,86,71,010/- FAILED TO APPRECIATE THE VARIOUS JUDICIAL DECISIONS CITED BY THE APP IN SUPPORT OF ALLOWANCE OF THE CLAIM. 3.0 THAT THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE OF RS.46,60,52,010/- BEING BAD DEBT WRITTEN OFF IN THE APPELLANTS BOOK ON THE GROUND THAT THE BAD DEBT SO WRITTEN OFF DID NOT EXC EED THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS PER THE PRO VISO TO SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961. 3.1 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE CLAIM IS ADMISSIBLE TO THE APPELLANT AS PER THE PROVISION OF SECTION 36(1)(VII ) AND ACCORDING TO THE BOARD CIRCULAR NO. 258 DATED 14.06.1979 AND CIRCULAR NO. 421 DATED 12.06.1985. 4.0. THAT THE LD. CIT(A) WAS WRONG IN DISALLOWING T HE APPELLANTS CLAIM OF DEDUCTION OF THE FOLLOWING ITEMS IN COMPUTING ITS B OOK PROFIT U/S. 115JA OF THE INCOME TAX ACT:- A) PROVISION FOR BAD AND DOUBTFUL DEBTS: RS.1,0 8,86,71,010/- B) PROVISION FOR STATIONERY WASTAGE : RS.25 ,00,000/- C) PROVISION FOR INTANGIBLE ASSETS : RS .3,17,00,000/- D) PROVISION FOR FRAUD AND FORGERY : RS. 1,33,07,804/- E) PROVISION FOR REVENUE EXPENSES : RS.1,08, 00,000/- F) ADJUSTMENT OF UNABSORBED DEPRECIATION BROUGHT FORWARD AS PER BOOK : RS.22,61,00,0 00/- ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 3 4.1 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE APPELLANT IN ITS BOOK WA S UNASCERTAINED LIABILITY AS THE SAME WAS WORKED OUT ON THE BASIS OF RBI GUIDELI NES, BANKING COMPANIES (A&T) ACT, 1970, BAKING REGULATION ACT, 1949 AND IS ALSO SUPPORTED BY THE DECISION OF BOMBAY HIGH COURT REPORTED IN 251 ITR 1 5, DISTINGUISHING THE MADRAS HIGH COURT DECISION REPORTED IN 244 ITR 256. 4.2 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE PROVISION FOR STATIONERY WASTAGE, INTANGIBLE ASSETS, FRAUD AND FORGERY AND/F OR REVENUE EXPENSES WERE MADE AS PER GUIDELINES ISSUED BY THE RBI AND ONLY A PPROVED BY THE AUDITORS APPOINTED BY RBI AND AS SUCH ALL THESE ITEMS OF PRO VISIONS WERE NOT IN THE NATURE OF CONTINGENT AND UNASCERTAINED LIABILITIES BUT WER E ASCERTAINED LIABILITIES ON ACTUARIAL CALCULATION BASIS AS PER RBI GUIDELINES. 4.3 THAT WITHOUT PREJUDICE TO THE CONTENTIONS RAISE D IN THE PRECEDING GROUNDS THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS, PROVISION FOR STATIONERY WASTAGE, PROVISION FOR INT ANGIBLE ASSETS, PROVISION FOR FRAUD AND FORGERY WERE IN RESPECT OF DIMINUTION IN THE VALUE OF THE ASSETS AND THESE WERE NOT PROVISIONS FOR MEETING THE LIABILITI ES AND AS SUCH NOT HIT BY THE PROVISION OF SECTION 115JA OF THE IT ACT. 4.4 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE UNABSORBED DEPRECIATION OF RS.22,61,00,000/- ACTUALLY EXISTED IN THE BOOKS, AL THOUGH THE SAME WAS ADJUSTED AGAINST THE CAPITAL AS A SPECIAL MEASURE IN PRESENT ING THE ACCOUNTS N A PRESCRIBED MANNER PERMITTED Y THE GOVERNMENT OF IND IA. 5.0 THAT THE LD. CIT(A) SHOULD HAVE DELETED THE ADD ITION OF RS.243,31,65,575/- BEING PROFIT ON INVESTMENT TREADING ACCOUNT INCLUDI NG PROFIT ON ACCOUNT OF VALUATION IN THE CLOSING STOCK. 3. GROUNDS NO. 2 AND 5 RAISED BY THE ASSESSEE IN IT S APPEAL HAVE NOT BEEN PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME ARE, THEREFORE, DISMISSED AS NOT PRESSED. 4. FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO.1 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY DISAL LOWING THE DEDUCTION OF 2,63,42,926/- FOR INTEREST CHARGED TO TAX IN EARLIE R YEARS. 5. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A PUBLIC SECTOR BANK IS GOVERNED BY BANKING COMPANIES (A&T) ACT, 19 70 BANKING REGULATION ACT, 1949 AND VARIOUS RULES AND REGULATIONS FRAMED BY RESERVE BANK OF INDIA (RBI FOR SORT) FROM TIME TO TIME. DURING THE COURSE OF ASSESSMENT PROCEEDING, AO ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 4 NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION FOR A S UM OF 2,63,42,926/- FROM THE TOTAL INCOME. THE ASSESSEE EXPLAINED THAT AFORE SAID SUM REPRESENTED INTEREST INCOME EARNED BY ASSESSEE ON ITS NON-PERFO RMING ASSET IN THE EARLIER YEARS. FURTHER, ASSESSEE EXPLAINED THAT THE AFORESA ID INTEREST OUGHT NOT TO HAVE BEEN TREATED AS INCOME OF EARLIER ASSESSMENT YEAR I N TERMS OF RBI GUIDELINES. ACCORDING TO RBI GUIDELINES NO INTEREST INCOME ON N ON PERFORMING ASSETS (NPAS FOR SHORT) SHOULD BE CHARGED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. AS SUCH, THE EXCESS INTEREST ON NPAS DECLA RED BY ASSESSEE IN THE EARLIER YEAR HAS TO BE REVERSED IN THE YEAR UNDER A PPEAL. HOWEVER, AO AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS HELD THA T INTEREST EARNED AND CREDITED IN THE EARLIER YEAR CANNOT BE REVERSED AS IT IS NOT ALLOWABLE ITEM OF EXPENSE / LIABILITY IN THE YEAR UNDER CONSIDERATION . ACCORDINGLY, AO DISALLOWED THE DEDUCTION CLAIMED BY ASSESSEE AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSION OF THE LD. AR AND HAVE PERUSED THE VARIOUS SUPPORTING PAPERS AND THE RECOR DS OF THE APPELLANT, I FIND THAT THE APPELLANTS CLAIM IS NOT JUSTIFIED. THE AP PELLANT HAS SHOWN EXCESS INTEREST INCOME IN EARLIER YEARS ON CERTAIN ACCOUNT S, WHICH HAVE ACTUALLY BEEN CONVERTED INTO NPAS ACCORDING TO RBI GUIDELINES AND THAT ACCORDING TO THE RBI GUIDELINES, NO INTEREST ON NPAS BECOMES DUE TO A BA NKING COMPANY. AS SUCH THE EXCESS INTEREST INCOME SHOWN BY THE APPELLANT I N EARLIER YEARS HAS BEEN REVERSED IN THE YEAR UNDER APPEAL ON THE BASIS OF A UDIT REPORT, BY PASSING AN ACCOUNTING ENTRY. THE REVERSAL OF SUCH INTEREST BY AN ACCOUNTING ENTRY CANNOT BE SAID TO BE AN EXPENDITURE INCURRED BY THE APPELLANT LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROF ESSION, AS SUCH, NO DEDUCTION OF THE IMPUGNED AMOUNT CAN BE ALLOWED UNDER SECTION 37. FURTHER, SINCE, THE ABOVE AMOUNT DOES NOT FALL WITHIN THE PROVISIONS OF SECTION 30 TO 43D, AS SUCH, THE SAME CANNOT BE ALLOWED AS PER SECTION 29 OF THE INCOME TAX ACT. THEREFORE, A WRONG ACCOUNTING ENTRY IN RESPECT OF THE INCOME I N EARLIER YEARS CANNOT BE CLAIMED AS DEDUCTION AS EXPENDITURE IN THE LATER YE ARS WHEN SUCH ENTRY IS REVERSED IN THE ACCOUNTS. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 5 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, IT WAS OBSERVED THAT THE ISS UE RAISED BY ASSESSEE IS SQUARELY COVERED IN ITS OWN CASE FOR THE AY 2000-01 IN ITA NO.2967/KOL/2003 DATED 09.12.2015, WHEREIN IT HAS BEEN DECIDED BY TH E COORDINATE BENCH OF THIS TRIBUNAL, THE RELEVANT EXTRACT IS REPRODUCED BELOW: - 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE PRUDENTIAL NORMS OF THE RESERVE BANK OF INDIA APPLICABLE AND ALSO PLACE D RELIANCE ON CERTAIN JUDICIAL PRONOUNCEMENTS RENDERED ON IDENTICAL FACTS. THE FIR ST DECISION WAS THAT THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS INDUSTRIAL FINANCE CORPORATION OF INDIA LTD. IN ITA NO.1444 OF 2010 DATED 11.07.2011. IN THE AFORESAID DECISION THE HON'BLE DELHI HIGH COURT HEL D ON SIMILAR CLAIM OBSERVING S FOLLOWS:- IT MAY NOT BE NECESSARY TO GO INTO THE VALIDITY OF THE REASONS GIVEN BY THE TRIBUNAL AS IN ANY CASE, THE ASSESSEE WAS ENTITLED TO THIS DEDUCTION. IF THE INCOME WHICH IS EARLIER RECOGNIZED IS NOT TO BE ALL OWED TO BE REVERSED IN THE SUBSEQUENT ASSESSMENT YEARS, IN ANY CASE IT IS PERMISSIBLE FOR THE ASSESSEE TO WRITE OFF SUCH AN INCOME IN THE CONCERN ED ASSESSMENT EARS WHEN IT WAS FOUND THAT THE AMOUNT WAS NOT RECOVERAB LE. REFERENCE IN THIS CONNECTION CAN BE MADE TO THE JUDGMENT OF THE SUPRE ME COURT IN THE CASE OF VIJAYA BANK VS CIT & ANR. (2010) 231 CTR (S C) 209 ; (2010) 37 DTR (SC) 401 (2010) 323 ITR 166 (SC)AND T.R.F CLT. VS. CIT (2010) 230 CTR (SC)14; (2010) 35 DTR (SC)156: (2010) 323 ITR 3 97 (SC). 7. THE NEXT DECISION IS THE DECISION RENDERED BY IT AT, HYDERABAD BENCH IN THE CASE OF ANDHRA BANK VS DCIT IN ITA NO.218/H/10 ORDE R DATED 04.04.2013. IN THE AFORESAID DECISION ITAT TOOK THE FOLLOWING VIEW:- 59, THE NEXT IS REGARDING DEDUCTION OF RS.23600000 BEING UNREALIZED INTEREST ON NPA WHICH IS REDUCED FROM THE INTEREST INCOME. THE ASSESSEE HAD RECOGNIZED INTEREST OF RS.23600000/- ON CERTAIN ACCOUNTS DURING THE ASSESSMENT YEAR 2005-06 THE SAME WAS OFFERED TO TAX ALSO. THESE ACCOUNTS BECAME NPA DURING THE ASSESSMENT YEAR 2006 -07 THE ASSESSEE THEREFORE REVERSED INTEREST OF RS.2.36 CRORES AND R EDUCED THE SAME FROM THE INTEREST INCOME FOR THE ASSESSMENT YEAR 2006-07 . THE SAME WAS DISALLOWED BY THE AO AND CONFIRMED BY THE CIT(A). 60. THE ASSESSEE SUBMITS THAT THESE ISSUE IS COVERE D BY THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. INDUST RIAL FINANCE CORPORATION REPORTED IN 201 TAXMANNN 75. IN THAT CASE ALSO THE ASSESSEE REVERSED THE INCOME OFFERED TO IT FOR TAX IN THE EARLIER YEA RS ON THE GROUND THAT ACCOUNTS ARE BECOME NPAS. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND, WHI CH IS AS FOLLOWS:- 1. WITHOUT PREJUDICE TO GROUND NO.7 THE LEARNED CI T(A) OUGHT TO HAVE ALLOWED THE UNREALIZED INTEREST OF RS.236,00,0 00/- ON NON- PERFORMING ASSETS AS DEDUCTION U/S. 36(1)(VII) OF T HE ACT BY TREATING THE SAME AS BAD DEBTS WRITTEN OFF. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 6 6.1 THE DELHI HIGH COURT HELD THAT INCOME WHICH WAS EARLIER RECOGNIZED IS NOT TO BE ALLOWED IN THE SUBSEQUENT Y EAR IN CASE IT IS PERMISSIBLE FOR THE ASSESSEE TO WRITE OFF SUCH INCO ME IN CONCERNED ASSESSMENT YEAR WHEN IT WAS FOUND THAT IT WAS NOT R ECOVERABLE. IN THIS CONNECTION THEY HAVE ALSO REFERRED TO THE DECI SION OF THE APEX COURT IN THE CASE OF VIJAY BANK REPORTED IN 323 ITR 166 AND TRF LTD REPORTED IN 323 ITR 397. THE DELHI HIGH COURT U PHELD THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF INTEREST REVERSED. 6.2 RESPECTFULLY FOLLOWING THE ABOVE WE DIRECT THE AO TO ALLOW DEDUCTION OF RS.2.36 CRORES BEING UNREALIZED INTERE ST OFFERED FOR TAX IN THE EARLIER YEAR NOW REVERSED BY THE ASSESSEE. TAKING A CONSISTENT VIEW OF THE COORDINATE BENCH OF THIS TRIBUNAL WE ALLOW THE ASSESSEES APPEAL AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION OF 2,63,42,926/- BEING UNREALIZED INTEREST OFFERED FOR TAX IN THE EARLIER YEAR NOW REVERSED BY THE ASSESSEE. WE HOLD ACCORDINGLY. 8. SECOND ISSUE RAISED IN MODIFIED GROUND NO.3 BY A SSESSEE DATED 20.03.2012, WHICH READS AS FOLLOWS:- MODIFIED GROUND NO.3 THAT ON FACTS AS WELL AS ON LAW, THE LEARNED CIT(A ) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.29,82,08,941, BEI NG BAD DEBT WRITTEN OFF BY THE APPELLANT IN RESPECT OF ADVANCES PERTAINING TO NON-RURAL BRANCHES ON THE GROUND THAT THE BAD DEBT SO WRITTEN-OFF DID NOT EXCEED THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT S PER THE PROVISO TO SECTION 36(1)(VII) OF THE INCOME TAX ACT , 1961 9. DURING THE YEAR, ASSESSEE HAS WRITTEN OFF BAD DE BTS FOR RS.46,60,59,010/- WHICH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT OF ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED THAT AS PER THE PROVISION OF SEC.36(VII), THE ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES THEN BAD DE BTS EXCEEDING THE CREDIT BALANCE IN THE PROVISIONS ACCOUNT FOR BAD AND DOUBT FUL DEBTS MADE UNDER THAT CLAUSE IF THE BAD DEBTS EXCEEDS TO THE SAID PROVISI ON. IN THE INSTANT CASE, THE BAD DEBTS WRITTEN OFF IN THE PROFIT AND ACCOUNT DO NOT EXCEED THE CREDIT BALANCE IN THE PROVISION OF BAD AND DOUBTFUL DEBTS. THEREFORE, AO DISALLOWED THE BAD DEBTS WRITTEN OFF AND ADDED TO THE TOTAL INCOME OF ASSESS EE. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 7 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO HAS UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- THE LD. AR ARGUES BEFORE ME THAT THE CLAIM OF BAD D EBT, WHICH HAS ACTUALLY BEEN WRITTEN OFF, IS ADMISSIBLE ACCORDING TO THE PR OVISIONS OF SECTION 36(1)(VII) AND IN ACCORDANCE WITH THE BOARDS CIRCULAR NO.258 DATED 14-06-79 AND CIRCULAR 421 DATED 12-06-85. THE AR SUBMITTED THAT THESE BAD DE BTS HAVE BEEN WRITTEN OFF APPLYING THE PORTION OF PROVISION FOR B AD DEBT, WHICH WAS NOT ALLOWED AS DEDUCTION U/S. 36(1)(VIIA). THE SIMILAR ISSUE CA ME FOR MY CONSIDERATION IN THE APPELLANTS APPEAL FOR THE IMMEDIATELY PRECEDED THR EE ASSESSMENT YEARS WHERE ON THE SIMILAR FACTS & CIRCUMSTANCES OF THE CASE, I HOLD THAT THE CLAIM WAS NOT ADMISSIBLE TO THE APPELLANT. FOLLOWING MY EARLIER D ECISION IN THE MATTER, I HOLD THAT THIS CLAIM IS NOT ADMISSIBLE AND THE DISALLOWA NCE MADE BY THE AO IS CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 11. BEFORE US LD AR SUBMITTED PAPER BOOK WHICH IS R UNNING PAGES FROM 1 TO 258 AND STATED THAT ASSESSEE HAS WRITTEN OFF A SUM OF RS.46,60,59,010/- AS BAD DEBTS AND OUT OF THE SAID SUM, RS.29,82,08,941/- RE PRESENTS THE BAD DEBTS IN RESPECT OF ADVANCES PERTAINING TO NON-RURAL BRANCHE S. THEREFORE, THE AFORESAID SUM IS OUTSIDE THE PURVIEW OF SEC. 36(VIIA) OF THE ACT AND STATED THAT THE ISSUE MAY BE DECIDED ON MERIT. TO THE CONTRARY, LD DR VEHEMENTLY SUPPORTED THE ORD ERS OF AUTHORITIES BELOW. 12. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE ISSUE RAISE D BY ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2070/KOL/2009 DATED 16.03.2016, WHEREAS THE ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N FAVOUR OF ASSESSEE AND AGAINST THE REVENUE, THE RELEVANT EXTRACT PORTION R EPRODUCED BELOW:- 22. THE ISSUE INVOLVED IN GROUND NO 4 OF THE REVENU ES APPEAL FOR AY 2005-06 RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITION OF RS.75,00,00,000/- MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF ASSESSEES CLAIM FOR BAD DEBTS WRITTEN OFF UNDER SE CTION 36(1)(VII) OF THE ACT. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 8 24. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDE, THIS ISSUE INVOLV ED IN GROUND NO.4 OF THE REVENUES APPEAL FOR A.Y 2005-06 NOW STANDS SQUAREL Y COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LIMITED (2012) 3 SCC 784 WHEREBY THE VIEW TAKEN BY THE COCHIN SPEC IAL BENCH OF ITAT HAS BEEN AFFIRMED BY THE HON'BLE APEX COURT. RESPECTFUL LY FOLLOWING THE SAID DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CATHOLIC SYRIAN BANK LIMITED, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CI T(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO.4 OF THE REVENUES APPEAL. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WE ALLOW MODIFIED GROUN D NO.3 RAISED BY ASSESSEE IS THUS ALLOWED. 13. ISSUE NO.3 AS WELL AS ADDITIONAL GROUND RAISED BY ASSESSEE WHICH ADMITTED BY US INTER-CONNECTED WITH THE ISSUES RELA TING TO THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY MAKING THE DISALLOWA NCE FOR THE COMPUTATION OF BOOK PROFIT U/S. 115JA OF THE ACT. 14. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD AS AGREED BY THE LD. REPRESENTATIVE OF BOTH THE SIDES. THE PRELIMINARY ISSUE INVOLVED IN T HIS CONTEXT IS WHETHER THE PROVISIONS OF SECTION 115JA ARE APPLICABLE TO THE A SSESSEE-BANK AND THE SAME IS SQUARELY COVERED IN FAVOUR OF ASSESSEE, INTER ALIA , BY THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD VS DCIT REPORTED IN 329 ITR 91, AND MUMBAI BENCH OF ITAT IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD VS- ACIT REPORTED IN 220 ITR 422 AND ANOTHER DECISION OF MUMBAI BENCH OF ITAT IN THE CAS E OF UNION BANK OF INDIA VS. ACIT (SUPRA). AS HELD BY THE MUMBAI BENCH OF ITAT IN TH E CASE OF UNION BANK OF INDIA (SUPRA), PROVISION OF SEC. 115JA IS NOT APPLICABLE TO THE ASSESSEE- BANK AS IT NOT REQUIRED TO PREPARE ITS PROFIT & LOS S ACCOUNT IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT, 1956 BUT IT PREPA RES ITS PROFIT & LOSS ACCOUNT AS PER THE BANKING REGULATION ACT, 1949. RESPECTFUL LY FOLLOWING THE RATIO OF THESE JUDICIAL PRONOUNCEMENTS, WE HOLD THAT THE PROVISION OF SEC. 115J IS NOT ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 9 APPLICABLE IN THE CASE OF THE ASSESSEE AND ACCORDIN GLY DELETE THE ADDITIONS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) WHIL E COMPUTING THE BOOK PROFIT OF THE ASSESSEE BY APPLYING THE SAID PROVISION. HEN CE, ISSUE NO.3 RAISED IN GROUND 4 AND ADDITIONAL GROUND RAISED BY ASSESSEE T HUS ALLOWED. 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. COMING TO ITA NO.77/KOL/2004 FOR A.Y 99-00 16. GROUND NOS 1 TO 3.4 RAISED BY ASSESSEE READ AS FOLLOWS:- 1.0 THAT THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.44,13,35,718/- BEING THE AMOUNT OF BAD DEBT W RITTEN OFF BY THE APPELLANT. 2.0 THAT THE CIT(A) WAS WRONG IN CONFIRMING THE DIS ALLOWANCE OF RS.3,47,10,898/- OUT OF THE CONTRIBUTION TO THE REC OGNIZED PROVIDENT FUND. 3.0 THAT THE LD. CIT(A) WAS WRONG IN CONFIRMING THE DISALLOWANCES MADE Y THE AO IN RESPECT OF THE FOLLOWING ITEMS IN COMPUTING I TS BOOK PROFIT U/S. 115JA OF THE INCOME TAX ACT, 1961: A) PROVISION FOR BAD AND DOUBTFUL DEBTS RS.56,45,2 3,296/- B) PROVISION FOR FRAUD AND FORGERY RS. 28,38,3 34/- C) ADJUSTMENT OF UNABSORBED DEPRECIATION BROUGHT FORWARD AS PER BOOK RS.22,61,00,000/- 3.1THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT TH E PROVISION FOR BAD AND DOUBTFUL DEBTS FOR RS.56,45,23,296/- MADE BY THE APPELLANT I N ITS BOOK WAS AN ASCERTAINED LIABILITY AS THE SAME WAS WORKED OUT ON THE BASIS OF RBI GUIDELINES, BANKING COMPANIES (A&T) ACT, 1970, BAKING REGULATIO N ACT, 1949 AND IS ALSO SUPPORTED BY THE DECISION OF BOMBAY HIGH COURT REPO RTED IN 251 ITR 15, DISTINGUISHING THE MADRAS HIGH COURT DECISION REPOR TED IN 244 ITR 256. 3.2 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE PROVISIONS FOR FRAUD AND FORGERY WAS MADE AS PER GUIDELINES ISSUED BY RBI AN D DULY APPROVED BY THE AUDITORS APPOINTED BY RBI AND AS SUCH THIS ITEM OF PROVISION WAS NOT IN THE NATURE OF CONTINGENT AND UNASCERTAINED LIABILITY BU T WAS AN ASCERTAINED LIABILITY ON ACTUARIAL CALCULATION BASIS AS PER RBI GUIDELINES. 3.3 WITHOUT PREJUDICE TO THE CONTENTION RAISED IN T HE PRECEDING GROUNDS THE LD. CIT FAILED TO APPRECIATE THAT PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISION FOR FRAUD AND FORGERY WERE IN RESPECT OF DIMINUTION IN THE VALUE OF ASSETS AND THESE WERE NOT PROVISIONS FOR MEETING THE LIABILITI ES AND AS SUCH WERE NOT HIT BY THE PROVISION OF SEC.115JA OF THE INCOME TAX ACT. 3.4 THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT T HE UNABSORBED DEPRECIATION OF RS.22,61,00,000/- ACTUALLY EXISTED IN THE BOOK ALTH OUGH THE SAME WAS ADJUSTED AGAINST THE CAPITAL AS A SPECIAL MEASURE IN PRESENT ING THE ACCOUNT IN A PRESCRIBED MANNER PERMITTED BY THE GOVT. OF INDIA. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 10 4. THAT THE ORDER PASSED BY THE LD. AO IS AGAINST T HE LAW AND FACTS OF THE APPELLANTS CASE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THIS APPEAL. 17. AT THE OUTSET, GROUND NO.1 AND GROUND NO.3 AS W ELL AS INTER-CONNECTED GROUND NO. 3.1 TO 3.4 OF ASSESSEES APPEAL, IT IS O BSERVED THAT THE BOTH ISSUES ARE INVOLVED THEREIN RELATING TO THE DISALLOWANCE O F BAD DEBT WRITTEN OFF BY ASSESSEE AND FACTS AND ISSUES ARE SAME EXCEPT FIGUR ES INVOLVED AS IN ITA NO.1691/KOL/2002 OF ASSESSEES APPEAL FOLLOWING OUR DECISION ON THE SE ISSUES AS EMBODIED IN PARA 12 TO 14 OF THIS ORDER, THE GRO UNDS OF ASSESSEE ARE ALLOWED. WE HOLD ACCORDINGLY. 18. GROUND NO.2 RAISED BY ASSESSEE IS THAT LD. CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.3,47,10,898/- OUT OF CONTRIBUTIO N TO THE RECOGNIZED PF FUND. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE AO HAS MADE THE ADDITION O F THE AMOUNT OF THE EMPLOYEE CONTRIBUTION AS THERE WAS A DELAY IN PAYME NT TO PF AUTHORITIES. HOWEVER, FROM THE ASSESSMENT ORDER WE FIND THAT ALL THE PAYMENT OF EMPLOYEES CONTRIBUTION WERE MADE BEFORE THE DUE DATE OF FILIN G OF INCOME TAX RETURN AS SPECIFIED U/S.139(1) OF THE ACT. NOW, THIS ISSUE S TANDS COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S VIJAY SHREE LIMITED VIDE ITAT NO.245 OF 2011 IN GA NO.2607 OF 2011 DATED 7 TH SEPTEMBER, 2011, WHEREIN IT HAS BEEN HELD AS UNDER:- AFTER HEARING MR. SINHA, LEARNED ADVOCATE, APPEARI NG ON BEHALF OF THE APPELLANT AND AFTER GOING THROUGH THE DECISION OF T HE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ALOM EXTRUSION LTD. , WE FIND THAT THE SUPREME COURT IN THE AFORESAID CASE HAS HELD TH AT THE AMENDMENT TO THE SECOND PROVISO TO THE SEC. 43(B) OF THE INCOME TAX ACT, AS INTRODUCED BY FINANCE ACT, 2003, WAS CURATIVE IN NATURE AND IS REQUIRED TO BE APPLIED RETROSPECTIVELY WITH EFFECT FROM 1 ST APRIL, 1988. ITA NO.1691/KOL/2002 & 77/KOL/2004 A.YS 98- 99 & 99-00 ALLAHABAD BANK V. DCIT, CIR-7 KOL. PAGE 11 SUCH BEING THE POSITION, THE DELETION OF THE AMOUNT PAID BY THE EMPLOYEES CONTRIBUTION BEYOND DUE DATE WAS DEDUCTI BLE BY INVOKING THE AFORESAID AMENDED PROVISIONS OF SECTION 43(B) OF TH E ACT. WE, THEREFORE, FIND THAT NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL AND CONSEQUENTLY, WE DISMISS THIS APPEAL. FROM THE ABOVE, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S VIJAY SHREE LIMITED (SUPRA). AS THE ISSUE IS COVERED, HENCE, WE ALLOW ASSESSEES GR OUND OF APPEAL. 20. REMAINING GROUNDS NO.4 & 5 ARE GENERAL IN NATUR E AND DO NOT REQUIRE ANY ADJUDICATION. 21. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 22. IN COMBINED RESULT, ASSESSEES APPEAL ITA NO.1691/K OL/2007 IS PARTLY ALLOWED AND THAT OF ITA NO.77/KOL/2004 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 08/ 06/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 08 / 06 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ALLAHABAD BANK, 2, NETEAJI SUBHAS ROAD, KOLKATA-700 001 2. /RESPONDENT-DCIT, CIRCLE-7, P-7, CHOWRINGHEE SQUARE , KOLKATA-700 069 3. ) *+, , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5.01233*+, , *+ , / DR, ITAT, KOLKATA 6.26789 / GUARD FILE. BY ORDER/ ,, /TRUE COPY/ / , *+ ,
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