The Karad Urban Co.Op Bank Ltd, Satara V. Deputy Commissioner of Income-tax, Satara Circle , Satara

MA 37/PUN/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 6333 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! , '# $ !% , ! & BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWAS THY, JM M.A. NO. 37/PUN/2017 (ARISING OUT OF ITA NO.2432/PUN/2012) ' (' / ASSESSMENT YEARS: 2009-10 THE KARAD URBAN CO.OP. BANK LTD. 516/2, SHANIWAR PETH, KARAD, DIST- SATARA PAN : AAAAT3981A .. /APPLICANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . / RESPONDENT #. / ITA NO. 2432/PUN/2012 ' (' / ASSESSMENT YEAR : 2009-10 THE KARAD URBAN CO.OP. BANK LTD. 516/2, SHANIWAR PETH, KARAD, DIST- SATARA PAN : AAAAT3981A ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI MUKESH JHA 2 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 / DATE OF HEARING : 23.02.2018 / DATE OF PRONOUNCEMENT : 28.03.2018 * / ORDER PER VIKAS AWASTHY, JM MA NO. 37/PUN/2017 THIS MISCELLANEOUS APPLICATION HAS BEEN FILED BY ASSESSEE SE EKING RECTIFICATION IN THE ORDER OF TRIBUNAL DATED 11.03.2016, WHER EIN GROUND NO. 13 RAISED IN ITA NO. 2432/PUN/2012 BY THE ASSESSEE WAS RE MAINED TO BE ADJUDICATED. 2. SHRI M.K KULKARNI APPEARING ON BEHALF OF ASSESSEE SUBMITT ED THAT THIS APPEAL BY THE ASSESSEE WAS INITIALLY DECIDED BY THE TRIBU NAL VIDE ORDER DATED 31.01.2014 ALONG WITH ITA NO.1454/PUN/2012 FOR ASSESSMEN T YEAR 2008-09. THE GROUND NO. 11 AND 13 RAISED IN THE APPEAL WERE REM AINED TO BE ADJUDICATED WHILE DECIDING THE APPEAL. THE ASSESSEE HAD FILE D MISCELLANEOUS APPLICATION NO. 57/PN/2014 POINTING THAT GROUND NOS. 11 AN D 13 RAISED IN THE APPEAL WERE NOT ADJUDICATED. THE TRIBUNAL VIDE ORDER DATED 09 .09.2014 RECALLED THE ORDER IN ITA NO.2432/PUN/2012 DATED 31.01.2014 AND THE APPEAL WAS LISTED FOR HEARING FOR DECIDING THE AFORESAID TWO GROUNDS ALO NG WITH GROUND NO. 8 IN ITA NO.1454/PUN/2012. THE TRIBUNAL VIDE ORDER DATED 11.03.2016 DECIDED THE APPEALS OF ASSESSEE. HOWEVER, DUE TO SOME CONFUSION IN MENTIONING GROUND VIS-A-VIS GROUND NUMBERS, AGAIN GROUND NO.13 RAIS ED IN THE APPEAL IN ITA NO.2432/PUN/2012 REMAINED UN-ADJUDICATED AND HENC E, THE PRESENT MISCELLANEOUS APPLICATION. 3 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 3. SHRI MUKESH JHA REPRESENTING THE DEPARTMENT FAIRLY A DMITTED THAT GROUND NO. 13 RAISED IN APPEAL BY ASSESSEE IN ITA NO. 243 2/PUN/2012 HAS NOT BEEN ADJUDICATED SO FAR BY THE TRIBUNAL. 4. BOTH SIDES HEARD. AFTER PERUSING EARLIER ORDERS OF TRIBU NAL, WE FIND THAT GROUND NO. 13 IN ITA NO.2432/PUN/2012 IS YET TO BE ADJUD ICATED. THE GROUND NO. 13 RAISED IN APPEAL BY ASSESSEE READS AS UNDER: 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS.1,19,80,337/- CLAIMED UNDER DEBT WAIVER SCHEME FORMULATED BY CENT RAL GOVT. AND APPROVED BY RBI. THE SUBSTANCE TO DISALLOWANCE IS I LLEGAL AND WITHOUT JURISDICTION. IT BE DELETED. THE ORDER OF TRIBUNAL DATED 11.03.2016 IS HEREBY RECALLED FOR THE LIMITED PURPOSE OF ADJUDICATING GROUND NO. 13 RAISED IN THE APPEA L. ACCORDINGLY, THE MISCELLANEOUS APPLICATION FILED BY ASSESSEE IS ALLO WED . ITA NO. 2432/PUN/2012 5. THIS APPEAL BY THE ASSESSEE HAS BEEN TAKEN UP FOR T HE LIMITED PURPOSE OF ADJUDICATING GROUND NO. 13 RAISED IN THE APPEAL. THE ASSES SEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSEE IN THE RETURN OF INCOME HAD CLAIMED BAD DEBTS UNDER DEBTS WAIVER SCHEME PURPORTEDLY FORMULATED BY CENTRAL GOVERNMENT AND APPROVED BY RESER VE BANK OF INDIA (RBI). THE ASSESSEE HAD CLAIMED BAD DEBTS WRITTEN OFF TO THE TUNE OF RS.1,18,37,411/- UNDER THE AFORESAID SCHEME. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAS CREATED A PROVISION FOR RESERVES ON ACCOUNT OF BAD DEBTS. SUCH PROVISION CLAIMED BY ASSESS EE, IS NOT ALLOWABLE. THE RELEVANT EXTRACT OF THE FINDINGS OF ASSESSING OFFICER ARE AS UNDE R: THE ABOVE SUBMISSION OF THE A.R IS CONSIDERED. THE SAME IS NOT ACCEPTABLE AS THE PROVISION FOR RESERVES ON ACCOUNT OF BAD DEBTS ARE 4 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 ALREADY ALLOWED IN THE CASE OF THE ASSESSEE BANK IN EARLIER ASSESSMENT YEARS AND ALL THE BANKS ARE SUPPOSED TO ADJUST/REDU CE THE AMOUNTS OF ACTUAL BAD DEBTS FROM THE AMOUNTS AVAILABLE IN SUCH RESERVES. IT IS NOT THE CASE OF THE ASSESSEE BANK THAT NO AMOUNTS ARE AVAIL ABLE IN THE RESERVES AVAILABLE WITH IT TO ADJUST THESE BAD DEBTS. THUS, NO JUSTIFIABLE REASON AND EXPLANATION HAS BEEN OFFERED IN SUPPORT OF THIS CLA IM OF DEDUCTION, DEBITED TO THE P & L A/C. IN VIEW OF THE ABOVE DISCUSSION, THE ABOVE AMOUNT O F RS.1,18,37,411/-, CLAIMED AS DEDUCTION FOR BAD DEBT S WRITTEN OFF, IS HEREBY DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2009-10. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEA LS) AGAIN REJECTED THE CLAIM OF ASSESSEE ON THE GROUND THAT IRRE COVERABLE DEBTS SHOWN IN THE BOOKS OF ACCOUNT IS MERE PROVISION FOR DEBT WAIVER OF INTEREST AND OTHER CHARGES. IT DOES NOT MEET STATUTORY REQUIREMENT UNDER THE PROVISIONS OF SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). FOR THE SAKE OF COMPLETENESS, THE FINDINGS OF COMMISSIONER OF INC OME TAX (APPEALS) ARE REPRODUCED HEREIN BELOW: THE ABOVE SCHEDULE AND THE DETAILS FURNISHED BY THE APPELLANT DO NOT INDICATE THAT THE AMOUNTS IN QUESTION WERE ACTUALLY WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF A/C THIS YEAR AS REQU IRED UNDER SEC. 36(1)(VII). FOR AVAILING DEDUCTION UNDER SEE.36(VII), THE DEBTS IN QUESTION ARE REQUIRED TO BE ACTUALLY WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF A/C AND A MERE PROVISION FOR DEBT WAIVER OF INTEREST AN D OTHER CHARGES DOES NOT MEET THAT STATUTORY REQUIREMENT UNDER THE SECTION. FURTHER, THE APPELLANT ALSO FAILED TO ESTABLISH THAT THE OTS INTEREST & OTHER CHARGES WERE TAKEN INTO ACCOUNT IN COMPUTING THE IN COME OF THE APPELLANT EITHER IN THIS YEAR OR IN THE EARLIER YEA RS AS REQUIRED UNDER SEC.36(2). THEREFORE, EVEN IF THE WAIVER MOSTLY REL ATED TO URBAN ADVANCES AS CLAIMED BY THE APPELLANT, THE SAME CANN OT BE ALLOWED AS DEDUCTION UNDER SEC. 36(1)(VII) AS THE APPELLANT FA ILED TO ESTABLISH THAT THE DEBTS WERE ACTUALLY WRITTEN OFF IN THIS YEAR AS IRRECOVERABLE. IN SUCH A SITUATION, THE DECISION OF THE APEX COURT IN THE CASE REFERRED ABOVE IS OF NO ASSISTANCE TO THE CASE OF THE APPELLANT. ACCO RDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.1,19,80,337/- ( 1,18,37,411 + 1,42,926) ON THIS GROUND IS UPHELD THOUGH ON A DIFF ERENT GROUND THAT THE DEBTS IN QUESTION, MOSTLY CLAIMED TO BE RELATIN G TO URBAN ADVANCES, WERE NOT ACTUALLY WRITTEN OFF IN THE BOOKS OF A/C O F THIS YEAR. 7. THE LD. AR APPEARING ON BEHALF OF ASSESSEE SUBMITTED BE FORE US THAT THE ASSESSEE HAS CLAIMED BAD DEBTS WRITTEN OFF IN ACCORDANCE WITH DEBT WAIVER 5 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 SCHEME APPROVED BY RBI. THE LD. AR FURTHER REFERRED TO A GRICULTURAL DEBT WAIVER AND DEBT RELIEF SCHEME, 2008 AND CLARIFICATION DATED 2 5 TH JUNE, 2008 ISSUED BY RBI. THE LD. AR POINTED THAT THE CENTRAL GOVERN MENT IN UNION BUDGET 2008-09 DECLARED AGRICULTURAL DEBT WAIVER AND DE BT RELIEF SCHEME 2008. VARIOUS CLARIFICATIONS WERE ISSUED FOR IMPLEMENTATION OF S CHEME. ACCORDING TO THE DIRECTIVES OF THE CENTRAL GOVERNMENT FO R THE URBAN CO- OPERATIVE BANKS, SUCH AS THE ASSESSEE BANK, THOUGH T HE INTEREST IS APPLIED TO THE LOANS COVERED UNDER DEBIT WAIVERS SCHEME, 2008 BUT THE SAME IS NOT RECOVERABLE FROM THE ELIGIBLE FARMERS FOR THE PERIOD 29.02.200 8 TO 31.03.2009 I.E. THE PERIOD RELATING TO THE ASSESSMENT YEAR 2009-10. T HE SAME IS NOT RECOVERABLE FROM THE FARMERS-BORROWERS. APART FROM WAIVER OF INTEREST, THE INSURANCE, VISIT FEE ETC IS REQUIRED TO BE BORNE BY THE B ANKS. IN VIEW OF DEBTS WAIVER SCHEME, THE AMOUNTS ALREADY ACCOUNTED AS INCOME ARE REQUIRED TO BE REVERSED BY RECTIFICATION ENTRIES. SUCH REVERSAL OF THE AMO UNTS IS AS PER AUTHORIZATION OF THE BOARD OF DIRECTORS OF THE BANK VIDE R ESOLUTION DATED 20.06.2008. THE REVERSAL OF SUCH INTEREST/CHARGES BORNE B Y THE BANK IS EXPENDITURE OF THE BANK AND IS ALLOWABLE AS DEDUCTION. THIS INTEREST/ CHARGES HAVE BEEN REVERSED IN ACCORDANCE WITH THE RBI GUIDELINES AND THE ASSESSEE IS UNDER OBLIGATION TO FOLLOW MANDATORY GUIDELINES OF RBI ISSUED FROM TIME TO TIME. 7.1 THE LD. AR FURTHER REFERRED TO SECTION 45Q OF THE RESE RVE BANK OF INDIA ACT, 1934 AND SUBMITTED THAT THE PROVISIONS OF THE RBI A CT HAVE OVERRIDING EFFECT OVER INCOME TAX ACT. THE LD. AR TO FURTHER BUTTRES S HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF HON'BLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. DEOGIRI NAGRI SAHAKARI BANK LTD. REPORTED AS 379 ITR 24 (BOM.). THE LD. AR REFERRING TO THE CLARIFICATION ISSUED BY RBI SUBMITTED THAT IN THE CASE OF NPA LOANS, NO INTEREST WILL BE APPLIED FROM THE DATE WHEN TH E LOAN ACCOUNT IS 6 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 CLASSIFIED AS NPA. HENCE, INTEREST ON LOANS CLASSIFIED AS NPA FOR ANY PERIOD AFTER IT IS SO CLASSIFIED CAN NEITHER BE CLAIMED FROM THE GO VERNMENT NOR FROM THE FARMER. FURTHER REFERRING TO THE RBI GUIDELINES, THE LD. AR POINTED THAT UNAPPLIED INTEREST ON NPA LOANS ARE NEITHER TO BE CLAIMED FROM THE GOVERNMENT NOR FROM THE FARMER. THE LD. AR REFERRED TO V ARIOUS SIMILAR CLARIFICATIONS ISSUED BY RBI. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMITT ED THAT THE CLARIFICATIONS AND RBI GUIDELINES TO WHICH THE LD. AR IS NOW RE FERRING, WERE NOT FURNISHED BEFORE THE AUTHORITIES BELOW. THE AUTHORITIES BELOW ON THE BASIS OF THE DOCUMENTS AVAILABLE WITH THEM HAVE ADJUDICATED THIS IS SUE. THE LD. DR VEHEMENTLY SUBMITTED THAT THE PROVISIONS OF THE INCOME TAX ACT, 1961 WOULD OVERRIDE THE RBI GUIDELINES AND THE ASSESSEE CANNOT MAK E CLAIM WHICH IS CONTRARY TO THE ACCOUNTING PROVISIONS ACCEPTED UNDER THE ACT. 9. WE HAVE THE SUBMISSIONS MADE BY REPRESENTATIVES OF R IVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. A PERUSAL OF THE ASSESSMENT ORDER AND ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) SHOW THAT B OTH THE AUTHORITIES BELOW HAVE DECIDED THIS ISSUE ON THE PREMISE THAT ASSESS EE HAS CREATED SOME PROVISION FOR BAD DEBTS AND CLAIMED THE SAME AS ALLOWABLE E XPENDITURE. WHEREAS, FROM THE SUBMISSION OF THE LD. AR, IT APPEARS THAT IT IS A CASE WHERE THE ASSESSEE HAS CLAIMED BAD DEBTS ON ACCOUNT OF DEBT WAIVER SCHEME, 2008 STATED TO BE FORMULATED BY CENTRAL GOVERNMENT AND APPR OVED BY THE RBI. BOTH THE AUTHORITIES HAVE ERRED IN NOT APPRECIATING THE FACTS RELATING TO THE ISSUE IN RIGHT PERSPECTIVE. THE LD. DR HAS POINTED THAT ASSESSEE HAS NOT PRODUCED RELEVANT DOCUMENTS BEFORE THE AUTHORITIES BELOW TO SUBS TANTIATE ITS CLAIM. WE ARE OF CONSIDERED VIEW THAT THIS ISSUE NEEDS A RE-VISIT T O THE FILE OF ASSESSING OFFICER. WITHOUT COMMENTING ON THE MERITS OF ASSESSEES CLA IM, WE ARE RESTORING 7 ITA NO.2432/PUN/2012 M.A. NO.37/PUN/2017 A.Y. 2009-10 THIS ISSUE TO ASSESSING OFFICER. THE ASSESSEE SHALL FURNISH R ELEVANT DOCUMENTS/DETAILS OF DEBTS WAIVER SCHEME, 2008 IN SUPPORT OF HIS CLAIM. THE ASSESSING OFFICER AFTER EXAMINING THE SAME AND AFTER AFFORDIN G OPPORTUNITY OF HEARING TO THE ASSESSEE SHALL DECIDE THIS ISSUE DE-NOVO IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO. 13 RAISED IN APPEAL BY ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. HOWEVER, WITH THE ADJUDICATION OF GROUND NO. 13, THERE WO ULD BE NO CHANGE IN THE FINAL OUTCOME OF THE APPEAL. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 28TH DAY OF MARCH, 2018. SD/- SD/- ( / ANIL CHATURVEDI ) ( $ !% /VIKAS AWASTHY) / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER / PUNE; '# / DATED : 28 TH MARCH, 2018 SB * + ,-$ .$( / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-III, PUNE 4. THE CIT-III, PUNE. 5. &'( !!)* , )* , + +,- , / DR, ITAT, B BENCH, PUNE. 6. (./ 01 / GUARD FILE. // TRUE COPY // 2 / BY ORDER, !3 )- / PRIVATE SECRETARY )* , / ITAT, PUNE.