Shree Sharada Sahakari Bank Ltd.,, Pune v. ITO, Ward 6(2), Pune

ITA 234/PUN/2013 | 2009-2010
Pronouncement Date: 29-04-2015 | Result: Dismissed

Appeal Details

RSA Number 23424514 RSA 2013
Assessee PAN AAAAS3916L
Bench Pune
Appeal Number ITA 234/PUN/2013
Duration Of Justice 2 year(s) 3 month(s) 7 day(s)
Appellant Shree Sharada Sahakari Bank Ltd.,, Pune
Respondent ITO, Ward 6(2), Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-04-2015
Date Of Final Hearing 06-04-2015
Next Hearing Date 06-04-2015
Assessment Year 2009-2010
Appeal Filed On 22-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO.234/PN/2013 ASSESSMENT YEAR: 2009-10 SHREE SHARADA SAHAKARI BANK LTD. 47/1/A TAWARE COLONY PARVATI PLAZA PUNE 411009 . APPELLANT PAN: AAAAS3916L VS. THE INCOME TAX OFFICER WARD 6(2) PUNE. . RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI B.D. SINGH DATE OF HEARING : 07-04-2015 DATE OF PRONOUNCEMENT : 29-04-2015 ORDER PER SUSHMA CHOWLA JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-III PUNE DATED 09.11.2012 RELATING TO ASSESSMENT YEAR 2009-1 0 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.11 51 111.00 MADE BY THE LEARNED ASSESSING OFFICER BY REJECTING THE CLAIM MADE BY THE APPELLANT U/S 36[1](VIII] OF THE IT. ACT 1961. THE SAID CLAIM MAY PLEASE BE ALLOWED TO THE APPELLANT 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT FOR CLAIMING THE D EDUCTION U/S 36[1] [VIII] OF THE IT ACT 1961 THE AMOUNT OF RESERVE OU GHT TO BE DEBITED TO THE PROFIT AND LOSS ACCOUNT AND MERE CLAIM IN THE C OMPUTATION OF INCOME BY WAY OF MAINTAINING SEPARATE RESERVE IS NO T A STATUTORY COMPLIANCE. THE AFORESAID FINDING / CONCLUSION DRAW N BY THE LEARNED CIT(A) BEING PATENTLY ILLEGAL BAD IN LAW AND DEVOI D OF MERITS THE SAME MAY PLEASE BE VACATED AND THE CLAIM MADE BY THE APP ELLANT U/S 36[1][VIII] OF THE I.T. ACT 1961 MAY PLEASE BE ALLO WED. 3. WITHOUT PREJUDICE TO GROUND OF APPEAL NOS.1 & 2 ABOVE AND BY WAY OF AN ALTERNATE SUBMISSION THE APPELLANT SUBMITS THAT THE APPELLANT MAY ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 2 BE PERMITTED NOW TO CREATE SUCH RESERVE U/S 36[1][V III] OF THE I.T ACT 1961 AND THE IMPUGNED DEDUCTION BE ALLOWED. 4. THE APPELLANT CRAVES THE PERMISSION TO ADD AMEND MODIFY ALTER REVISE SUBSTITUTE DELETE ANY OR ALL GROUNDS OF A PPEAL IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN REL ATION TO THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A CO-OPERATIVE BANK REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIE TIES ACT 1960 AND CARRIES ON THE BUSINESS OF BANKING UNDER THE LICENSE GRANTE D BY THE RESERVE BANK OF INDIA. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATI ON HAD FURNISHED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.3 54 61 420/-. THEREAFTER IT FILED A REVISED RETURN OF INCOME DECLARING THE SAME INCOME BUT CLAI MING EXCESS TDS OF RS.94 973/-. THE ASSESSEE THEN FILED SECOND REVISE D RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3 17 06 440/- IN WHICH IT CLAIME D THE FOLLOWING DEDUCTIONS :- (A) DEDUCTION OF RS.25 70 792/- CLAIMED UNDER SECT ION 36(1)(VIIA) (PROVISION) (B) DEDUCTION OF RS.11 51 111/- CLAIMED UNDER SECTI ON 36(1)(VIII) (C) ALLOWANCE UNDER SECTION 40(IA) OF RS.33 077/- H AS BEEN CLAIMED FOR TDS PAID DURING THE A.Y. 2009-10 PERTAINING TO EXPENSES DISALLOWED IN A.Y. 2008-09 DUE TO NON-PAYMENT OF TDS IN A.Y. 2008-09. 5. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY. THE ASSESSING OFFICER SHOW-CAUSED THE ASSESSEE TO PROVIDE PROOF A S TO WHETHER THE AMOUNT WAS TRANSFERRED DURING THE YEAR TO SPECIAL RESERVE ACCOUNT CREATED FOR THE PURPOSE OF SECTION 36(1)(VIII) OF THE ACT. IN RESP ONSE THE ASSESSEE STATED THAT THE SAID DEDUCTION OF RS.11 51 111/- ON ACCOUNT OF SECTION 36(1)(VIII) OF THE ACT WAS CLAIMED IN THE REVISED RETURN OF INCOME FILED O N 28.03.2011 AND WORKING OF THE SAME WAS ENCLOSED THEREIN. IT WAS FURTHER CL AIMED BY THE ASSESSEE THAT THE DEBITING OF SUCH PROVISION TO THE PROFIT & LOSS ACC OUNT WAS NOT A CONDITION PRECEDENT FOR CLAIMING THE DEDUCTION UNDER THIS SEC TION AND HENCE THE SAID ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 3 DEDUCTION BE ALLOWED TO THE ASSESSEE. WITHOUT PREJ UDICE THE ASSESSEE REQUESTED THAT IT MAY PLEASE BE GIVEN AN OPPORTUNIT Y TO CREATE SUCH RESERVE NOW. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD N OT CREATED ANY RESERVE DURING THE FINANCIAL YEAR 2009-10 AND THROUGH A REV ISED RETURN IT HAD REQUESTED FOR AN OPPORTUNITY TO CREATE SUCH RESERVE NOW. IN THE ABSENCE OF ANY RESERVE BEING CREATED DURING THE PREVIOUS YEAR THE ASSESSEE CLAIMED A DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT AT RS.11 51 111/- W HICH WAS DISALLOWED BY THE ASSESSING OFFICER. 6. THE CIT(A) OBSERVED THAT FROM THE READING OF THE PROVISIONS IT WAS CLEAR THAT THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT WAS WITH REFERENCE TO THE SPECIAL RESERVE CREATED AND MAINTAINED AND THE AMOU NT CARRIED DURING THE YEAR TO SUCH SPECIAL RESERVE. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT THE SPECIAL RESERVE MUST BE CREATED BY THE BANK OUT OF THE TOTA L INCOME INCLUDED BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI-A OF THE ACT AND SUCH RESERVE IS TO BE CREATED ONLY IN THE BOOKS OF ACCOUNT OF THE ASSESSE E. THE ASSESSEE HAVING FAILED TO CREATE ANY SPECIAL RESERVE IN ITS BOOKS O F ACCOUNT WAS HELD TO BE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT BY THE CIT(A). THE OTHER CONTENTION OF THE ASSESSEE THAT IT SHOULD BE ALLOWE D AN OPPORTUNITY TO CREATE THE REQUISITE RESERVE DURING THE ASSESSMENT PROCEEDINGS WAS ALSO REJECTED BY THE CIT(A) SINCE THE ASSESSEE HAD FAILED TO CREATE ANY RESERVE IN ITS BOOKS OF ACCOUNT BEFORE CLAIMING THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT (2005) 272 ITR 54 (P&H) WHERE IN THE CONTEXT OF THE PROVISION OF SECTION 36 (1)(VIIA) OF THE ACT IT WAS HELD THAT MAKING PROVISION FOR BAD AND DOUBTFUL DEBTS EQ UAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE BOOKS OF ACCOUNT WAS NECESSARY FOR CLAIMING DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. IT WAS HELD BY THE CIT(A) THAT THE SAID RATIO WAS APPLICABLE EVEN TO THE RESERVE TO BE CREATED UNDER SECTION 36(1)(VIII) OF THE ACT. ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 4 THE CIT(A) FURTHER HELD THAT THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE INDU STRIAL DEVELOPMENT CORPORATION (2010) 323 ITR 495 (P&H) RENDERED ON T HE ISSUE WAS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT NO RESERVE WAS CREATED WHILE CLAIMING THE DEDUCTION UN DER SECTION 36(1)(VIII) OF THE ACT. THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS CONNECTION WAS THAT IF THE LEGISLATURE WANTED CREAT ION OF SUCH RESERVE THEN WORDING OF SECTION WOULD BE DIFFERENT. OUR ATTENTI ON WAS DRAWN TO THE WORDING OF SECTION 34(3A) OF THE ACT. FURTHER RELIANCE WAS PL ACED ON THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION (SUPRA). IT WAS POINTED OUT BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT AFT ER MAKING CLAIM OF DEDUCTION IN THE COMPUTATION OF INCOME FILED ALONGWITH THE RE VISED RETURN THE ASSESSEE HAD MADE A PRAYER BEFORE THE AUTHORITIES BELOW THAT IT BE ALLOWED AN OPPORTUNITY TO MAKE RESERVES AND PASS ENTRIES. THE CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT ALL THESE BEING BENEFICIAL PROVISION THEN THE PROVISION OUGHT TO BE INTERPRETED LIBERALL Y. FURTHER THE LD. AUTHORIZED REPRESENTATIVE POINTED OUT THAT SIMILAR ISSUE AROSE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI MAHALAXMI CO-OP. BANK LTD. VS. ITO IN ITA NO.1658/PN/2011 RELATING TO ASSESSMENT YEAR 2008-09 AND THE TRIBUNAL VIDE ORDER DATED 29.10.2013 ADJUDICATED THE ISSUE OF ALL OWANCE OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AND IT WAS POINTED O UT THAT THE RATIO LAID DOWN IN THE SAID DECISION IS NOT APPLICABLE AS THE WORDINGS IN SECTION 36(1)(VIII) OF THE ACT WERE DIFFERENT. ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 5 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE CIT(A) WITH SPECIAL REFERENCE TO PARA 5 TO 5.1 OF THE IMPU GNED ORDER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO ALL OWABILITY OF DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. THE ASSESSEE WAS A CO-OPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING. IN THE ORIGINAL RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT CLAIMED ANY DED UCTION UNDER SECTION 36(1)(VIII) OF THE ACT. HOWEVER IN THE REVISED RE TURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE A CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT AT RS.11 51 111/-. THE CASE OF THE REVENUE AUTHORITIES WAS THAT IN THE ABSENCE OF ANY SPECIAL RESERVE BEING CR EATED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT THE DEDUCTION UNDER SECTION 36(1) (VIII) OF THE ACT WAS NOT ALLOWABLE. THE CONTENTION OF THE ASSESSEE ON THE OTHER HAND IS THAT DEBITING OF SUCH PROVISION TO THE PROFIT & LOSS ACCOUNT WAS NOT A CONDITION PRECEDENT FOR CLAIMING DEDUCTION UNDER THIS SECTION. AN ALTERNAT E PLEA WAS RAISED BEFORE THE LOWER AUTHORITIES THAT WITHOUT PREJUDICE TO THE ABO VE ASSESSEE BANK BE ALLOWED AN OPPORTUNITY TO CREATE SUCH RESERVE NOW. 10. SECTION 36(1)(VIII) OF THE ACT PROVIDES AS UNDE R :- 36(1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN IN COMPU TING THE INCOME REFERRED TO IN SECTION 28 (I) .. (VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED AN D MAINTAINED BY A SPECIFIED ENTITY AN AMOUNT NOT EXCEEDING TWENTY PER CENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION (BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUCH RESERVE ACCOUNT: PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS CARRIED TO SUCH RESERVE ACCOUNT FROM TIME TO TIME EXCEEDS TWICE THE AMOUNT OF THE PAID UP SHARE CAPITAL AND OF THE GENERAL RESERVES OF THE SPECIFIED ENTITY NO ALLOWANCE UNDER THIS CLAUSE SHALL BE MADE IN RESPECT OF SUCH EXCESS. ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 6 11. FOR COMPUTING THE INCOME UNDER THE HEAD BUSINE SS INCOME CERTAIN DEDUCTIONS ARE ALLOWED FROM SUCH BUSINESS INCOME AN D ONE SUCH DEDUCTION IS LAID DOWN IN SECTION 36(1)(VIII) OF THE ACT. THE S AID SECTION PROVIDES A DEDUCTION NOT EXCEEDING 20% OF THE PROFITS DERIVED FROM ELIGI BLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED BY A SPECIFIED ENTIT Y AND THE SAID AMOUNT HAVING BEEN CARRIED TO SUCH RESERVE ACCOUNT. THE CONDITIO N OF MAINTAINING THE SPECIAL RESERVE WAS INCORPORATED W.E.F. 01.04.1998 BY THE F INANCE ACT 1997. THE WORDINGS OF SUB-SECTION ARE THAT SPECIAL RESERVE SH OULD BE CREATED AND MAINTAINED BY A SPECIFIED ENTITY FROM THE PROFITS O F THE ELIGIBLE BUSINESS FOR THE RELEVANT PREVIOUS YEAR FROM WHICH DEDUCTION IS TO B E CLAIMED. THE SECTION FURTHER PROVIDES THAT THE AMOUNT SHOULD BE CARRIED TO SUCH RESERVE ACCOUNT. IN OTHER WORDS IT IS SPECIFIED THAT ENTRIES ARE TO BE MADE IN THE BOOKS OF ACCOUNT BY WAY OF A CREATION OF A SPECIAL RESERVE IN ORDER TO CLAI M THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT WHICH IN TURN WOULD NOT EX CEED 20% OF THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS. FURTHER CERTAIN RESTR ICTIONS ARE PROVIDED IN THE PROVISO TO THE SAID SUB-SECTION WHICH IS NOT RELEVA NT FOR DECIDING THE ISSUE BEFORE US. 12. IN THE FACTS OF THE PRESENT CASE ADMITTEDLY AS SESSEE WAS A SPECIFIED ENTITY ENTITLED TO THE BENEFIT OF DEDUCTION UNDER S ECTION 36(1)(VIII) OF THE ACT. FURTHER IN ORDER TO GET THE BENEFIT OF THE SAID DE DUCTION UNDER SECTION 36(1)(VIII) OF THE ACT THE REQUIREMENT WAS TO CREATE A SPECIAL RESERVE IN ITS BOOKS OF ACCOUNT OUT OF ITS CURRENT INCOME WHICH THE ASSESSE E HAS FAILED TO DO SO. THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE IS THAT THERE IS NO SUCH REQUIREMENT OF CREATION OF SPECIAL RESERVE FOR CLAIMING THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. OUR ATTENTION WAS DRAWN TO THE WORDING OF SECTION 34(3A) OF THE ACT WHEREIN IT IS PROVIDED THAT THE D EDUCTION UNDER SECTION 33 OF THE ACT SHALL NOT BE ALLOWED UNLESS AN AMOUNT EQUAL TO SEVENTY-FIVE PER CENT OF THE ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 7 DEVELOPMENT REBATE TO BE ACTUALLY ALLOWED IS DEBITE D TO THE PROFIT & LOSS ACCOUNT AND ALSO CREATED TO BE A RESERVE ACCOUNT TO BE UTIL IZED BY THE ASSESSEE DURING THE PERIOD OF EIGHT YEARS NEXT. 13. ON THE OTHER HAND THE CASE OF THE DEPARTMENT I S THAT THE PROVISIONS ARE SIMILAR TO THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT WHEREIN ALSO RESERVE HAD TO BE CREATED IN THE BOOKS OF ACCOUNT. WE FIND THA T THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI MAHALAXMI CO-OP. BANK LTD. VS. ITO (SUPRA) HAD ELABORATED UPON THE CREATION OF PROVISION AND IN TU RN HAD RELIED ON THE RATIO LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT (SUPRA) AND HAD HELD THAT WHERE THE ASSESSEE HAS FAILED TO MAKE THE PROVISIONS IN THE BOOKS OF ACCOUNT EQUAL TO THE AMOUNT OF DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 36(1)(VIIA) OF THE ACT TH E ASSESSEE WAS NOT ENTITLED TO THE ENTIRE CLAIM OF DEDUCTION BUT ONLY DEDUCTION TO THE EXTENT OF RS.50 00 000/- BEING THE AMOUNT OF PROVISION ACTUALLY MADE IN THE BOOKS OF ACCOUNT WAS ALLOWED IN THE HANDS OF THE ASSESSEE. THE RELEVANT FINDING S OF THE TRIBUNAL ARE AS UNDER :- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE HAVE ALSO ANXIOUSLY PERUSED THE AUTHORITIES CITED AT BAR IN O RDER TO DETERMINE THE CONTROVERSY ON HAND. THE RELEVANT PORTION OF SECTIO N 36(1)(VIIA) OF THE ACT AS APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION I.E. A.Y. 2008-09 READS AS UNDER : - [(VIIA) [IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING [* * *] A BANK INCO RPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON -SCHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY A GRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK] AN AMOUNT [NOT EXCEEDING SEVEN A ND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKI NG ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER : 10. A BARE PERUSAL OF AFORESAID SECTION CLEARLY BR INGS OUT THAT THE DEDUCTION SPECIFIED THEREIN IS IN RESPECT OF ANY PROVISION F OR BAD AND DOUBTFUL DEBTS MADE BY.. AN ELIGIBLE ASSESSEE. THE PRESENCE OF THE A FORESAID EXPRESSION IN THE SECTION SUPPORTS THE PLEA OF THE REVENUE WHICH IS TO THE EFFECT THAT THE ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 8 DEDUCTION ALLOWABLE UNDER SECTION 36(1)(VIIA) OF TH E ACT IS IN RESPECT OF THE PROVISION MADE BY THE ASSESSEE. IN OUR CONSIDERED OPINION THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA) CLEARLY COVERS THE CONTROVERSY IN FAVOUR OF THE REVENUE AND BELIES THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE ASSESS EE. IN THE CASE BEFORE THE HONBLE HIGH COURT ASSESSEE-BANK HAD ORIGINALLY FI LED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 1985-86 CLAIMING DEDUCTION UNDER SE CTION 36(1)(VIIA) OF THE ACT AT RS.1 90 36 000/-. AFTER FILING OF THE RETURN THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT WERE AMENDED BY FINANCE ACT 1985 WHEREB Y DEDUCTION WAS ENHANCED TO 10% OF THE PROFIT OR 2% OF THE AGGREGAT E AVERAGE ADVANCES MADE BY RURAL BRANCHES OF THE BANK WHICHEVER WAS HIGHER . ON ACCOUNT OF THE AMENDED PROVISIONS ASSESSEE FILED A REVISED RETURN OF INCOME ON 24.04.1986 ENHANCING THE CLAIM FOR DEDUCTION FROM RS.1 90 36 0 00/- TO RS.1 94 21 000/-. THE ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDER SE CTION 36(1)(VIIA) OF THE ACT TO RS.1 90 36 000/- ONLY AND DISALLOWED THE BALANCE ON THE GROUND THAT IN THE BOOKS OF ACCOUNT PERTAINING TO THE RELEVANT ASSESSMENT YE AR ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.1 90 36 000/- ONLY. THE ASSESSEE ARGUED THAT THE PROVISION OF RS.1 90 36 000/- WAS M ADE IN THE BALANCE-SHEET FINALIZED ON 14.02.1985 WHICH WAS AS PER THE UNAMEN DED PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND THAT IN VIEW OF THE AMEN DMENT OF SECTION 36(1)(VIIA) OF THE ACT PERMITTING HIGHER CLAIM OF DEDUCTION THE A SSESSEE COULD NOT HAVE POSSIBLY MADE THE HIGHER PROVISION IN THE BALANCE-S HEET FINALIZED ON A PRIOR DATE BUT IT MADE UP THE SHORTFALL BY MAKING AN ADE QUATE PROVISION IN THE BALANCE-SHEET OF THE SUBSEQUENT ASSESSMENT YEAR. ON THIS BASIS IT WAS SOUGHT TO BE MADE OUT THAT THERE WAS SUBSTANTIAL COMPLIANC E WITH THE REQUIREMENT OF LAW OF MAKING PROVISION FOR BAD AND DOUBTFUL DEBTS AND THEREFORE ASSESSEE JUSTIFIED THE CLAIM OF DEDUCTION FOR THE COMPLETE AMOUNT OF R S.1 94 21 000/- AND NOT RESTRICTED TO RS.1 90 36 000/-. THE CIT(A) AS WELL AS THE TRIBUNAL NEGATED THE PLEA OF THE ASSESSEE AND ACCORDINGLY THE MATTER WA S CARRIED BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE HONBLE HIGH COURT REFERRED TO THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND OBSERVED THAT ..THE DEDUCTION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PRO VISION MADE AND FURTHER WENT ON TO HOLD THAT ..MAKING OF A PROVISION FOR BAD A ND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS MUST FOR CLAIMI NG SUCH DEDUCTION. IN VIEW OF THE AFORESAID JUDGEMENT OF THE HONBLE PUNJAB & HAR YANA HIGH COURT IN OUR VIEW THE POSITION SOUGHT TO BE CANVASSED BY THE AS SESSEE DESERVES TO BE REPELLED. WE REPRODUCE HEREINAFTER THE RELEVANT POR TION OF THE ORDER OF THE HONBLE HIGH COURT WHICH READS AS UNDER :- 5. SEC.36(1)(VIIA) OF THE ACT AS APPLICABLE TO THE ASST. YR. 1985-86 READS AS UNDER : IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL D EBTS MADE BY A SCHEDULED BANK [NOT BEING A BANK APPROVED BY THE CE NTRAL GOVERNMENT FOR THE PURPOSES OF CL.(VIIIA) OR A BANK INCORPORAT ED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCHEDULED BANK A N AMOUNT NOT EXCEEDING TEN PER CENT OF THE TOTAL INCOME (COMPUTE D BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) OR AN AMOUNT NOT EXCEEDING TWO PER CENT OF THE AGGREGATE AVERAGE ADV ANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCR IBED MANNER WHICHEVER IS HIGHER. 6. A BARE PERUSAL OF THE ABOVE SHOWS THAT THE DEDUC TION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PRO VISION MADE. THEREFORE MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBTS EQ UAL TO THE AMOUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAIMING SU CH DEDUCTION. THE ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 9 TRIBUNAL HAS RIGHTLY POINTED OUT THAT THIS ISSUE ST ANDS FURTHER CLARIFIED FROM THE PROVISO TO CL.(VII) OF S.36(1) OF THE ACT WHIC H READS AS UNDER : PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CL.(VIIA) APPLIES THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT O R PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFU L DEBTS ACCOUNT MADE UNDER THAT CLAUSE. 7. THIS ALSO CLEARLY SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE ACCOUNT BOOKS IS NECESSARY FOR CLAIMING DEDUCTION UNDER S. 36(1)(VIIA) OF THE ACT. THE TRIBUNAL HAS DISTINGUISHED VARIOUS AUTHORITIES RELIED UPON BY TH E ASSESSEE WHEREIN DEDUCTIONS HAD BEEN ALLOWED UNDER VARIOUS PROVISION S WHICH ALSO REQUIRED CREATION OF RESERVE AFTER THE ASSESSEE HAD CREATED SUCH RESERVE IN THE ACCOUNT BOOKS BEFORE THE COMPLETION OF THE A SSESSMENT. IT HAS BEEN CORRECTLY POINTED OUT THAT IN ALL THOSE CASES RESERVES/PROVISIONS HAD BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SAME ASSES SMENT YEAR AND NOT OF THE SUBSEQUENT ASSESSMENT YEAR. 8. IN THE PRESENT CASE THE ASSESSEE HAS NOT MADE A NY PROVISION IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 1985-86 BY MAKING SUPPLEMENTARY ENTRIES AND BY REV ISING ITS BALANCE SHEET. THE PROVISION HAS BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR. 9. WE ARE THEREFORE SATISFIED THAT THE TRIBUNAL W AS RIGHT IN HOLDING THAT SINCE THE ASSESSEE HAD MADE A PROVISION OF RS. 1 19 36 000 FOR BAD AND DOUBTFUL DEBTS ITS CLAIM FOR DEDUCTION UNDER S . 36(1)(VIIA) OF THE ACT HAD TO BE RESTRICTED TO THAT AMOUNT ONLY. SINCE THE LANGUAGE OF THE STATUTE IS CLEAR AND IS NOT CAPABLE OF ANY OTHER INTERPRETA TION WE ARE SATISFIED THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEA L FOR CONSIDERATION BY THIS COURT. 11. IN VIEW OF THE AFORESAID INTERPRETATION OF SECT ION 36(1)(VIIA) OF THE ACT BY THE HONBLE PUNJAB & HARYANA HIGH COURT THE ORDERS OF THE LOWER AUTHORITIES DESERVE TO BE UPHELD INASMUCH AS THE ASSESSEE HAS N OT MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNT EQUA L TO THE AMOUNT OF DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 36(1)(VIIA) OF T HE ACT AND THEREFORE IN OUR VIEW THE LOWER AUTHORITIES WERE JUSTIFIED IN RESTR ICTING THE DEDUCTION TO RS.50 00 000/- BEING THE AMOUNT OF PROVISION ACTUA LLY MADE IN THE BOOKS OF ACCOUNT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CITED CERTAIN DECISION IN SUPPORT OF HIS PROPOSITION THAT THE CLAIM OF DEDUCT ION UNDER SECTION 36(1)(VIIA) OF THE ACT IS NOT LINKED TO MAKING OF A PROVISION IN T HE ACCOUNT BOOKS. AT THE OUTSET WE MAY OBSERVE THAT THE DECISIONS RELIED UPON BY TH E ASSESSEE ARE OF VARIOUS BENCHES OF THE TRIBUNAL AND NOT OF ANY HIGH COURT. THEREFORE THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA) WHICH IS CONTRARY TO THE DECISIONS OF THE TRIBUNAL RELIED UP ON BY THE ASSESSEE; AND BEING SOLITARY JUDGEMENT OF A HIGH COURT IS REQUIRED TO BE APPLIED HAVING REGARD TO THE ESTABLISHED NORMS OF JUDICIAL DISCIPLINE. FOR THE S AID REASON WE REFRAIN FROM DISCUSSING EACH OF THE DECISIONS OF THE TRIBUNAL RE LIED BY THE ASSESSEE BEFORE US. ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 10 14. WE FURTHER FIND THAT THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION (SUPRA) WHILE DECIDING THE ISSUE OF ALLOWABILITY OF CLAIM OF DEDU CTION UNDER SECTION 36(1)(VIII) OF THE ACT HELD THAT WHERE THE ASSESSEE HAD CLAIMED SA ID DEDUCTION AND CREATED A RESERVE ON THE BASIS OF BOOK PROFIT BUT WHERE THE ASSESSEE WAS ENTITLED TO A HIGHER DEDUCTION UNDER SECTION 36(1)(VIII) OF THE A CT FOR WHICH THE RESERVE ALREADY CREATED WAS NOT SUFFICIENT AN OPPORTUNITY WAS OFFE RED TO THE ASSESSEE TO CREATE FURTHER RESERVE. 15. THE CASE OF THE ASSESSEE BEFORE US IS THAT ADMI TTEDLY IT HAD NOT CREATED ANY RESERVE IN ITS BOOKS OF ACCOUNT BEFORE CLAIMING THE SAID DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT ON THE SURMISE THAT NO SUCH RESERVE IS TO BE CREATED IN VIEW OF WORDING OF THE SECTION. WE FIND NO MERI T IN THE SAID PLEA OF THE ASSESSEE IN VIEW OF THE SIMILAR WORDINGS IN SECTION 36(1)(VIIA) OF THE ACT WHICH HAVE BEEN INTERPRETED BY THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT (SUPRA) WHICH IN TURN HAS BEEN APPLIED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI MAHA LAXMI CO-OP. BANK LTD. VS. ITO (SUPRA). IN THE ABSENCE OF ANY RESERVE BEING C REATED THE ASSESSEE IS NOT ENTITLED TO THE SAID CLAIM OF DEDUCTION UNDER SECTI ON 36(1)(VIII) OF THE ACT. THE SECOND ASPECT OF THE ISSUE IS THE PLEA OF THE ASSES SEE THAT IT SHOULD BE ALLOWED AN OPPORTUNITY TO CREATE THE SAID RESERVE IN ITS BO OKS OF ACCOUNT NOW. FROM THE PLAIN READING OF THE WORDINGS OF THE SECTION IT IS CLEAR THAT RESERVE IS TO BE CREATED FROM THE PROFITS OF THE RELEVANT FINANCIAL YEAR I.E. OUT OF THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS BEFORE CLAIMING ANY DEDUCTION UNDER THE SAID CLAUSE. IN VIEW OF THE CLEAR WORDING OF THE SECTION THAT WHERE IT IS PROVI DED THAT THE SPECIAL RESERVE IS TO BE CREATED AND MAINTAINED BY THE SPECIAL ENTITY FRO M ITS PROFIT DERIVED FROM THE ELIGIBLE BUSINESS THEN SUCH NON-CREATION OF SPECIA L RESERVE BY THE ASSESSEE CANNOT BE MADE GOOD BY CREATING ANY RESERVE ON A LA TER DATE. THE BOOKS OF ITA NO.234/PN/2013 SHREE SHARADA SAHAKARI BANK LTD. 11 ACCOUNT OF THE ASSESSEE ARE ADMITTEDLY AUDITED AND IN THE ABSENCE OF ANY RESERVE BEING CREATED IN SUCH AUDITED BOOKS OF ACCO UNT NO REMEDY IS AVAILABLE TO THE ASSESSEE TO CREATE SUCH A RESERVE ON A LATER DATE. THE FACTS IN THE CASE OF CIT VS. PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORA TION (SUPRA) WERE DIFFERENT WHEREIN THE ASSESSEE HAD ALREADY CREATED A RESERVE BEFORE CLAIMING THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT. HO WEVER THE ASSESSEE THEREIN WAS ENTITLED TO A HIGHER DEDUCTION UNDER SECTION 36 (1)(VIII) OF THE ACT FOR WHICH OPPORTUNITY WAS GRANTED TO CREATE ADDITIONAL RESERV E. IN THE FACTS OF THE PRESENT CASE THERE WAS NO RESERVE CREATED BY THE ASSESSEE AND IN THE ABSENCE OF SAME WE FIND NO MERIT IN THE ALTERNATE PLEA RAISED BY TH E ASSESSEE AND THE SAME IS DISMISSED. IN VIEW THEREOF THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED AS ABOVE. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 29 TH APRIL 2015 SUJEET COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III PUNE; 4) THE CIT-III PUNE; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T. PUNE