The Kottayam Dist. Co-op Bank Ltd, Kottayam v. ACIT, Kottayam

ITA 514/COCH/2013 | 2008-2009
Pronouncement Date: 11-04-2014

Appeal Details

RSA Number 51421914 RSA 2013
Assessee PAN AAAJK0492J
Bench Cochin
Appeal Number ITA 514/COCH/2013
Duration Of Justice 7 month(s) 7 day(s)
Appellant The Kottayam Dist. Co-op Bank Ltd, Kottayam
Respondent ACIT, Kottayam
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 11-04-2014
Date Of Final Hearing 07-04-2014
Next Hearing Date 07-04-2014
Assessment Year 2008-2009
Appeal Filed On 03-09-2013
Judgment Text
IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND B.R.BASKAR AN AM I.T.A. NOS.513-515/COCH/2013 ASSESSMENT YEARS : 2007-08 2008-09 &2010-11 THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD. CENTRAL JUNCTION KOTTAYAM. [PAN: AAAJK 0492J VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1 KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) I.T.A. NOS.509/COCH/2013 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1 KOTTAYAM. VS. THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD. CENTRAL JUNCTION KOTTAYAM. [PAN: AAAJK 0492J (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) ASSESSEE BY MS. ROSIE ATHULYA JOSEPH ADV. REVENUE BY SHRI K.K. JOHN SR. DR DATE OF HEARING 07/04/2014 DATE OF PRONOUNCEMENT 11/04/2014 O R D E R PER B.R.BASKARAN ACCOUNTANT MEMBER: THE THREE APPEALS FILED BY THE ASSESSEE AND THE AP PEAL FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY T HE LD. CIT(A)-IV KOCHI. THE APPEALS FILED BY THE ASSESSEE RELATE TO THE ASSESSM ENT YEARS 2007-08 2008-09 AND 2010-11 AND THE APPEAL FILED BY THE REVENUE REL ATES TO THE ASSESSMENT YEAR 2008-09. I.T.A. NOS. 513-515 & 509 /COCH/2013 2 2. SINCE THE ISSUE URGED IN ALL THE APPEALS FILED B Y THE ASSESSEE IS IDENTICAL IN NATURE AND THE APPEAL FILED BY THE REVENUE FOR ASSE SSMENT YEAR 2008-09 ALSO RELATED TO THE SAME ISSUE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE SOLITARY ISSUE URGED IN ALL THE APPEALS FILE D BY THE ASSESSEE RELATES TO THE DEFINITION OF RURAL BRANCH FOR THE PURPOSE OF ARRIVING AT DEDUCTION U/S. 36(1)(VIIA) OF THE ACT. 4. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE STATED IN BRIEF. IN TERMS OF SEC. 36(1)(VIIA)(A) OF THE ACT THE ASSESSEE HEREIN IS ENTITLED FOR A DEDUCTION OF PROVISION MADE FOR BAD AND DOUBTFUL DEBT AT AN AMOU NT NOT EXCEEDING 7.5% OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCT ION UNDER 36(I)(VIIA) AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE ASSESSEE BANK. THE TERM RURAL BRANCH IS DEFINED AS UNDER IN THE EXPLANATION TO SE C. 36(1)(VIIA) OF THE ACT:- RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK O R A NON-SCHEDULED BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR THE ASSESSEE INTERPRETED THE TERM A PLACE FOUND I N THE ABOVE SAID EXPLANATION TO SEC. 36(1)(VIIA) OF THE ACT AS THE WARD WITHI N THE REVENUE VILLAGE AND ACCORDINGLY CLAIMED DEDUCTION ON THE ADVANCES GIVEN BRANCHES WHERE THE POPULATION OF THE WARD WAS LESS THAN 10 000. HOWEV ER THE ASSESSING OFFICER INTERPRETED THE TERM A PLACE AS THE VILLAGE PAN CHAYAT WHERE THE BRANCH OF THE BANK IS LOCATED. THE AO NOTICED THAT THE POPUL ATION OF ALL THE VILLAGE PANCHAYATS WHERE THE BRANCH OF THE BANK WAS LOCATE D EXCEEDED 10 000. ACCORDINGLY HE REJECTED THE CLAIM FOR DEDUCTION OF 10% OF THE RURAL ADVANCES AS MENTIONED IN SEC. 36(1)(VIIA) OF THE ACT IN ALL THE THREE YEARS. HOWEVER IN ASSESSMENT YEARS 2007-08 AND 2010-11 THE ASSESSING OFFICER ALLOWED DEDUCTION I.T.A. NOS. 513-515 & 509 /COCH/2013 3 U/S 36(1)(VIIA) OF THE ACT AT 7.5% OF THE TOTAL INC OME SINCE THE DEDUCTION ALLOWABLE UNDER THAT SECTION CONSISTED OF TWO PARTS VIZ. (A) 7.5% OF THE TOTAL INCOME(COMPUTED BEFORE MAKING ANY DEDUCTION UNDER 36(I)(VIIA) AND CHAPTER VIA) AND (B) AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AV ERAGE ADVANCES MADE BY THE RURAL BRANCHES. THE AO HOWEVER DID NOT ALLOW SUCH KIND OF DEDUCTI ON IN ASSESSMENT YEAR 2008- 09. 5. THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS C LASSIFIED ALL THE ADVANCES AND LOANS MAINLY INTO TWO CATEGORIES AS PER THE CIRCULA R ISSUED BY THE RESERVE BANK OF INDIA I.E. PERFORMING ASSETS OR STANDARD ASSE TS AND NON-PERFORMING ASSETS. ACCORDINGLY THE ASSESSEE PROVIDED FOR TH E PROVISION FOR BAD AND DOUBTFUL DEBTS ON BOTH TYPE OF ASSETS AS UNDER:- (A) PROVISION FOR NON-PERFORMING ASSETS (B) PROVISION FOR STANDARD ASSETS THE AO TOOK THE VIEW THAT THE PROVISION MADE ON ST ANDARD ASSETS CANNOT BE CONSIDERED AS A PROVISION FOR BAD AND DOUBTFUL DEB TS SINCE THE LOANS AND ADVANCES CLASSIFIED AS STANDARD ASSETS CANNOT HAV E THE RISK OF BECOMING BAD AND DOUBTFUL. SINCE THE AMOUNT ALLOWED IN ASSESSME NT YEARS 2007-08 AND 2010- 11 U/S 36(1)(VIIA) WAS RESTRICTED TO 7.5% OF THE TO TAL INCOME AND SINCE THE AMOUNT SO ALLOWED WAS LESSER THAN THE AMOUNT OF PR OVISION FOR BAD AND DOUBTFUL DEBTS CREATED ON NON-PERFORMING ASSETS THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO DISALLOW THE CLAIM MADE ON THE STANDARD ASSETS. 5. IN THE APPELLATE PROCEEDINGS THE LD CIT(A) NOTICED THAT THE HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF LOR D KRISHNA BANK IN I.T.A. 234/2009 (195 TAXMAN 57) HAS HELD THAT THE THAT THE POPULATION OF GRAMA PANCHAYAT WHICH IS THE PRIMARY UNIT OF THE GOVERNM ENT HAS TO BE CONSIDERED AND NOT THAT OF THE WARD FOR THE PURPOSE OF SEC. 36 (1)(VIIA) OF THE ACT. SINCE THE I.T.A. NOS. 513-515 & 509 /COCH/2013 4 ISSUE WAS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ABOVE SAID DECISION OF THE JURISDICTIONAL HIGH COURT THE LD CIT(A) REJECT ED THE CONTENTIONS OF THE ASSESSEE BY FOLLOWING THE DECISION IN ALL THE THREE YEARS. 5.1 THE LD CIT(A) HOWEVER ACCEPTED THE CONTENTI ONS OF THE ASSESSEE THAT THE PROVISIONS OF SEC. 36(1)(VIIA) DO NOT MAKE ANY DIST INCTION BETWEEN NON- PERFORMING ASSETS AND STANDARD ASSETS AND HENCE THE PROVISION CREATED FOR BAD AND DOUBTFUL DEBTS ON ENTIRE AMOUNT OF LOANS AN D ADVANCES IS ALLOWABLE SUBJECT TO THE LIMITS PRESCRIBED IN SEC. 36(1)(VIIA ) OF THE ACT. SINCE THE ASSESSING OFFICER HIMSELF HAD ALLOWED DEDUCTION UNDER THE ABO VE SAID SECTION UP TO 7.5% OF THE TOTAL INCOME WHICH HAPPENED TO BE LESSER THAN THE PROVISION CREATED ON NON PERFORMING ASSETS THERE WAS NO NECESSITY TO DISTUR B THE DEDUCTION SO ALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 AN D 2010-11. 5.2 HOWEVER IN ASSESSMENT YEAR 2008-09 THE A O HAD NOT ALLOWED THE DEDUCTION U/S 36(1)(VIIA) OF THE ACT EVEN THOUGH T HE TOTAL INCOME COMPUTED BY HIM FOR THAT YEAR TURNED INTO A POSITIVE FIGURE. H ENCE THE LD CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION. FOR THE SAKE OF CONVENI ENCE WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY LD CIT(A). ..BUT AFTER THE ASSESSMENT FINALIZED BY THE AO U/ S143(3) THE CLAIM ON ACCOUNT OF BAD AND DOUBTFUL DEBTS @ 10% OF THE AGGR EGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES WAS DISALLOWED AND RESULTANT TO THAT THE ASSESSED INCOME BECAME A POSITIVE INCOME. IN T HAT CASE A SUM OF RS.34 32 558/- CLAIMED BY THE APPELLANT AS DEDUCTIO N @ 7.5% OF THE AGGREGATE OF ADVANCES BY THE RURAL BRANCHES SHOULD HAVE BEEN ALLOWED. ON VERIFICATION IT IS FOUND THAT THE AO HAS ALLOWE D THE IDENTICAL DEDUCTION IN THE IMMEDIATELY PRECEDING YEAR I.E. AY 2007-08. AS THIS ISSUE IS A MATTER OF FACT THE APPELLANTS CLAIM SHOULD HAVE B EEN ALLOWED ONCE THE INCOME TURNED POSITIVE AFTER THE ASSESSMENT. ACCOR DINGLY THE AO IS DIRECTED TO ALLOW THE CLAIM EVEN IF THIS AMOUNT WA S NOT MADE BY THE APPELLANT IN THEIR RETURN OF INCOME. AT THE TIME OF FILING THE RETURN OF INCOME THE APPELLANT HAD NO POSITIVE INCOME AND THA T COULD NOT HAVE ANTICIPATED THAT AFTER DISALLOWANCE BY THE AO THE I NCOME WOULD TURN POSITIVE HENCE THE CLAIMED FORWARDED BY THE APPELLA NT IS APPROPRIATE AND THE SAME SHOULD BE ALLOWED. I.T.A. NOS. 513-515 & 509 /COCH/2013 5 AGGRIEVED BY THE ORDERS PASSED BY LD CIT(A) THE AS SESSEE HAS FILED THESE THREE APPEALS BEFORE US. THE REVENUE IS AGGRIEVED BY THE DECISION RENDERED BY LD CIT(A) IN ASSESSMENT YEAR 2008-09 ON THE FOLLOWING POINTS VIZ. (A) DIRECTING THE AO TO ALLOW DEDUCTION @ 7.5% OF AGGRE GATE ADVANCES MADE BY THE RURAL BRANCHES OF THE ASSESSEE. AND (B) HOLDING THAT THE PROVISION FOR BAD AND DOUBTFUL DEB TS CAN BE MADE ON THE LOANS AND ADVANCES CLASSIFIED AS STANDARD ASSET S. 6. AT THE TIME OF HEARING BOTH THE PARTIES AGR EED THAT THE LD. CIT(A) HAS FOLLOWED THE BINDING DECISION RENDERED BY THE HONB LE JURISDICTIONAL HIGH COURT OF KERALA IN THE CASE OF LORD KRISHNA BANK LTD. IN ITS JUDGMENT IN I.T.A. 234/2009 (195 TAXMAN 57). SINCE THE LD CIT(A) HAS FOLLOWED T HE BINDING DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LO RD KRISHNA BANK LTD. (SUPRA) AND ACCORDINGLY HELD THAT THE PLACE MENTIONED IN THE DEFINITION OF RURAL BRANCH GIVEN IN THE EXPLANATION TO SEC. 36(1)(VIIA) IS THE VILLAGE PANCHAYAT WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISI ON RENDERED BY LD. CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS. 7. IN ASSESSMENT YEAR 2008-09 WE HAVE NOTICED T HAT THE LD CIT(A) HAS DIRECTED THE AO TO ALLOW A SUM OF RS.34 32 558/- AS DEDUCTION U/S 36(1)(VIIA) OF THE ACT. HOWEVER THE LD CIT(A) DESCRIBED THE ABOV E SAID AMOUNT AS 7.5% OF THE AGGREGATE ADVANCES MADE BY THE RURAL BRANCHES . THE REVENUE IS AGGRIEVED BY THE SAME. HOWEVER WE NOTICE THAT THE GROUND UR GED BY THE ASSESSEE BEFORE LD CIT(A) WAS THE PLEA FOR ALLOWING DEDUCTION @ 7.5 % OF THE TOTAL INCOME AND THE ASSESSEE HAD COMPUTED THE SAME AT RS.34 32 558/ -. THE SAID CLAIM WAS ALLOWED BY LD CIT(A). HENCE WE ARE OF THE VIEW THA T THERE WAS TYPOGRAPHICAL MISTAKE IN THE ORDER PASSED BY HIM I.E. INSTEAD O F STATING THAT 7.5% OF THE TOTAL INCOME (COMPUTED BEFORE ALLOWING DEDUCTION U/S 36(1 )(VIIA) AND UNDER CHAPTER VIA) THE LD CIT(A) SEEMS TO HAVE WRONGLY STATED AS 7.5% OF THE AGGREGATE I.T.A. NOS. 513-515 & 509 /COCH/2013 6 ADVANCES MADE BY RURAL BRANCHES. ACCORDINGLY WE MODIFY THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEDUCTION @ 7.5% OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER 36(I)(VIIA) AND CHAPTER VIA) SUBJECT TO THE AMOUNT OF PROVISION FOR BAD AN D DOUBTFUL DEBTS CREATED BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESS MENT YEAR 2008-09. 7.1 WITH REGARD TO THE NEXT ISSUE RELATING TO T HE PROVISION CREATED ON LOANS AND ADVANCES CLASSIFIED AS STANDARD ASSETS WE NOTI CE THAT THE REVENUE HAS PLACED RELIANCE ON THE DECISION RENDERED BY THE JAI PUR BENCH OF TRIBUNAL IN THE CASE OF VINAYAK LOCAL AREA BANK LTD VS. DCIT (ITA N O.456/JP/2011 DT. 11.5.2012) TO CONTEND THAT THE PROVISION MADE IN RE SPECT OF LOANS CLASSIFIED AS STANDARD ASSETS IS NOT MAINTAINABLE. ON A PERUSAL OF THE ORDER OF THE JAIPUR BENCH IN THE CASE OF VINAYAK LOCAL AREA BANK LTD W E NOTICE THAT THE TRIBUNAL HAS NOT EXPRESSED ANY VIEW BUT HAS SIMPLY STATED T HAT THE CLAIM IS NOT PRIMA FACIE MAINTAINABLE. FURTHER THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE:- ..STANDARD ASSETS ARE BY DEFINITION PERFORMING ASSETS AGAINST WHICH NO PROVISION IS ADVOCATED... THE ASSESSEES CLAIM IN RESPECT OF THESE ITEMS IS THUS NOT MAINTAINABLE AT LEAST PRIMA FACI E. SO HOWEVER THOUGH IT IS PRIMARILY THE DUTY OF THE ASSESSEE TO ESTABLI SH ITS CLAIM /S THE REVENUE HAS ALSO IN THE INSTANT CASE FAILED TO EXAM INE AND DETERMINE THE RELEVANT FACTS I.E. WHETHER THE IMPUGNED CLAIM DO ES INDEED QUALIFY U/S 36(1)(VIIA)THERE BEING THUS NO ADJUDICATION ON ME RITS UNDER THE CIRCUMSTANCES WE ONLY CONSIDER IT FIT AND PROPER A ND IN THE INTEREST OF JUSTICE THAT THE MATTER WITH REGARD TO THE CLAIM F OR RS.48.49 LACS IS RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUD ICATION IN THE INSTANT CASE WE FIND THAT THERE IS NO NECES SITY FOR THE AO TO CONSIDER THE PROVISION MADE ON STANDARD ASSETS SINCE THE AMOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS ALLOWABLE AT 7.5% OF THE TOTAL INCOM E REFERRED ABOVE APPEARS TO BE LESSER THAN THE AMOUNT OF PROVISION CREATED ON N ON-PERFORMING ASSETS. I.T.A. NOS. 513-515 & 509 /COCH/2013 7 HENCE THERE IS NO NECESSITY TO CONSIDER THE CLAIM OF PROVISION MADE ON STANDARD ASSETS DURING THIS YEAR. 8. IN THE RESULT ALL THE THREE APPEALS FILED BY TH E ASSESSEE ARE DISMISSED AND THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 11-04-2 014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH APRIL 2014 GJ COPY TO: 1. THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD. CE NTRAL JUNCTION KOTTAYAM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE -1 KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV KOCH I. 4. THE COMMISSIONER OF INCOME-TAX KOTTAYAM. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T COCHIN