The Kodungallur Town Co-op Bank Ltd, Kodungallur v. The ACIT, Trichur

ITA 564/COCH/2015 | 2011-2012
Pronouncement Date: 29-09-2016 | Result: Allowed

Appeal Details

RSA Number 56421914 RSA 2015
Assessee PAN AAABT2480R
Bench Cochin
Appeal Number ITA 564/COCH/2015
Duration Of Justice 8 month(s) 29 day(s)
Appellant The Kodungallur Town Co-op Bank Ltd, Kodungallur
Respondent The ACIT, Trichur
Appeal Type Income Tax Appeal
Pronouncement Date 29-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 29-09-2016
Date Of Final Hearing 28-09-2016
Next Hearing Date 28-09-2016
Assessment Year 2011-2012
Appeal Filed On 31-12-2015
Judgment Text
ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN AM & GEORGE GEORGE K JM ITA NO 564 /COCH/201 5 (A SST YEAR 20 11 - 12 ) THE KODUNGALLUR TOWN CO - OP BANK LTD. HEAD OFFICE KODUNGALLUR 680 664. VS THE PRINCIPAL COMMISSIONER OF INCOME TAX THRISSUR. ( APPELLANT) (RESPONDENT) PAN NO. AAABT2480R ASSESSEE BY SHRI MOHAN PULIKKAL REVENUE BY SH SHANTOM BOSE CIT - DR DATE OF HEARING 2 8 TH SEPT 2016 DATE OF PRONOUNCEMENT 29TH SEPT 2016 ORDER PER GEORGE GEORGE K JM : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CIT S ORDER DATED 298/09/2015 . THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . 2. BRIEFLY STATED THE FACTS OF THE CASE ARE AS UNDER: - THE ASSESSEE IS A CO - OPERATIVE BANK. FOR THE ASSESSME NT YEAR 2011 - 12 ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 28/02/2014 FIXING A TOTAL INCOME OF RS.4 75 16 910/ - . THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.10 51 02 551/ - U/S.36(1)(VIIA)(A) OF THE ACT. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT THE ASSESSING OFFICER HAD ALLOWED ONLY A SUM OF RS.38 52 732/ - U/S. 36(1)(VIIA)(A) OF THE ACT BEING 7.5% OF THE TOTAL INCOME AND THE BALANCE CLAIM BEIN G 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 2 THE ASSESSEES RU R AL BRANCHES WAS DISALLOWED ON THE GROUND THAT THE RURAL BRANCHES AS DECLARED BY THE BANK WERE NOT ACTUALLY RURAL BRANCHES DEFINED UNDER EXPLANATION (IA) OF SECTION 36(1)(VIIA) OF THE ACT. 3 . SUBSEQUENT TO THE COMPLETION OF ASSESSMENT THE CIT PASSED AN ORDER U/S. 263 OF THE ACT (ORDER DATED 28/9/2015) SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE OF DEDUCTION U/S. 36(1)(VIIA)(A) OF THE AC T IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. ACCORDING TO THE CIT IN VIEW OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT 343 ITR 270(SC) SECTION 36(1)(VIIA)(A) APPLIES ONLY TO RURAL ADVANCES AND S INCE THE ASSESSEES BANK WAS NOT HAVING ANY RURAL BRANCH DEDUCTION ALLOWED U/S. 36(1)(VIIA)(A) OF THE ACT IS NOT IN ORDER. THE RELEVANT FINDING OF THE CIT READS AS FOLLOWS: - 4. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE ASSES SEE. THE HON'BLE SUPREME COURT VIDE ORDER OF 17.02.2012 IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT HAS HELD 'INDISPUTABLY CLAUSE (VIIA) (A) OF SECTION 36( 1) APPLIES ONLY TO RURAL ADVANCES'. THE POSITION OF LAW IS VERY CLEAR. IN THIS CONTEXT IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT EXAMINED ANY SUCH DETAILS TO ASCERTAIN AND CONFIRM THE RURAL ADVANCES. 5. SINCE THE ELIGIBILITY OF THE DEDUCTION U/S.36(1)(VIIA)(A) HAD NOT BEEN EXAMINED AS DISCUSSED ABOVE DURING THE SCRUTINY I AM CONVINCED THAT T HE ASSESSMENT ORDER U/S.143(3) DATED 28.02.2014 MADE BY THE ASST. COMMISSIONER OF INCOME TAX CIRCLE - 2( 1) THRISSUR IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE I.T. ACT 1961. THEREFORE THE AFORESA ID ORDER DATED 28.02.2014 IS SET ASIDE WITH DIRECTION TO EXAMINE THE ISSUE OF DEDUCTION U/S.36(1)(VIIA) (A) IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 4. ASSES SEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY CO V ERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO.408/COCH/2015 ( ORDER DATED 18/ 07/2016 ) . IT WAS SUBMITTED THAT THE ORDER OF THE TRIBUNAL HAD FOLLOWED THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.37 OF 2013 (JUDGMENT DATED 03/04/2014 ). ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 3 5. THE LD. DEPARTMENTAL REPRESENTATIVE PRESENT WAS DUL Y HEARD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON IDENTICAL FACTS IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010 - 11 THE TRIBUNAL HAD SET ASIDE THE ORDER PASSED BY THE C I T U/S. 263 OF THE ACT. THE RELEVANT FINDIN G OF THE TRIBUNAL WHICH HAD IN TURN FOLLOWED THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE(SUPRA) READS AS FOLLOWS: - 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE JUDGMENT OF THE HONBLE S UPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD (SUPRA) RELIED BY THE CIT WHILE INVOKING HIS REVISIONARY JURISDICTION DOES NOT APPLY TO THE FACTS OF THE PRESENT CASE. THE HONBLE SUPREME COURT HAD ESSENTIALLY CONSIDERED THE ISSUE WHETHER THEDEDUCTION AVAILABLE TO SCHEDULED BANKS UNDER CLAUSE (VII) OF SUB - SEC .( 1) OF SEC.36 OF THE ACT IN RESPECT OF BAD DEBTS WRITTEN OFF SHALL BE LIMITED TO THE EXTENT THE SAID DEBTS EXCEED THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDE R CLAUSE (VIIA). THE ASSESSMENTS RELATED TO THE ASSESSMENT YEAR 2002 - 03 AND PRIOR YEARS A ND THE HONBLE APEX COURT HAD CONSIDERED THE LAW WITH REFERENCE TO THE FACT SITUATION AND SOCIAL COMMITMENTS OF THE S CHEDULED BANKS AT THAT TIME . THE ASSESSEE HEREIN I S A CO - OPERATIVE BANK. THE COOPERATIVE BANKS WAS INCLUDED IN THE CA TEGOR Y OF BENEFICIARIES UNDER CLAUSE ( VIIA ) B Y FINANCE ACT 2007 WITH EFFECT FROM 01 . 04 . 2007. THEREFORE THE HONBLE APEX COURT IN CATHOLIC SYRIAN BANK 'S CA S E DID NOT HAVE THE OPPORTUNI T Y TO CONSIDER THE FACT SITUATIONTHAT WOULD HAVE PERSUADED THE LEGISLATURE TO INCLUDE CO - OPERATIVE BANKS ALSO IN THE CATEGORY OF BENEFICIARIES UNDER CLAUSE (VIIA) OF SUB - SEC.(1) OF SEC . 36 OF THE ACT. THE DEDUCTION PROVIDED IN THE FIR S T PART OF CLAUSE (VI IA)(A) OF 7 . 5 % OF THE TOTAL INCOME HITHERTO ENJOYED BY THE ASSESSEE SINCE TH E IN C LU S ION OF CO - OPERATI V E BANKS WITHIN THE AMBIT OF CLAUSE (VIIA)(A) BY FINANCE ACT 2007 IS UNCO N C ERN E D WITH ADVANCES MADE BY THE RURAL BRANCHES OF THE BANKS. A READING OF PAR AGRAPH 27 OF THE J UDGMENT OF THE HONBLE APEX COURT WOULD SHOW THAT WHILE MAKING THE OBSERVATION 'INDISPUTABLY CLAUSE (VIIA)(A) APPLIES ONLY TO RURAL ADVANCES THE HONBLE APEX COURT WAS EXAMINING THE ISSUE IF THERE WOULD BE DOUBLE DEDUCTION OF ACTUAL BA D DEBTS WRITTEN OFF UNDER CLAUSE (VII) AND DEDUCTION IN RESPECT OF RURAL ADVANCES PROVIDED UNDER THE SECOND PART OF CLAUSE (VIIA) . THE HONBLE APEX COURT HAS NOT HELD THAT THE FIRST PART OF CLAUSE (VIIA) PROVIDING FOR DEDUCTION OF 7.5 % OF THE TOTAL INCOME APPLIES ONLY TO RURAL ADVANCES. THE CBDT IN CLAUSE 5 OF ITS CIRCULAR NO . 464 DATED JULY 18 1986 REFERRED TO BY THE HONBLE APEX COURT IN CATHOLIC SYRIAN BANK'S CASE MAKES IT VERY CLEAR THAT THE TWO DEDUCTIONS PROVIDED IN CLAUSE (VIIA)(A) VIZ. 7.5% OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND 10 % OF THE AGGREGATE ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 4 AVERAGE ADVANCES MADE BY THE RURAL BRANCHES ARE DISTINCT AND INDEPENDENT . THE INTENTION OF THE LEGISLATURE WAS TO GIVE THE BENEFIT OF DEDUCTION OF 7.5% OF THE TOTAL INCOME TO THE SC H E DULED NON - SCHEDULED AND CO - OPERATIVE BANKS UNDER CLAUSE (VIIA) WHILE A SIMILAR BENEFIT OF DED UCTION OF A SPECIFIED PERCENTAGE OF THE TOTAL INCOME WAS EXTENDED TO THE FOREIGN BANKS AND PUBLIC FINANCIAL INSTITUTIONS UN DER CLAUSES (VIIA) (B) AND (VIIA)(C) RESPECTIVELY APART FROM THE BENEFIT AVAILABLE TO THEM UNDER CLAUSE (VII). THE PROPOSAL TO DENY THE BENEFIT OF THE FIRST PART OF CLAUSE (VIIA)(A) TO THE ASSESSEE LINKING IT TO RURAL ADVANCES WOULD THEREFORE SUBVERT THE LEGISLATIVE INTENT . 8 FURTHER THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE CITED SUPRA HAS CONSIDERED AN IDENTICAL ISSUE. THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS UNDER: 9. ADMITTEDLY APPELLANTS/ASSESSEES ARE COOPERATIVE BANKS. WITH INTRODUCTION OF FINANCE ACT OF 2007 COMING INTO EFFECT FROM04.2007 ONE HAS TO UNDERSTAND WHAT WAS THE POSITION WAS PRIOR TO 1.4.2007 AND AFTER 1.4.2007. DURING THE RELEVANT ASSESSMENT YEAR ADMITTEDLY THE APPELLANTS/ASSESSEES WERE NOT ENTITLED FOR ANY DEDUCTION PROVIDED UNDER SECTION 80P OF THE ACT. PRIOR TO 1.4.2007 THEY WERE ENJOYING THE BENEFITS PROVIDED UNDER SECTION 80P. WITH THE INTRODUCTION OF FINANCE ACT 2007 WITH EFFECT FROM 1.4.2007 THEY COULD CLAIM DEDUCTIONS AS P ROVIDED UNDER SECTION 36(1) OF THE ACT. WE ARE CONCERNED WITH SUB - CLAUSE(A) OF CLAUSE (VIIA) TO SECTION36(1). PRIOR TO FINANCE ACT OF 2007 COOPERATIVE BANK WAS NOT INCLUDED IN SUB - CLAUSE (A) SO FAR AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS. WITH EFFECT FRO M 1.4.2007 COOPERATIVE BANK WAS INCLUDED UNDER SUB CLAUSE (A) OF CLAUSE (VIIA) OF SECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURE CREDIT SOCIETY ETC. IS INCLUDED IN SUB CLAUSE (A) OF CLAUSE (VIIA). THE PROVISION IS A BENEFICIAL ONE. NO DOUBT PLAIN READING OF MAIN SECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN DIFFICULTIES BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEGISLATURE IS TO BE UN DERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVISIONS. THE POLICY WAS TO INCLUDE COOPERATIVE BANKS AS WELL AS THEY COULD NOT TAKE SHELTER UNDER SECTION 80P OF THE INCOME TAX ACT ANY MORE. BY RESTRICTING THE SCOPE OF THE PROVISIONS THE VERY PURPOSE OF INC LUSION OF COOPERATIVE BANK WOULD BE LOST. SUB CLAUSE (A) CONSISTS OF TWO TYPES OF DEDUCTION. ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING 67.5% OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA). SECTION ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RULE BRANCHES OF SUCH BANK WHILE COMPUTING IN THE PRESCRIBED MANNER. SO FAR AS BENEFIT OF 7.5% OF THE TOTAL INCOME THERE IS NO CONDITION THAT IT SHOULD BE IN RESPE CT OF ANY RURAL BRANCH. ALL TYPES OF BANKS DESCRIBED UNDER SUB CLAQUE (A) OF CLAUSE (VIIA) ARE ENTITLED ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 5 TO SEEK DEDUCTION OF AN AMOUNT OF EXCEEDING 7.5% OF THE TOTAL INCOME. ONLY CONDITION IS THERE SHOULD BE A PROVISION FOR BAD AND DOUBTFUL DEBTS 9 IN VIEW OF THE AFORESAID REASONING AND THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE IN ASSESSEES OWN CASE CITED SUPRA WE ARE OF THE VIEW THAT THE CIT IS NOT JUSTIFIED IN INVOKING HIS REVISIONARY JURISDICTION U/S 263 OF THE ACT AND THEREFORE WE SET ASIDE THE SAME. IT IS ORDERED ACCORDINGLY. 10 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6.1 IN VIEW OF THE CO - ORDINATE BENCH DECISION IN ASSESSEES OWN CASE WHICH IS IDENTICAL TO THE FACTS OF THE PRESENT CASE WE HOLD THAT THE CIT IS NOT JUSTIFIED IN INVOKING HIS REVISIONARY JURISDICTION U/S. 263 OF THE ACT AND THEREFORE WE SET ASIDE THE SAME. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPT 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 29TH SEPT 2016 VM SR. PS COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR 6 . GUARD FILE BY ORDER ASSIS TANT REGISTRAR ITAT COCHIN ITA NO 564/COCH/2015 (ASST YEAR 20 11 - 12 ) 6