M/s Ujjain Paraspar Sahakari Bank Ltd., Ujjain v. The ACIT, 1(1), Ujjain

ITA 585/IND/2010 | 2005-2006
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 58522714 RSA 2010
Assessee PAN AAACU6406F
Bench Indore
Appeal Number ITA 585/IND/2010
Duration Of Justice 1 year(s) 3 day(s)
Appellant M/s Ujjain Paraspar Sahakari Bank Ltd., Ujjain
Respondent The ACIT, 1(1), Ujjain
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 16-09-2011
Assessment Year 2005-2006
Appeal Filed On 13-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARMA A.M. PAN NO. : AAACU6406F I.T.A.NO. 585 / IND /20 10 A.Y. : 2005 - 06 UJJAIN PARASPAR SAHKARI BANK LIMITED ACIT 1(1) UJJAIN VS UJJAIN APPELLANT RESPONDENT APPELLANT BY : SHRI RAJENDRA SODANI ADV. RESPONDENT BY : SHRI ARUN DEWAN SR. DR DATE OF HEARING : 06.09.2011 DATE OF PRONOUNCEMENT : 16.09.2011 O R D E R PER R. C. SHARMA A.M. THIS IS AN APPEAL FILED BY T HE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 9.7.2010 FOR THE ASSESSMENT YEAR 2005 - 06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME - TAX ACT 1961. - : 2 : - 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF DEDUCTION OF PROVISION OF NPA AS PRO VIDED U/S 36(1)(VIIA) OF THE INCOME - TAX ACT 1961. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. FACTS IN BRIEF ARE THAT THE ASSESSEE IS COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. THE ASSESSEE FILED AUDITED COPIES OF ACCOUNTS ALONGW ITH THE RETURN OF INCOME. IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE DISCLOSED NET PROFIT OF RS. 33 55 940/ - . THE ASSESSEE HAS MADE PROVISION FOR RS. 17 63 515/ - UNDER HEAD SPECIAL BAD AND DOUBTFUL RESERVE PROVISIONS IN THE ACCOUNTS. THE ASSESSEE WAS RE QUIRED TO EXPLAIN AS TO WHY THE PROVISIONS SHOULD NOT BE ADDED IN THE TOTAL INCOME. IN RESPONSE TO THIS NOTICE THE ASSESSEE FILED A WRITTEN REPLY DATED 27.04. 2007. IN THE SAID REPLY IT HAS BEEN CONTENDED THAT THE BAD AND DOUBTFUL DEBTS ARE ALLOWABLE UNDE R THE INCOME - TAX ACT AS AND WHEN THESE ARE WRITTEN OFF AND FURTHER THEY ARE ADDED BACK IN THE INCOME AS AND WHEN RECOVERY IS MADE. ALL THESE ITEMS HAVE BEEN WRITTEN OFF ON THE INSTRUCTIONS OF THE RESERVE BANK OF INDIA . HOWEVER NO SUCH - : 3 : - 3 INSTRUCTIONS WERE PR ODUCED. THE CONTENTION OF ASSESSEE WAS NOT ACCEPT ED BY THE ASSESSING OFFICER ON THE PLEA THAT UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF INCOME - TAX ACT 1961 THE DEDUCTION OF BAD AND DOUBTFUL DEBTS RESERVE IS ALLOWABLE IN THE CASE OF SCHEDULED BANK OR NON - SCHEDULED BANK. THE ASSESSEE IS NEITHER A SCHEDULED BANK NOR A NON - SCHEDULED BANK. THEREFORE THE CLAIM OF ASSESSEE WAS HELD TO BE NOT ADMISSIBLE. EVERY ORDER OF INSTRUCTION OF RESERVE BANK OF INDIA WAS HELD TO BE NOT ADMISSIBLE FOR ALLOWING EXPENDITU RE UNDER THE INCOME - TAX ACT 1961. ACCORDINGLY AN ADDITION OF RS. 17 63 515/ - WAS MADE IN THE TOTAL INCOME OF ASSESSEE. THE ASSESSEE ALSO MADE PROVISION FOR SUB - STANDARD ASSETS AND DEBITED THE PROFIT AND LOSS ACCOUNT BY RS. 65 273/ - . ON BEING ASKED THE A SSESSEE EXPLAINED THAT THE PROVISION WAS MADE UNDER THE GUIDELINES OF RESERVE BANK OF INDIA. AS PER AO ONLY RESERVE FOR BAD AND DOUBTFUL DEBTS IS ADMISSIBLE U/S 36(1)(VIIA) TO THE SCHEDULED BANK OR NON - SCHEDULED BANK. THEREFORE AN AMOUNT OF RS. 65 273/ - WAS DISALLOWED AND ADDED IN THE TOTAL INCOME OF ASSESSEE. - : 4 : - 4 5. BY THE IMPUGNED ORDER THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER : - THE FACTS OF THE CASE AS WELL AS THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE PROVISIONS OF SECTION 36(1)(VIIA) HAVE BEEN MADE APPLICABLE IN THE APPELLANT S CASE W.E.F. 01.04.2007 THROUGH FINANCE A CT 2007. PRIOR TO THAT THIS PROVISIONS WAS NOT APPLICABLE TO COOPERATIVE SECTOR BANKS. THEREFORE THE DEDUCTIONS IN RESPECT OF BAD & DOUBTFUL DEBTS FOR RS. 17 63 515/ - AS WELL FOR SUB - STANDARD ASSETS FOR RS. 65 273/ - ARE NOT ALLOWABLE IN THE APPELLANT S CASE FOR THE YEAR UNDER CONSIDERATION. THE AO S ACTION IN DISALLOWING RS. 17 63 515/ - UNDER THE HEAD SPECIAL BAD AND DOUBTFUL DEBTS AND RS. 65 273/ - UNDER THE HEAD PROVISIONS FOR SUB - STANDARD ASSETS IS HEREBY SUSTAINED. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ADDITION OF RS. 17 63 515/ - IN RESPECT OF SPECIAL BAD & DOUBTFUL DEBTS - : 5 : - 5 HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE IS NEITHER A SCHEDULED BANK NOR A NON - SCHEDULED BANK AND THEREFORE PROVISIONS OF SECTION 36(1)(VIIA) OF INCOME - TAX ACT 1961 ARE NOT APPLICABLE IN ITS CASE. ON THE SIMILAR GROUND ADDITION OF RS. 65 273/ - HAS BEEN MADE IN RESPECT OF PROVISION FOR SUB - STANDARD ASSETS. THE ADDITION ON ACCOUNT OF UNEXPLAINED DEPOSITS AMOUNTING TO RS. 5 34 575/ - HAS BEEN MADE BY THE ASSESSING OFFICER ON THE PRESUMPTION THAT SUCH ACCOUNT HOLDERS CANNOT ENFORCE THE BANK TO GET HIS DEPOSITS BACK DUE TO LIMITATION AND FURTHER WHEN RECOVERY OF SERVICE CHARGES THE BANK WILL NOT PAY THE UNCLAIMED DEPOSITS TO THE ACCOUNT HOLDERS. 7. SO FAR AS THE ALLOWABILITY OF PROVISION MADE AS PER R.B.I.NORMS KEEPING IN VIEW THE STANDARD OF ASSETS IS CONCERNED THE ISSUE IS DECIDED BY HON'BLE SUPREME COURT IN THE CASE OF SO U THERN TECHNOLOGY 320 ITR 577 WHEREIN IT WAS HELD THAT PROVISIONS FOR BAD DEBTS IS TO BE ALLOWED AS PER THE PROVISION OF INCO ME - TAX ACT 1961 AND NOT AS PER THE GUIDELINES OF R.B.I.. SO FAR AS ASSESSEE S CASE IS CONCERNED THE - : 6 : - 6 RELEVANT PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT WHICH READS AS UNDER : - [(VIIA) [ IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON SCHEDULED BANK [OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELO PMENT BANK] AN AMOUNT [NOT EXCEEDING SEVEN AND ONE - HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL B RANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER: 8. IT IS CLEAR FROM THE ABOVE CLAUSE (VIIA) THAT IT IS APPLICABLE TO THE SCHEDULE BANK OR A NON - SCHEDULED BANK OR A CO - OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OP ERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. HOWEVER CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT S OCIETY OR PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK HAS BEEN INSERTED BY THE FINANCE ACT 2007 W.E.F. 1.4.2007. SINCE T HE ASSESSEE IS A CO - OPERATIVE BANK THEREFORE BENEFIT OF CLAUSE (VIIA) CAN BE ALLOWED TO IT ONLY W.E.F. 2007 - 08. IN THE INSTANT CASE RELEVANT - : 7 : - 7 ASSESSMENT YEAR IS 2005 - 06 THEREFORE THE ASSESSEE CANNOT BE GIVEN BENEFIT OF ANY PROVISION FOR BAD DEBTS MADE BY IT. CONTENTION OF LD. AUTHORIZED REPRESENTATIVE THAT IN TERMS OF EXPLANATION FOUND BELOW SUB CLAUSE (A) OF CLAUSE (VIIA) THE SUB. CL.(A) IS APPLICABLE TO THE RELEVANT ASSESSMENT YEAR 2005 - 06 UNDER CONSIDERATION HAS NO FORCE SINCE CO - OPERATIVE BANK HAS BEEN GIVEN BENEFIT OF SECTION 36(VIIA) ONLY W.E.F. 1.4.2007. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR DECLINING CLAIM OF BENEFIT U/S 36(1)(VIIA) OF THE ACT 1961. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. T HIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER 2011. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH SEPTEMBER 2011 . CPU* 1316 1