Income Tax Appellate Tribunal - Agra
Bhind District C-Operative Bank Ltd., ... vs Assessee on 7 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER
M.A. No. 21/Agra/2013
(in ITA No. 571/Agra/2012)
Asst. year : 2009-10
Bhind District Co-operative Bank Ltd., vs. A.C.I.T., Range-2,
Sadar Bazar, Bhind. Gwalior.
(PAN: AAAAB 1172 B))
(Appellant) (Respondent)
Appellant by : None (Written submissions)
Respondent by` : Shri Athesham Ansari, Jr. DR
Date of hearing : 07.02.2014
Date of pronouncement : 14.02.2014
ORDER
Per Bhavnesh Saini, J.M.:
This miscellaneous application is fled by the assessee against the order of the Tribunal dated 15.03.2013, whereby the appeal of the assessee was dismissed.
2. Briefly, the facts of the case are that the assessee challenged the order of the ld. CIT(A) in main appeal No. 571/Agra/2012 in not allowing penal interest of Rs.1.94 crores, which is not actually received by the bank. The assessee is a banking institution and engaged in providing financial services to its customers. In this case, on examination of computation of profit and loss account for assessment year under appeal, it revealed that the assessee has made provision for doubtful 2 M.A. No. 21/Agra/2013 debt amounting to Rs.8,15,53,000/-, penal interest amounting to Rs.1.94 crore and provision for sundry debtors amounting to Rs.8,07,000/-. Such provisions have been made on anticipation basis and the liability / loss being not actually arisen during the year under consideration. Provisions for doubtful debt, penal interest and sundry debtors were required to be disallowed because under the IT Act, the provision made in account for an accrued or known liability is an admissible deduction and no other provisions qualify for deduction. Since in this case, no such liability has accrued, therefore, the claim of assessee was disallowed and all amounts were added to the income of the assessee. All the three additions were challenged before the ld. CIT(A). However, as far as admissibility of provision for doubtful debts and sundry debtors are concerned, the assessee has furnished working of the amount of provisions admissible u/s.36(1)(viia) of the IT Act, which is reproduced at page 2 of the appellate order and the ld. CIT(A) allowed part deduction to the assessee as per the above provisions and rest of the additions were confirmed.
2.1. In respect of provision for penal interest of Rs.1.94 crore, the assessee submitted copy of guidelines issued by RBI in respect of accounting of accrued interest on NPA, which is as under :
3 M.A. No. 21/Agra/2013
"Bank should not debit to the borrower's account interest accrued on NPA, but show them separately under "Interest Receivable Account" and a corresponding amount under "Overdue Interest Reserve Account" on the assets and liabilities side of the balance sheet respectively. (The amount held in the Overdue Interest Reserve Account, however, cannot be regarded as "reserve" or as part of the owned funds of the bank as it is not created out of the income actually received by the bank."
3. The ld. CIT(A) considering facts of the case rejected claim of assessee. His findings are reproduced as under :
"6. The appellant has claimed that in view of the guidelines the claim of the appellant is allowable. I have seen the copy of the P & L account furnished by the appellant. It is seen that the sum of Rs.1,94,00,000/- has been shown as 'reserve' (Kaalateet Byaz Kosh) and not as provision. Further this interest has not been written of in the books of accounts by appellant. Any amount which is not written of as 'bad debt' and not covered by the provisions of section 36(1)(viia) is not admissible as deduction. Therefore, the claim of the appellant of Rs.1,94,00,000/- is disallowable. Accordingly, the appeal of the appellant is dismissed on this issue."
4. The submissions of both the parties before the Tribunal are reproduced as under :
"3. The ld. counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-36, which is profit and loss account ending year 31.03.2009 to show that interest overdue was not received which is taken as "Kaalateet Byaz Kosh". He has submitted that this figure was taken to balance sheet under the head "Interest Receivable"(PB-31). He has referred to PB-11, which is audit report, in which method of accounting employed by the assessee was mercantile system except in the case of interest on NPA advances on cash basis as per RBI guidelines. He has referred to PB-46 to show that in the assessment year under consideration, interest of 1.94 crore was received lesser, which is taken into interest receivable account and was carried forward to the next year. He has also relied upon the decision of Hon'ble Supreme Court in the case of 4 M.A. No. 21/Agra/2013 UCO bank vs. CIT, 237 ITR 889, in which the assessee followed mixed method of accounting and for interest on doubtful loans has no real income in the year which accrued to was considered only when it was realized. On the other hand, the ld. DR relied upon the orders of the authorities below and submitted that when for 2-3 quarters, no interest was received, it was considered as provision for penal interest. The same accrued in favour of the assessee which should have been shown for taxation purposes. The ld. DR relied upon the decision of Madras High Court in the case of T.N. Power Finance and Infrastructure Development Corporation Ltd. vs. JCIT, 280 ITR 491 in which it was held -
"Held, that merely because the Reserve Bank of India had directed the assessee to provide for non-performing assets, that direction could not override the mandatory provisions of the Income- tax Act contained in section 36(1 (viia) which stipulate a deduction not exceeding 5 per cent, of the total income only in respect of the provision for bad and doubtful debts which are predominately revenue in nature or trade related and not for provision for non- performing assets which are of predominately capital nature. The assessee was not entitled to deduction, in view of the Explanation to section 36(1)(vii) which says that the provision for bad and doubtful debts made in the accounts of the assessee is not an allowable deduction."
5. The Tribunal considering the submissions of the parties and the material on record, dismissed the appeal of the assessee. The findings of the Tribunal in para 4 are reproduced as under :
"4. We have considered the rival submissions and the material on record. The AO found that the assessee made provision for doubtful debts, penal interest and sundry debtors in the profit and loss account. Such provisions have been made merely on anticipation basis and the liability/ loss being not actually arising during the year under consideration. Under the IT Act, the provision could be made in accounts for an accrued or known liability which may qualify for deduction and there is no other provision to qualify for deduction. Thus in the case of assessee, it was found that no such liability has accrued for claiming deduction, therefore, deduction was liable to be disallowed. The assessee at the appellate stage with regard to provisions for doubtful debts and sundry debtors, restricted his claim for deduction as per provisions of section 36(1)(viia) of the IT Act, which 5 M.A. No. 21/Agra/2013 was accordingly partly allowed by the ld. CIT(A) according to the above provision. However, for provision for penal interest in a sum of Rs.1.94 crores, the assessee has not made any claim for deduction either u/s. 36(1)(vii) or u/s. 36(1)(viia) of the IT Act. The assessee claimed that such claim is allowable as per guidelines issued by RBI as noted above. NPA accounts are accounts of defaulters if they do not pay or no chance to pay. Entries made by assessee on accrual of penal interest appears to be made on mercantile system of accounting but later on claimed deduction in P & L account on cash basis cannot be held to be justified. Once income accrued, it has to be taxed. Both method cannot operate together. The above RBI guidelines have been issued for administrative purpose for regulating the banking business to monitor NPA A/c. It has nothing to do with the deduction claimed either u/s. 36(1)(vii) or sec. 36(1)(viia) of the IT Act. The ld. DR also relied upon the decision of Madras High Court in the case of T.N. Power Finance and Infrastructure Development Corporation Ltd. (supra) in which also it was held that Reserve Bank directives cannot override the statutory provisions. Hon'ble Supreme Court in the case of Southern Technologies Ltd. vs. JCIT, 320 ITR 577 held (Head Notes) -
"Provision for non-performing assets and debited to profit and loss account - Made under Reserve Bank Prudential Norms - Can be treated as income - Expense not deductible under section 36(1)(vii) or (viia) - Reserve Bank disclosure norms have nothing to do with computation of taxable income under Income-tax Act."
It was further held that what is not deductible under specific provision is not deductible as general business expenditure. The assessee is a co-operative bank. Therefore, provisions of section 36(1)(viia) may apply in favour of the assessee to some extent for making provision for bad and doubtful debts. Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT, 343 ITR 270 held that "scheduled commercial banks would continue to get the full benefit of write off of irrecoverable debts u/s. 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debts u/s. 36(1)(viia)". The Hon'ble Supreme Court followed the same decision in the case of DCIT vs. Karnataka Banks Ltd., 349 ITR 705. The ld. CIT(A) specifically found in the case of the assessee that penal interest has not been written off in the books of account by the assessee. Any amount, which is not written off as bad debt and not covered by the provision of section 36(1)(viia), is not admissible as deduction. Thus, assessee has failed to prove before the authorities below as to under which of the provisions of law, such a claim of deduction was made on provision for penal interest. Since the conditions of above provisions have not been satisfied in the case of assessee and no such claim is also made before the authorities below under the above provisions and nothing is clarified under which provision the assessee made a claim of deduction. 6 M.A. No. 21/Agra/2013 Therefore, the claim of assessee for deduction was rightly not entertained by the authorities below. The assessee in the audit report claimed that the assessee is employing the method of accounting on mercantile system except in the case of interest on NPA advance on cash basis as per RBI norms. The ld. counsel also relied upon the decision in the case of UCO bank vs. CIT (supra), in which the assessee followed mixed method of accounting as per the circular, therefore, claim of the assessee was allowed because the interest on loan, whose recovery was doubtful and which has not been recovered by the assessee bank for last three years, but has been kept in suspense account was held not includible in the income of the assessee. However, the appeal of the assessee under consideration pertains to assessment year 2009-10 and there is amendment in section 145 of the IT Act w.e.f. 01.04.1997 as substituted by Finance Act, 1995 and it has been provided that income chargeable under the head 'profit and gains of business and profession' or 'income from other sources' shall subject to provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. It appears from the facts and circumstances of the case that the assessee earlier showed the penal interest as income arising on accrual basis, but later on the assessee made provision for doubtful penal interest in the profit and loss account without any justification. There was no basis for the assessee to claim deduction in the profit and loss account by considering the same as provision for penal interest. The assessee has also not made out any case before the authorities below as to under which provisions of law, the assessee claimed deduction of provision for penal interest. RBI guidelines, thus, issued were not in consonance with the provisions of the IT Act, therefore, cannot be applied in favour of the assessee for allowing deduction in favour of the assessee. We, therefore, do not find any justification to interfere with the order of the ld. CIT(A). We confirm the addition and dismiss the appeal of the assessee."
6. The assessee in miscellaneous application has stated that the Tribunal has not considered the guidelines of RBI binding on the bank and that the decision in the case of Southern Technology Ltd. (supra) is not applicable to the case and that the circular is binding. It is, therefore, stated that the mistake apparent on record may be rectified and order may be amended.
7 M.A. No. 21/Agra/2013
7. At the time of hearing of miscellaneous application, none appeared on behalf of the assessee. The assessee's counsel Shri S.K. Lulla, C.A. forwarded a letter stating that the M.A. may be decided on merits in the light of the following decision :
(i). CT vs. Industrial Finance Corporation of India Ltd., 248 CTR 69
(ii). ACIT vs. Osmanabad Janta Sah. Bank Ltd., 152 TTJ (UO) 01.
(iii). CIT vs. Punjab State Cooperative Bank Ltd. 34 Taxman 128.
(iv). Jaipur Central Cooperative Bank vs. Deptt. Of Income-tax ITA No. 817/Jp/2011.
8. On the other hand, the ld. DR submitted that the Tribunal has decided the appeal on merits. The Tribunal has no power to review their orders already passed on merits and no mistakes apparent on record have been pointed out in the miscellaneous application. Therefore, the miscellaneous application may be dismissed.
9. We have considered the submissions of the ld. DR and the material on record. Section 254(2) provides that the Appellate Tribunal may with a view to rectify any mistake apparent from record amend any order passed by it under sub- section (1) and shall make such amendment. It is well settled law that the Tribunal has no power to review their own orders passed on merits. We rely upon the decision of Hon'ble Calcutta High Court in the case of CIT vs. Anamika Builders Pvt. Ltd., 251 ITR 585, wherein it is held that the Tribunal should not change its view already taken in the matter. We are further fortified in our view by the 8 M.A. No. 21/Agra/2013 decision of Hon'ble Andhra Pradesh High Court in the case of CIT vs. Ideal Engineers, 251 ITR 743, the decision of Hon'ble M.P. High Court in the case of Agarwal Warehousing, 257 ITR 235 (MP) and of Hon'ble Madras High Court in the case of CIT vs. Adyar Gate Hotel Ltd., 294 ITR 155 in which Hon'ble Madras High Court also held that the miscellaneous application should not be considered on the debatable issue. Hon'ble Calcutta High Court in the case of Hindustan Lever Ltd. 284 ITR 42 held that the mistake must be so obvious that it can be easily corrected to wit any arithmetical mistake, wrong quotation of section etc. and not on debatable issues. Considering the facts of the case in the light of the above decisions, it is clear that the Tribunal has no power to review their own orders already passed on merits. In this case whatever points have been raised in MA have been considered and the decision of the Supreme Court in the case of UCO Bank, 237 ITR 889, which is also referred in miscellaneous application, has been considered in the light of relevant provisions of law. Whatever submissions were raised by the ld. counsel for the assessee, have been dealt with and the appeal of the assessee was dismissed. Therefore, there is no mistake apparent on record of the Tribunal. Whatever decisions are now cited in the letter of the ld. counsel for the assessee above, were not cited at the time of hearing of appeal. There could not be any reconsideration of facts while exercising jurisdiction u/s. 254(2) of the IT Act. Since the appeal of the assessee has been decided on merits, considering the material and evidences on record in the light of submissions of the parties, 9 M.A. No. 21/Agra/2013 therefore, review of the judgment is not permissible. The miscellaneous application of the assessee has no merit and is accordingly dismissed.
10. In the result, the miscellaneous application of the assessee is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(PRAMOD KUMAR) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy