Income Tax Appellate Tribunal - Mumbai
Vasai Janta Sahakari Co Op Bank Ltd, ... vs Acit Cir 4, Thane on 14 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA No.6863/M/2016
Assessment Year: 2011-12
M/s. The Vasai Janta DCIT Circle-4, Thane
Sahakari Co-op Bank A-Wing, 6th Floor,
Ltd., Ashar I.T. Park, Wagle
Mrudhgandh, Indl. Estate,
Vs.
Azad Road, Thane 400 604
Parnaka,
Vasai Road,
Thane-401202
PAN: AACFV 5222D
(Appellant) (Respondent)
Present for:
Assessee by : Shri Bhupendra Shah, A.R.
Revenue by : Shri D.G. Pansari, D.R.
Date of Hearing : 18.09.2018
Date of Pronouncement : 14.11.2018
ORDER
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 01.08.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
2. The only issue raised by the assessee is against the order of Ld. CIT(A) confirming the disallowance of Rs.2,79,15,899/- being the disallowance as made by the AO by denying deduction claimed under section 36(1)(viia) of the Act.
2 ITA No.6863/M/2016M/s. The Vasai Janta Sahakari Co-op Bank Ltd.
3. The facts in brief are that during the course of assessment proceedings the AO found that assessee has made provisions for bad and doubtful debts to the tune of Rs.64,00,000/- in the P & L account whereas the deduction claimed under section 36(1)(viia) was of Rs.68,89,103/- and under section 36(1)(vii) Rs.2,74,26,796/- aggregating to Rs.3,43,15,900/-. According to the AO the assessee has claimed excessive deduction to the tune of Rs.2,79,15,899/- which is over and above the provisions made in the books of accounts which is not allowable under the Act. Accordingly, a show cause notice was issued to the assessee as to why the excessive deduction claimed under section 36(1)(viia) and 36(1)(vii) of the Act should not be disallowed and added to the income of the assessee which was replied by the assessee vide letter dated 24.01.2014 and 04.03.14. The AO while brushing aside the submissions of the assessee came to the conclusion that assessee can claim deduction under section 36(1)(viia) up to 7.5% of the net income as calculated according to rules or 10% of the aggregate average advances made by the rural branches but the said deduction is limited to the provisions made in the books of accounts. According to the AO deduction under section 36(1)(vii) can be claimed up to the provisions made in the books of accounts. The assessee has only credited provisions for bad and doubtful reserves of Rs.64 lakhs and therefore excess claim of Rs.2,79,15,899/- is not allowable and added the same to the income of the assessee.
4. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by upholding the order of the AO.
3 ITA No.6863/M/2016M/s. The Vasai Janta Sahakari Co-op Bank Ltd.
5. The Ld. A.R. vehemently submitted before us that the assessee is entitled to claim the deduction under both sections i.e. under section 36(1)(vii) and also under section 36(1)(viia) of the Act. The assessee submitted that the assessee has written off Rs.2,74,26,796/- under section 36(1)(vii) by referring to page No.81 to 85 which contained comprehensive details as to the individual borrower, amount of loan, principle and interest outstanding, date of creating provisions, amount of provisions and amounts written off. The Ld. A.R. pointed out that assessee has in fact created provisions of the equal amount in the earlier years equal to Rs.2,74,26,796/- as is apparent and clear from the page No.81 to 85, Annexure A to Annexure E. The assessee also referred to page No.30 of the paper book by pointing out that the total bad and doubtful debts reserved as on 31.03.2011 were Rs.20,80,50,448/-. The Ld. A.R. submitted that the provisions of section 36(1)(vii) and section 36(1)(viia) are different and independent to each other. Provision of section 36(1)(vii) provides/pre-supposes that that amount which has become bad has been written off in the books of accounts whereas the deduction under section 36(1)(viia) is available on the basis of provisions made in the books of accounts subject to the limit specified in the said section. The Ld. A.R. submitted that the assessee has claimed Rs.2,74,26,796/- under section 36(1)(vii) of the Act as amount actually written off and not under section 36(1)(viia) of the Act. Similarly, Rs.4,89,103/- was claimed under section 36(1)(viia) in the current year against the provisions made in the earlier years against the balance of bad and doubtful reserved account which at the year end was Rs.20,80,50,448/-. The Ld. A.R. relied on the decision of 4 ITA No.6863/M/2016 M/s. The Vasai Janta Sahakari Co-op Bank Ltd.
Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT (343 ITR 270)(SC) in defense of his arguments claiming that the assessee revised its return of income and claimed deduction of Rs.2,74,26,796/-therein. The Ld. A.R. stated that the Apex Court has held that section 36(1)(vii) and section 36(1)(viia) are two independent provisions and conditionalities specified under section 36(1)(vii) and section 36(1)(viia) are completely different. Therefore, the action of the Ld. CIT(A) in affirming the order of the AO disallowing the claim of deduction of Rs.2,74,26,796/- on the ground that no provisions of the said amount was made in the books of accounts is totally wrong and against the provision of the Act. Finally, the Ld. A.R. prayed before the Bench that in view of the said provisions, the deductions of Rs. 2,74,26,796/- u/s 36(1)(vii) and Rs. 4,89,103/- u/s 36(1)(viia) as claimed by the assessee should directed to be allowed by reversing the order of Ld. CIT(A).
6. The Ld. D.R., on the other hand, relied on the decision of the authorities below.
7. We have heard the rival submissions of both the parties and perused the material on record including the decisions cited by the Ld. A.R. The dispute is with regard to the claim of deductions under section 36(1)(vii) and section 36(1)(viia) of the Act . According to the AO, the assessee should create provisions for bad and doubtful debts only then the deduction could be allowed under section 36(1)(vii) and section 36(1)(viia) of the Act. The order of the AO is also affirmed by the Ld. CIT(A) giving the same reasoning. We have perused the facts of the case carefully in the light of the ratio laid down by the Hon'ble Apex Court in 5 ITA No.6863/M/2016 M/s. The Vasai Janta Sahakari Co-op Bank Ltd.
the case of Catholic Syrian Bank Ltd. vs. CIT (supra) and after reading the provisions of the Act vis-à-vis the ratio laid down, there is no iota of doubt as to the ambit and scope of provisions of section 36(1)(vii) and section 36(1)(viia) of the Act. The Hon'ble Apex Court has held that conditionality for claim of deduction under section 36(1)(vii) and section 36(1)(viia) of the Act are different and both are independent sections of each other. Therefore there is merit in the contentions and arguments of the ld DR that bad debts actually written off of Rs. 2,74,26,796/- should be allowed u/s 36(1)(vii) and Rs. 4,89,103/- should be allowed u/s 36(1)(viia) against the B.D.D.R. which is more than 20.00 Cr. So respectfully following the ratio laid down in the Hon'ble Apex Court in the above decision, we set aside the order of Ld. CIT(A) and direct the AO to allow the deductions to the assessee of Rs.2,74,26,796/- under section 36(1)(vii) as actually written off and section 36(1)(viia) qua which the provision was created in the earlier years.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 14.11.2018.
Sd/- Sd/-
(Mahavir Singh) (Rajesh Kumar)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 14.11.2018.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
6 ITA No.6863/M/2016
M/s. The Vasai Janta Sahakari Co-op Bank Ltd.
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.