Income Tax Appellate Tribunal - Kolkata
The Midnapur Peoples Cooperative Bank ... vs Acit, Circle-1, Midnapore, Kolkata on 24 July, 2019
ITA Nos. 1851, 1852 & 1853/KOL/2016
Assessment Years: 2010-2011, 2012-2013 & 2013-2014
The Midnapur Peoples Cooperative Bank Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri S.S. Viswanethra Ravi, Judicial Member
I.T .A. Nos. 1851, 1852 & 1853/KOL/2016
Assessment Years: 2010-2011, 2012-2013 & 2013-2014
The Mi dnapur Peop les' Cooperati ve Bank Limited.........................Appellant
Aliganj, Post Office-Midnapore,
Dist. Paschim Mi dnapore-721101, West Bengal
[PAN: AAAAT6290J]
-Vs.-
Assistant Commissioner of Income Tax,........................................Respondent
Central-1, Midnapore,
54/1, Rafi A hmed Ki dwai Ro ad, 1 s t Floor,
Kolkata-700 016
Appearances by:
Shri So mak Basu, Advocate, for the Appellant
Shri C.J. Singh, JCIT, Sr. D.R , for the Responden t
Date of concluding th e hearing : Ju ne 17, 2019
Date of pronouncing the order : Ju ly 24, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President (KZ):-
These three appeals filed by the assessee are directed against three separate orders, all dated 21.07.2016, passed by the ld. Commissioner of Income Tax (Appeals)-11, Kolkata for assessment years 2010-11, 2012-13 & 2013-14 and since the issues involved therein are common, the same have been heard together and are being disposed of by a single consolidated order for the sake of convenience.
2. First we take up the appeal of the assessee for A.Y. 2010-11 being ITA No. 1851/KOL/2016. Grounds No. 1 to 3 raised in this appeal involve a common issue relating to the disallowance of Rs.10,00,000/- made by 1 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made by the assessee for Non-Performing Assets (NPA).
3. The assessee in the present case is a Bank, which filed its return of income for A.Y. 2010-11 on 05.10.2010 declaring total income of Rs.18,53,335/-. In the Profit & Loss Account filed along with the sai d return, a sum of Rs.10,00,000/- was debited on account of provision made for Non-Performing Assets (NPA). According to the Assessing Officer, the said provision made by the assessee was for a contingent or unascertained liability and the same was not allowable as deduction under the Income Tax Act, 1961. He, therefore, disallowed the claim of the assessee for deduction on account of provision made for NPA. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer for the following reasons given in his impugned order:-
"I h ave carefully considered the facts of t he case and the submissio ns of t he assessee. As discussed above, it is ultimat ely the RBI wh ich decides and publishes the data about Rural branches and t here is no difference between the concept of rural branches as used by RBI vis-a-vis that of NABARD. A Rural branch should be sit uated in a village, which may be under G ram Panchayat or in a town but th e population should not exceed 10000. So the first requirement is that the locat ion should be a village, as per the Revenue Records of the district. Assessee's reliance on the Ward-wise population dat a of Midnapo re Municipal ity and singling out a part icular Ward for claiming rural branch st atus is not justified. Municipality comprises of entire t own and for administ rative convenience it is divided into several Wards. Th ese Wards are not 'Villages' as per Revenue reco rds of the district. All the Wards together make the t own and the po pul ation of the entire Midnapo re town has t o be considered toget her, which is much higher than the figure of 10000. Hence, appellant's claim regarding Midnapo re Branch to be a rural branch is not accept able and it is held that appellant is not ent itled for deduct ion u/s 36(1)(viia) in respect of this branch.
Now corning to the 2 n d branch at Chandrak ona Ro ad, it has been certified by the Pradhan of Sat bank ura G ram Panch ayat th at the C. K. Road Branch is sit uated at Bila Mouza having a po pulation of only 4085 as per 2011 Census and 3143 as per 2001 Census. However, information g athered from int ernet shows t hat Bil a mouza alongwith several other mouzas combined to ether are called Chandrakona Town. This 2 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited town had a po pulat ion of 20400 as per 20 01 Census. Several Scheduled Banks, like St ate Bank of India, UCO Bank , Bank of India, Allahabad Bank, Axis Bank and several other Cooperat ive Bank s are located in this town. As the popul ation of Chandrakona town is mo re th an 10,0 00, even th e second branch of the assessee is not eligible for deductio n u/s 36(1)(viia)..
Under the facts and circumst ances, as discussed above, Assessing Officer h as rightly denied deduct ion u/s 36(1)(viia) of the Inco me T ax Act, 1961 to the assessee. Hence, these grounds are dismissed".
4. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. Counsel for the assessee has submitted that the disallowance made by the Assessing Officer on account of provision made for NPA was confirmed by the ld. CIT(Appeals) vide his impugned order on the ground that the population of Midnapore Town being much higher than 10,000, the assessee's Midnapore Branch was not a Rural Branch and it was not entitled for deduction under section 36(1)(viia). He has submitted that the finding given by the ld. CIT(Appeals) in respect of population of the Midnapore Town is factually incorrect and the assessee has gathered the following documentary evidence to support and substantiate its case:-
(i) A copy of the Population Certificate dated 01.09.2016 issued by the District Planning Officer, Paschim Midnapore;
(ii) A copy of the Certificate dated 01.09.2016 issued by the Assistant Registrar of Cooperative Societies, Paschim Midanpore Range.
He has filed the above documentary evidence as additional evidence before the Tribunal along with an application seeking admission thereof on the ground that the same obtained by the assessee after passing of the impugned order of the ld. CIT(Appeals) is relevant to decide the issue involved in Grounds No. 1 to 3 of the assessee's appeal. He has also submitted that this issue may be sent back to the Assessing Officer for deciding the same afresh after verifying the additional evidence filed by 3 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited the assessee. Keeping in view the relevance of the additional evidence filed by the assessee, the same is admitted by us. The ld. D.R. has also not raised any objection for the admission of the additional evidence as well as for sending the matter back to the Assessing Officer for verification of the additional evidence. We accordingly set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for deciding the same afresh after verifying the additional evidence filed by the assessee. Grounds No. 1 to 3 of the assessee's appeal for A.Y. 2010-11 are accordingly treated as allowed for statistical purposes.
5. As regards the issue involved in Ground No. 4 of the assessee's appeal for A.Y. 2010-11 relating to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for leave encashment, the ld. Representatives of both the sides have agreed that this issue is squarely covered by the various decisions of this Tribunal. In one of such decisions rendered in the case of M/s. SRB & Associates LLP (ITA No. 498/KOL/2015), a similar issue was decided by the Tribunal vide paragraph no. 4 of its order as under:-
"4. Aft er hearing rival submissio ns and going through the facts and circumstances of the case and the order of the Tribunal cit ed supra, we find that th e issue is dealt by the Coordinate bench of t his T ribunal as under.' "3. At the outset , Id. senio r counsel for th e assessee submitted that in all these th ree appeals, the issue relates to allowability of provision for leave encashment in terms of sub-section (f) of section 438 of the Inco me T ax Act . The assessee had advanced it s claim rel ying on th e decisio n of the Hon'ble Kolkat a High Court in the case of M/s. Exide Industries Lt d. reported in 292 IT R 470. However, the Assessing Officer did not accept the assessee's claim observing that Deport ment has preferred a Special Leave Petition before the H on'bie Supreme Court and stay of the order of the Hon'ble Kolkat a High Court was granted by the Hon'ble Apex Court . Ld. senior co uns el submitted th at under identical circumstances, Tribunal h as restored the matter to t he file of Assessing Officer to decide th e issue it , accordance with the decision of the Hon'ble Apex Court in the 4 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited case of DCIT , Circle-8, Kolkata -vs.- M/s. Ernst & Young Pvt . Ltd. in ITA No. 1787/KoI/2008. He, therefo re, submitted t hat the matter may be restore d back to th e file of Assessing Officer.
4. Learned Depart mental Representat ive did not raise any objection.
5. We h ave considered the submissions of both the parties and have perused the reco rds of the case. We find that T ribunal on identical issue in ITA No. 1787/KOL/2008 in th e cas e of M/s. Ernst & Young Pvt . Lt d. h as observed at para 12 in page 6 as under: -
"12. Ground No. 5 of t he revenue's appeal is against th e relief allowed by the CIT (A) in respect of pro vision for leave encashment which was deleted by the CIT(A) following the decisio n of th e Hon'ble jurisdictional High C ourt in the case of M/s. Exide Indust ries Ltd. (supra). It was pointed o ut by the Id. OR th at the Hon'ble Apex Court in SLP (Civil) 22889 of 2008 h as st ayed t he o peration of th e decisio n of the Hon'ble jurisdictional High Court . In view of the above, we set aside the orders of the authorities below on this point and restore the matt er back to the file of the AO with the direct ion that he will readjudicate th is issue as per decision of t he Hon'ble Apex Court in the case of M/s. Exide Industries Lt d. (supra)" .
Respectfully following the same we set aside the orders of autho rities below on this point and resto re the matter back to t he file of Assessing Officer fo r adjudicatio n as per t he decision of the Hon'ble Ape x Court in the case of M/s. Exide Indust ries Ltd.(supra).
In view of the above and respect fully following the same, we set aside the orders of the authorit ies bel ow and resto re the matter back to th e fil e of Assessing Officer for adjudication as per the decision of Hon'ble Apex Court in the case of M/s. Exide Indust ries Ltd. (Supra). This gro und of appeal of assessee is allowed fo r statistical purposes" .
6. As the issue involved in the present case as well as the material facts relevant thereto are similar to the case of the SRB & Associates LLP (supra), we respectfully follow the order of this Tribunal passed in the said case and restore the matter to the file of the Assessing Officer for fresh adjudication as per the direction as given in the case of M/s. SRBC & 5 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited Associates LLP. Ground No. 4 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
7. The issue involved in Ground No. 5 of the assessee's appeal for A.Y. 2010-11 relates to the addition of Rs.10,00,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for difference in General Ledger (GL) and Detailed Ledger (DL).
8. In the Profit & Loss Account filed along with the return of income, a sum of Rs.4,00,000/- was debited by the assessee on account of provision made for the difference between General Ledger balance and Detailed Ledger balance. Before the Assessing Officer, it was submitted by the assessee that the said provision was made as per the RBI guidelines on account of discrepancy as detected between the General Ledger and Detailed Ledger. The Assessing Officer, however, disallowed the provision made by the assessee on this issue on the ground that there was no provision in the Income Tax Act to allow the same. On appeal, the ld. CIT(Appeals) confirmed the said disallowance made by the Assessing Officer observing that the discrepancy between the General Ledger and Detailed Ledger as noted at the time of computerisation which happened in the year 2004 having not been reconciled by the assessee even after long time, the claim of the assessee for the provision made for such un- reconciled difference was not justified. He also agreed with the Assessing Officer that there was no provision in the Income Tax Act for allowing such provision.
9. We have heard both the sides on this issue and also perused the relevant material available on record. It is observed that the provision made by the assessee on account of difference between General Ledger and Detailed Ledger as per the guidelines of the RBI is such that the same cannot be said to be a provision made for any obligation or liability. As rightly held by the authorities below, there is no provision in the Income 6 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited Tax Act under which the said provision can be allowed as deduction. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of provision made by the assessee for the difference in its General Ledger and Detailed Ledger and upholding the same, we dismiss Ground No. 5 of the assessee's appeal.
10. Now we shall take up the assessee's appeal for A.Y. 2012-13 being ITA No. 1852/KOL/2016, which involves a solitary issue relating to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for NPA. Since this issue is similar to the one involved in Grounds No. 1 to 3 of the assessee's appeal for A.Y. 2010-11, which has been already decided by us, we follow our conclusion drawn in A.Y. 2010-11 and restore this issue to the file of the Assessing Officer for deciding the same afresh after verifying the additional evidence filed by the assessee. The appeal of the assessee for A.Y. 2012-13 is treated as allowed for statistical purposes.
11. Now we take up the assessee's appeal for A.Y. 2013-14 being ITA No. 1853/KOL/2016. Grounds No. 1 to 3 raised in this appeal involve the similar issue relating to the disallowance made on account of provision made for NPA as involved in Grounds No. 1 to 3 of the assessee's appeal for A.Y. 2010-11, which has already been decided by us. Following our conclusion drawn in A.Y. 2010-11, we restore this issue to the file of the Assessing Officer for deciding the same afresh after verifying the additional evidence filed by the assessee. Grounds No. 1 to 3 are accordingly treated as allowed for statistical purposes.
12. As regards Ground No. 4 of the assessee's appeal for A.Y. 2013-14, it is observed that the issue involved therein relating to the disallowance made on account of provision for difference between General Ledger and Detailed Ledger is similar to the one involved in Ground No. 5 of the 7 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited assessee's appeal for A.Y. 2010-11, which has already been decided by us. Following our conclusion drawn for A.Y. 2010-11, we uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and dismiss Ground No. 4 of the assessee's appeal.
13. As regards the issue involved in Ground No. 5 of the assessee's appeal for A.Y. 2013-14 relating to the addition of Rs.16,58,820/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest accrued on investment made by the assessee in WBSCB, Punjab National Bank and Allahabad Bank, the ld. Counsel for the assessee has contended that this income was offered by the assessee to tax in A.Y. 2014-15 on receipt basis. He has contended that since the income so offered in A.Y. 2014-15 has been accepted by the Department, the addition of the same amount in the year under consideration, i.e. A.Y. 2013-14 has resulted into double addition. The ld. D.R. has contended that this claim made by the assessee requires verification by the Assessing Officer.
14. We find merit in the contention of the ld. D.R. and since the ld. Counsel for the assessee has also not raised any objection in sending the matter back to the Assessing Officer, we direct the Assessing Officer to verify the claim of the assessee of having offered the amount in question to tax in A.Y. 2014-15 on receipt basis. If it is found on such verification that the said amount is already assessed to tax in A.Y. 2014-15 and the matter has reached its finality, the Assessing Officer shall delete the addition of the same amount made in the year under consideration. Ground No. 5 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
15. In the result, the appeal of the assessee for A.Y. 2012-13 is treated as allowed for statistical purposes, while the appeals of the 8 ITA Nos. 1851, 1852 & 1853/KOL/2016 Assessment Years: 2010-2011, 2012-2013 & 2013-2014 The Midnapur Peoples Cooperative Bank Limited assessee for A.Ys. 2010-11 and 2013-14 are treated as partly allowed for statistical purposes.
Order pronounced in the open Court on July 24, 2019.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 24 t h day of July, 2019
Copies to : (1) The Mi dnapur Peop les' Cooperati ve Bank Limited,
Aliganj, Post Office-Midnapore,
Dist. Paschim Mi dnapore-721101, West Bengal (2 ) Assistant Commissioner of Income Tax, Central-1, Midnapore, 54/1, Rafi A hmed Ki dwai Ro ad, 1 s t Floor, Kolkata-700 016 (3) Commissioner of Inco me T ax (Appeals)-11, Kolkata, (4) Commissio ner of Income Tax- , (5) The Depart ment al Represent ative (6) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 9