Income Tax Appellate Tribunal - Amritsar
M/S Punjab Gramin Bank, Kapurthala vs Assistant Commissioner Of Income Tax, ... on 15 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
(CAMP AT JALANDHAR)
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A Nos.583 & 584(Asr)/2015
Assessment Year: 2010-11
PAN: AAALP0309F
M/s. Punjab Gramin Bank, Vs. The Asstt. Commissioner of
Jalandhar Road, Income Tax, Circle-IV,
Kapurthala. Jalandhar
(Appellant) (Respondent)
I.T.A No.580 (Asr)/2015
Assessment Year: 2011-12
The Deputy Commissioner of Vs. M/s. Punjab Gramin Bank,
Income Tax, Jalandhar Road,
Circle -IV, Jalandhar. Kapurthala
(Appellant) (Respondent)
I.T.A Nos.569 (Asr)/2016
Assessment Year: 2012-13
The Asst. Commissioner of Vs. M/s. Punjab Gramin Bank,
Income Tax, Jalandhar Road,
Circle -4, Jalandhar. Kapurthala.
(Appellant) (Respondent)
I.T.A Nos.597 (Asr)/2016
Assessment Year: 2012-13
M/s. Punjab Gramin Bank, Vs. The Asst. Commissioner of
Jalandhar Road, Income Tax,
Kapurthala. Circle -4, Jalandhar.
(Appellant) (Respondent)
Appellant by: Sh. Pawan Kumar, CIT (DR.)
Respondent by: Sh. Ranjan Sehgal (CA)
Date of Hearing: 23.01.2017
Date of Pronouncement: 15.03.2017
2 ITA Nos.583, 584 & 580(Asr)/2015
Asst. Years: 2010-11, 2011-12
ITA Nos.569 & 597(Asr)/2016
Asst.Year: 2012-13
ORDER
PER T. S. KAPOOR (AM):
This is a bunch of five appeals for three assessment year against the separate orders of Ld. CIT(A) dated 18.08.2015 for Asst. Year 2010- 11 & 2011-12 and dated 30.09.2016 for Asst. Year: 2012-13. ITA No. 583(Asr)/2015 for Asst. Year2010-11 has been filed by assessee whereas the other four appeals are cross appeals filed by assessee as well as by Revenue.
2. These appeals were heard altogether and common issues are involved in these appeals and therefore for the sake of convenience a common and consolidated order is being passed.
3. The grievance of assessee in its appeals is that Ld. CIT(A) had made out a new case and had confirmed the addition u/s 43B(f) of the Income-tax Act without affording an opportunity to the assessee, whereas the Assessing Officer had made addition u/s 37 of the Act.
4. The grounds of appeal raised by assessee as well as by Revenue are reproduced below.
Appeals by Revenue
(i) In ITA No. 580 (Asr)/ 2015.
"1. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 48,26,000/- Made by the Assessing Officer by disallowing the provision for standard assets.
1(a). While allowing the relief of Rs. 48,26,000/- Ld. CIT(A) has failed to appreciate that the Assessing Officer has clearly held out of provision of Rs. 1,33,55,468/- only Rs. 85,29,468 were on a/c of bad and doubtful debts and the balance amount of Rs. 48,26,000/- were on a/c of 3 ITA Nos.583, 584 & 580(Asr)/2015 Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13 standards assets and as peer provision of section 36 (1) (viia) only provision for bad and doubtful debts was allowable as deduction.
1(b). While allowing the relief of Rs. 48,26,000/- Ld. CIT(A) failed to appreciate that it was contingent liability and was not allowable as business expenditure.
2. It is prayed that the order of the Ld. Commissioner of Income Tax (Appeals) be set aside and that of the Assessing Officer be restored.
3. The appellant requests for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed off."
(ii) In ITA No. 569(Asr)2016.
1. That on the facts and in the circumstances of the case Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 91,52,000/- made by the Assessing Officer by disallowing the provision for standard assets.
2. That while allowing the relief of Rs. 91,52,000/- Ld. CIT(A) has not appreciated that the Assessing Officer has clearly held that out of provision of Rs. 5,88,36,000/- only Rs. 4,96,84,000/- were on account of bad and doubtful debts and the balance amount of Rs. 91,52,000/- was on account of Standard Assets and as per provisions of section 36(1) (viia) only provision for bad and doubtful debts was allowable as deduction.
3. That while allowing the relief of Rs. 91,52,000/- Ld. CIT(A) has failed to appreciate that it was contingent liability and was not allowable as business expenditure.
4. It is prayed that the order of the Ld. Commissioner of Income Tax (Appeal) be set aside and that of the Assessing Officer be restored.
5. The appellant requests for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed off. Appeal by assessee
(i) In ITA No.583 & 584 (Asr)/ 2015.
"1. The Ld. CIT(A) has erred in not appreciating the facts of the case and provisions of law in its actual spirit.
2. The Ld. CIT(A) has erred in confirming addition of premium paid to LIC under group leave encashment scheme policy under section 43B(f) of Income Tax Act without giving opportunity because addition was made by the Assessing Officer under section 37 of Income Tax Act.
3. The Ld. CIT(A) has erred in not appreciating the fact regarding payment of premium to LIC under group leave encashment scheme policy by the appellant assessee for getting itself insured against liability of leave encashment towards it employees.
4. The Ld. CIT(A) has erred in not appreciating the fact that the appellant assessee has actually paid the amount which will become payable to its employees on account of leave encashment, to LIC under a valid insurance 4 ITA Nos.583, 584 & 580(Asr)/2015 Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13 policy and provisions of section 43B(f) of Income Tax Act are not attracted in the facts and circumstances of the case.
5. The appellant assessee leave to raise and urge any other ground of appeal as may be deemed proper at the time of hearing."
(iii) In ITA No. 597(Asr)/ 2016 "1. The Ld. CIT(A) has erred in not appreciating the facts of the case and provisions of law in its actual spirit.
2. The Ld. CIT(A) has erred in confirming addition of premium paid to LIC under group leave encashment scheme policy under section 43B(f) of Income Tax Act without giving opportunity because addition was made by the Assessing Officer under section 37 of Income Tax Act.
3. The Ld. CIT(A) has erred in note appreciating the fact regarding payment of premium to LIC under group leave encashment scheme policy by the appellant assessee for getting itself insured against liability of leave encashment towards its employees.
4. The Ld. CIT(A) has erred in not appreciating the fact that the appellant assessee has actually paid the amount which will become payable to its employees on account of leave encashment, to LIC under a valid insurance policy and provisions of section 43B(f) of Income Tax Act are not attracted in the facts and circumstances of the case."
6. The brief facts of the cases as noted in the assessment order are that the assessee is a Cooperative Society and is engaged in the business of banking. During assessment proceedings, the Assessing Officer observed that assessee had made a provision for leave encashment and had claimed a deduction for payment of insurance premium to LIC of India and Bajaj Alianze. The Assessing Officer held that the payment of policies issued by LIC and Bajaj Alianze were an investment plans the premium of which has been put into growth fund and small part of the premium was for leave encashment and major portion of payment was in growth fund, therefore the Assessing Officer held that the expenditure incurred and claimed as business expenditure has not been expanded "wholly and exclusively" for the purposes of the business or profession, 5 ITA Nos.583, 584 & 580(Asr)/2015 Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13 as per the provision of Sec.37 of the Income Tax Act, and therefore the Assessing Officer made disallowance of the said payment.
The Assessing Officer further observed that assessee made provision for bad and doubtful debts and the same was not bifurcated into provision for bad and doubtful debts and provision on standard assets. The assessee was asked to file the details of provision created during the year against standard assets and was show caused and as to why this amount may not be added to the income. The assessee submitted that section 36(1) (viia) of the Income Tax Act speaks of provision for bad and doubtful debts as allowable expenses and specifies only deduction of provision for bad and doubtful debts without any distinction regarding nature of advances against which this provision has been made. It was submitted that there was no concept of standard assets or non standard assets in the Income Tax Act. The Assessing Officer, however was not convinced with the reply of the assessee and therefore disallowed the deduction claimed by assessee on account of provision for bad and doubtful debts on standard assets.
7. Aggrieved with the orders, the assessee filed appeal before Ld. CIT(A) and the Ld. CIT(A) allowed the relief to the assessee on account of provision for bad and doubtful debts on standard assets, whereas in respect of provision for leave encashment, the Ld. CIT(A) confirmed the addition. While confirming the addition the Ld. CIT(A) did not consider the claim of assessee u/s 37 of the Act but confirmed the addition u/s 43B (f) of the Act.
6 ITA Nos.583, 584 & 580(Asr)/2015
Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13
8. Aggrieved both parties are in appeal before us.
9. At the outset, the Ld. AR submitted that the issue of provision for bad and doubtful debts on standards assets is squarely covered in favour of the assessee by the order of the Tribunal in the case of the assessee itself for Asst. Year: 2008-09 which was decided by Hon'ble Tribunal on dated 20.06.2016 and in this respect invited our attention to the order of the Tribunal placed at (PB 1 to 6). The Ld. AR submitted that the case of the assessee was also covered by the decision of Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala Vs. CIT reported 272 ITR 54 and in this respect invited our attention to the copy of the order placed at (PB 15 to 16).
10. As regards the issue of disallowance of premium paid to LIC for covering leave encashment of its employees, the Ld. AR submitted that the premium paid by assessee was deductible u/s 37 (1) of the Act as the assessee had paid the premium to insure its liability for payment of leave encashment to its employees at the time of their retirement or death. It was submitted that any liability which will arise in future on account of leave encashment of employees of the assessee will be paid by the LIC only. It was further submitted that assessee had made actual payment and as such provision of section 43B (f) were not attracted at all. It was submitted that clause-F 43(B) awakes only if the assessee had made provisions and had not made the actual payment whereas in the instant case, the assessee has made payment to LIC.
7 ITA Nos.583, 584 & 580(Asr)/2015
Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13
11. The Ld. DR, on the other hand, relied on the orders of authorities below in respect of appeals filed by assessee whereas he relied on the order of assessment in respect of appeals filed by revenue.
12. We have heard the rival parties and have gone through the material placed on record. We find that the issue of provision for doubtful debts on standard assets is covered in favour of assessee by the order of the Tribunal dated 22.06.2016 for Assessment Year: 2008-09, wherein the appeal of the revenue was dismissed which was filed by Revenue on similar grounds. The relevant findings of the Tribunal as contained in para 8 onwards are reproduced below.
8. " We have heard the rival parties and have gone through the material on record. We find that the assessee had created a provision of Rs. 50,00,000/- which included a sum of Rs. 13,25,000/- as provisions for bad and doubtful debts and the balance amount of Rs. 36,75,000/- was provision against standard assets and the entire amount was claimed as deduction under section 36(1)(viia) of the Act. The Assessing Officer was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure. The Ld. CIT(A), however, allowed relief to the assessee by holding that the claim of the assessee fall into the main provisions of section 36(1)(viia). To resolve the dispute it is important to visit the provisions of section 36(1)(viia) of the Act and which for the sake of convenience are reproduced below.
"36(1)(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 outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner.
Provided that a schedule bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India 8 ITA Nos.583, 584 & 580(Asr)/2015 Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13 as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five percent of the amount of such assets shown in the books of account of the bank on the last day of the previous year.
Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five percent", the words "ten percent" had been substituted.
Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government.
Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head "Profits and gains business or profession."
From the above provisions it can be seen that deduction u/s 36(1) (viia) of the Act is allowed in respect of provisions for bad and doubtful debts. This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section (1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that though section 36(1) (vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1) (viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section 36(1)(viia) of the Act. The Ld. CIT(A) has passed a very exhaustive and speaking order and we do not find any infirmity in the same.
9 ITA Nos.583, 584 & 580(Asr)/2015
Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13 Therefore following the above Tribunal order, we do not see any infirmity in the order of Ld. CIT(A).
13. In view of the above fact and circumstances the grounds of appeal raised by Revenue in ITA No. 580 & 569 are dismissed.
14. Now coming to the appeals filed by assessee, we find that Assessing Officer had disallowed the payment made to LIC and Bajaj Alianze u/s 37(1) of the Act, holding the same to be not expanded 'wholly and exclusively" for the purposes of business. The Ld. CIT(A) while confirming the disallowance has not considered the claim of the assessee u/s 37(1) of the Act and has confirmed the addition by holding that the provisions of section 43B(f) were applicable to the assessee. However, the claim of the assessee in its written submissions is that assessee had not created the provisions and in fact had made the payment and therefore the provisions of section 43B(f) of the Act were not applicable, it was also required that Ld. CIT(A) had confirmed the disallowance u/s 43B (f) without affording opportunity to the Assessee. Therefore, we deem it appropriate to remit this issue to the office of Ld. CIT(A) who should examine the claim of the assessee u/s 37(1) of the Act as the Assessing Officer had made the disallowance u/s 37(1) of the Act. The Ld. CIT(A) should also hear the assessee on the applicability of provisions of section 43B(f) of the Act. In view of the above, the appeals filed by assessee are allowed for statistical purposes.
10 ITA Nos.583, 584 & 580(Asr)/2015
Asst. Years: 2010-11, 2011-12 ITA Nos.569 & 597(Asr)/2016 Asst.Year: 2012-13
15. In nutshell, the appeals filed by the assessee are allowed for statistical purposes, whereas the appeals filed by revenue are dismissed.
Order pronounced in the open Court on 15.03.2017.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 15.03.2017.
/GP/Sr. Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order