2023 (2) TMI 19 - AT - Income Tax

Tribunal Upholds Deduction Decision for Assessment Years 2013-14 & 2014-15

The Surat District Co- Operative Bank Ltd., Assistant Commissioner of Income Tax, Circle-2 (2), Versus Deputy Commissioner of Income Tax, Circle-2 (2), Aayakar Bhavan, Majura Gate, Surat., The Surat District Co- Operative Bank Ltd.

The Tribunal upheld the decision to allow the deduction under Section 36(1)(viia) for the assessment years 2013-14 and 2014-15, following the precedent ... Deduction u/s 36(1)(viia) - provision for Bad and Doubtful debts - HELD THAT:- From perusal of record, we find that combination of this Bench in assessee’s own case for the A.Y. 2010-11 [2022 (5) TMI 856 - ITAT SURAT] has confirmed the order of Ld. CIT(A), thereby decided the appeal in favour of the assessee as held that that the provisions for bad and doubtful debts should be allowed u/s. 36(1)(viia), to the extent of provision made and available in the books of account, whether made in the current previous year. Thus, in view of the aforesaid factual discussion, we affirm the order of Ld. CIT(A) by adding our aforesaid observation. - Decided against revenue. Issues Involved:1. Disallowance of deduction under Section 36(1)(viia) of the Income Tax Act for various assessment years.2. Consistency in the application of Section 36(1)(viia) across different assessment years.3. Interpretation of provisions under Section 36(1)(viia) and their applicability to bad and doubtful debts.Detailed Analysis:1. Disallowance of Deduction under Section 36(1)(viia):- Issue: The revenue challenged the deletion of disallowance of Rs. 4,50,00,000/- for the assessment year 2013-14, and Rs. 2,65,00,000/- for the assessment year 2014-15, claimed by the assessee under Section 36(1)(viia) of the Income Tax Act.- Arguments by Revenue: The revenue argued that the amounts claimed did not form part of the 'provision for Bad and Doubtful debts' and thus were not allowable under Section 36(1)(viia). They contended that the Assessing Officer (AO) had rightly disallowed the claims and these should be added back to the total income of the assessee.- Arguments by Assessee: The assessee's representative argued that the issue was covered by the Tribunal's decision in the assessee's own case for the assessment year 2010-11, where similar claims were allowed. It was submitted that the facts for the years under consideration were identical to those of the earlier year, and thus the appeals by the revenue should be dismissed.- Tribunal's Decision: The Tribunal referred to its earlier decision in the assessee's case for the assessment year 2010-11, where it was held that the provision for bad and doubtful debts made by a cooperative bank is allowable under Section 36(1)(viia). The Tribunal found that the assessee had rural advances against which the provision was made, and the deduction claimed was within the permissible limits. The Tribunal upheld the CIT(A)'s decision to allow the deduction and dismissed the revenue's appeal for the assessment years 2013-14 and 2014-15.2. Consistency in the Application of Section 36(1)(viia):- Issue: The principle of consistency in applying Section 36(1)(viia) across different assessment years was a significant point of contention.- Tribunal's Observations: The Tribunal emphasized the importance of consistency, noting that similar deductions had been allowed in previous assessment years (2008-09, 2009-10, 2015-16, 2016-17, and 2017-18). It was highlighted that the revenue had not contested the facts or the method of computation in these years. The Tribunal reiterated that the principle of consistency should be maintained unless there are significant changes in facts or law.- Conclusion: The Tribunal dismissed the revenue's appeals for the assessment years 2013-14 and 2014-15, following the precedent set in the assessee's own case for the assessment year 2010-11.3. Interpretation of Provisions under Section 36(1)(viia):- Issue: The interpretation of Section 36(1)(viia) and its applicability to provisions for bad and doubtful debts, including those against standard assets, was a central issue.- Tribunal's Analysis: The Tribunal referred to various judicial precedents, including the Supreme Court's decision in the case of Catholic Syrian Bank vs. CIT, which clarified that provisions under Section 36(1)(viia) for bad and doubtful debts are distinct and independent from those under Section 36(1)(vii). The Tribunal also cited decisions from other benches, which held that provisions for bad and doubtful debts against standard assets are covered under the main provisions of Section 36(1)(viia).- Conclusion: The Tribunal affirmed that the assessee's claims for provisions made under Section 36(1)(viia) were allowable, as they met the statutory requirements and were consistent with judicial interpretations.Final Orders:1. Assessment Year 2013-14: The appeal of the revenue was dismissed.2. Assessment Year 2014-15: The appeal of the revenue was dismissed.3. Assessment Year 2012-13: The appeal of the assessee was allowed, granting the claimed deduction under Section 36(1)(viia).Pronouncement:The order was pronounced in open court on 28/06/2022 and the result was also placed on the notice board.