TaxTMI 
TaxTMI 
2013 (8) TMI 665
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....6-97); Rs. 1,10,87,607/- (AY 1997-98); and Rs. 1,35,68,759/- (AY 1998-99) made by the AO on account of provision for bad and doubtful debts for rural branches." (ii) Common ground for A.Y. 1996-97 & 1997-98 is as under: That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 1,89,51,490/- (AY 1996-97); and Rs. 1,39,16,625/- (AY 1997-98) made by the AO on account of loss on revaluation of securities. (iii) Solitary ground for A.Y. 1998-99 is as under: That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 74,21,922/- made by the AO on account of loan to Asia Pacific Investment Trust. Assessee's appeals: (iv) One common ground raised in assessee's appeals for all the years in question is as under: That the learned Commissioner of Income Tax (Appeals) was not justified in confirming the action of Assessing officer by adding the income of Rs. 66,93,415/- (A.Y. 1996-97); 73,83,408 (A.Y. 1997-98); and Rs. 1,60,061/- (A.Y. 1998-99) on account of claim received from Deposit Insurance & Credit guarantee Corporation (DICGC). The claim received from DICGC was n....
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....ng to assessee, the meaning of the 'place' includes a ward of a Gram Panchayat, if the population of the ward is less than ten thousand irrespective of the fact that the total population of the Gram Panchayat may be more than ten thousand. Assessing officer has stated the names of the rural branches whose population as per the last published census figures was more than ten thousand and held that any ward of these branches was not eligible to be considered as a rural branch in terms of Explanation (1a) to Sec. 36(1)(viia) as ward was not a place which according to assessing officer was Panchayat. Assessee objected on the basis that as per RBI guidelines, if the population of a ward of any Gram Panchayat is less than ten thousand then the same means a place where the rural branch is situated. The word 'place' is not defined in the Income-tax Act and as the legislature intended to promote the banking in small places including wards which is a smallest unit for counting the population of Panchayat assessee was eligible for claim of bad debt @ 10% of the aggregate of rural branch advances as prescribed by Explanation (1a) to Section 36(1)(viia). Assessing officer disallowed the claim 3....
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....anches held by assessing officer to be not rural in nature have been mentioned as rural branches by RBI circulars. The classification done by RBI read with the case laws and harmonious interpretation means the word 'place' includes a ward whose population is less than ten thousand as per 1990-91 census. The addition was deleted by following observations: "I have carefully examined the assessment order as well as the grounds of appeal and submissions of the AR on the above issue. The issue is covered by the decision of the Hon'ble ITAT., Cochin Bench in the Lord Krishna Bank Ltd. case in ITA. No. 54 (Coch)/2000 for assessment year 1994-95 dated 29th July 03 the relevant pages are from page 4, para 6 upto page 6. The conclusions of the ITAT at para 7 are as under:- "We considered this issue very carefully. It is to be seen that branches are opened by a Bank on getting sanction from the Reserve Bank of India. The Reserve Bank sanctions branches on different classifications, like rural, urban etc. In respect of the branches disputed in this case, permission of the Reserve Bank have been obtained by the assessee bank on thestatus that all branches are rural branches. Therefore, it....
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....fied area etc. . Thus the place means a wholesome geographical location. Ward is part and parcel of a place and cannot be taken as independent unit as the ward is always identified by other place as a member or part of place which means the Village panchayat as unit of population count. The assessing officer on the basis of 1990-91 census has demonstrated that the population of specified Village panchayat is more than ten thousand, therefore, the assessee's claim about rural branches was properly rejected. 4.1. Apropos urban branches, ld. DR pleads that there is a clear finding by assessing officer that in the impugned years bad debt written off was less than the amount of provision created. Thus assessee already stands to have availed the writing off and the claim in fact amounts to availing double deduction. Therefore, it has been rightly disallowed. 5. Ld. Counsel for the assessee on the other hand contends that: (i) CIT(A) has relied on Circular of the RBI which is issued under sec. 23 of the Banking Regulation Act and has statutory authority. (ii) ITAT Cochin judgment in the case of M/s Lord Krishna Bank Ltd. Vs. DCIT (ITA no. 54/Coch/2000) vide order dated 29-7-20....
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....en observations similar to view as taken by ITAT Cochin Bench in the case of M/s Lord Krishna Bank Ltd. (supra) and has held the reopening to be invalid. 6. In reply, ld. DR contends that: (i) ITAT Delhi Bench in the case of PNB has not decided this issue on merit but only quashed the reassessment proceedings. Therefore, the judgment is not applicable. (ii) RBI Circulars furnished by ld. Counsel are dated 3-6-2003 whereas the years in question are 1996-97 to 1998-99. 7. We have heard rival contentions on this issue and perused the relevant material available on record. Apropos the urban branches, writing off of bad debt, we hold that the assessee is eligible to write off of bad debt u/s 36(1)(viia), however, we find merit in the argument of ld. DR that there is a finding of the ld. Assessing officer that the amount of bad debt written off of current year is less than the amount of provision created, creates an important question of verification since the relevant figures are not given. 7.1. Ld. Counsel for the assessee had made a statement in this behalf at the Bar that the current year's bad debt has not been claimed in the provisions as the assessee follows a diffe....
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....sessee by following observations: "For all these reasons, we are of the view that the Income-tax Appellate Tribunal has rightly held that the securities held by the assessee bank in all these cases are the stock-in-trade of the business of the assessee banks and the notional loss suffered on account of the revaluation of the said securities at the close of the year is an allowable deduction in the computation of the profits of the appellant." 11. We have heard rival contentions and perused the material available on record. In our considered view the issue stands settled by the Jurisdictional High Court i.e. Kerala High Court, at the relevant time, in the case of assessee bank. Besides, we see no infirmity in the order of CIT(A) holding it to be covered by Hon'ble Supreme Court in the case of United Commercial Bank (supra) also. Accordingly, revenue's ground is dismissed. 12. Apropos solitary revenue ground no (iii) in A.Y. 1998-99 i.e. loss in respect of loan given to Asia Pacific Investment Trust, facts in brief are: The assessing officer disallowed the claim of the assessee by following observations: "The bank has claimed as bad debts written off Rs. 79,74,426/-out of....
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.... Section 36(2) of the Income Tax Act under clause (i) the money lent should be in ordinary course of the business of banking carried down by the assessee. The AO's contention that this advance made by the bank without any tangible security by way of mortgage of immovable assets would be relevant from businessman's point of view. Once it is accepted by the AO that the transactions actually took place as mentioned in his order and it is in the ordinary course of the business of banking carried down by the assessee it is an allowable deduction." 12.2. CIT(A) allowed the claim of the assessee. Aggrieved, revenue is before us. 13. Both the parties are heard. It has not been disputed that the loan was given to Asia Pacific Investment Trust by consortium headed by SBI and assessee contributed a part of it. The banking practice of advancing moneys to NBFC without taking any collateral security which was part of the loan policy and financing of the consortium becomes a business decision. Further, after the said trust went into liquidation and advance became irrecoverable, the RBI directed the assessee to write off the same as bad debt. In view of these clear findings, facts and circum....
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.... the assessment order and the provision of section 41(4) read with section 36(1)(vii) of the Income Tax Act. I have perused the scheme relating to Deposit Insurance and Credit Guarantee wherein DICGC covers in respect of any credit institution of any credit facility by providing Guarantee on account of set credit facility i.e. certain percentage of credit facility is undertaken to the Guaranteed by the DICGC in the event of any default. The appellant informed me that the credit facilities which covered under DICGC claims, when they turn into defaulters DICGC is informed and claim is lodged. The process takes a long time and the claim are settle to the extent 60 to 75 percent of the amount outstanding in respect of defaulting account. It has been stated that the balance is only written off and claim as bad debt by the assessee when the decision for write off is taken by the bank. I have considered the submission of the assessee and the assessment order. The AO has made addition of the DICGC claim treating the same as income to the extent that there is recovery of bad debts. Hence, after considering the submissions of the appellant, the disallowance made by the AO is upheld." 1....
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.... This ground of the assessee is allowed in all these years. 18. Apropos the disallowance of expenses under Rule 6D, the same is not pressed by the assessee, hence dismissed. 19. Apropos solitary ground for A.Y. 1997-98 i.e. no. (vi) i.e. nature of dividend income, the ground is only academic in nature and does not led to any consequence. The same is accordingly dismissed. 20. Coming to remaining grounds for A.Y. 1998-99, apropos the loss on investment in debenture of CRB capital, assessing officer disallowed the claim holding that the investment in debenture of CRB capital was loss of investment/ capital by following observations: "The bank has claimed as a bad debt investment in debenture CRB Capital not recoverable. The investment in debentures of CRB Capital made by the bank is 24,00,000 and provision for loss on investments made Rs.12, 500/- and the bank has written of Rs.24, 12, 500/- being not recoverable as a bad debt. The bank does not satisfy the conditions prescribed in section 36(1) (vii) to claim the said amount as a bad debt. Moreover this is a loss in relation to an investment made and such loss can be treated as a Capital loss alone. The claim is hence no....
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....ent asset will reflect the reduced value of the current assets i.e. to say the assessee will treat the CRB advance at zero value and the value of the stock of current assets will be accordingly reduced. Here what assessee is doing is to claim out and out loss. Thus, there is every possibility that t he assessee is deriving double advantage i.e. one by bringing the closing value of the current assets down and as well as claiming the loss. 23. We have heard rival contentions and gone through the relevant material available on record. The possibility raised by the ld. DR cannot be ruled out. In that eventuality it is to be verified whether the assessee has recoursed to such type of double claim i.e. reducing the value of the current assets as well as claiming the loss. In our view the assessee is to be allowed a single time loss either in value of the current asset or the claim of the loss of assets. In view thereof we are inclined to set aside this issue back to the file of assessing officer to verify these aspects and decide the issue after hearing the assessee afresh in accordance with law. 24. Apropos the remaining issue for A.Y. 1998-99 i.e. disallowance of expenses on modi....