TaxTMI 
TaxTMI 
2018 (9) TMI 533
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.... be categorized into two parts. 4. Firstly which are arising out of the assessment orders framed u/s 143(3) of the Act pertaining to Assessment Year 2008-09 to 2013-14 by ITA No. 107, 109, 111, 113 & 114/Ind/2017; (i) Disallowance of amortization of expenses on government securities for Assessment Years 2008-09 to 2012-13; (ii) Disallowance of claim u/s 36(1)(viia) of the Act for Assessment Year 2013-14. 5. Secondly the issue arising out of the orders framed u/s 143(3) r. w. s. 147 of the Act; (i) Challenging the validity of notice u/s 148 of the Act as well as the reassessment proceedings made u/s 147 of the Act. (ii) Disallowance of provision for bad and doubtful debts u/s 36(1)(viia) of the Act. (iii) Disallowance of excess provision for non performing of assets for Assessment Year 2009-10 (vi)Disallowance of amortization of expenses for government securities for Assessment Year 2011-12 6. Briefly stated facts as culled out from the records are that the assessee is a Regional Rural Co-operative Bank engaged in the business of banking in Jhabua and Dhar Districts. Return of income for Assessment Years 2008-09, 2009-10....
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....011-12 112 16, 33, 02, 639/- 58, 04, 000/- 8. We will first take up the issue of re-opening of the assessment for Assessment Years 2008-09 to 2011-12. 9. The Ld. Counsel for the assessee made following written submissions challenging the validity of reopening of assessment for the Assessment Years 2008-09 to 2011-12 as under; "The assessee M/s Jhabua Dhar Kshetriya Gramin Bank: (hereinafter called the Bank) is a Regional Rural Bank (RRB) sponsored by Bank of Baroda (a nationalized bank). The shareholdings are held by the Central Govt. , State Govt. and the Sponsored Bank is. Bank of Baroda. No shares are issued for any private contribution. All the RRBs' are declared as a scheduled bank: by the Reserve Bank: of India. The assessee is governed by RRB Act 1976. The NABARD and RBI are supervisory and controlling authorities. 2. The assessee bank is a regular assessee and is filing the returns since many years. The returns for various years are filed as under. A. Y. Income Returned Date of filing return Claim u/s 36(1)(viia) 2008-09 -6, 75, 51, 723/- 29. 08. 2008 15, 90, 14, 543/- 2009-10 -15, 14, 30, 724/- ....
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....f the assessee to disclose fully or truly all material facts necessary for the assessment. 4. The Ld AO did not accept the contention of the assessee about the reopening of the case and has disallowed the claim made u/s 36(1)(viia) on the ground that the claim would be allowable only on the basis of actual provision made in the books and not on the basis of the allowability u/s 36(1)(viia). It is submitted that the assessee has made this claim on the basis of the decision of the Bangalore Bench in the case of Syndicate Bank. Subsequently, indirectly by way of a remark the Hon'ble Supreme Court in the case of Southern Technologies reported in 320 ITR 577 (Para 41 P. 610 of the report) has affirmed such a claim. However, the Hon'ble Tribunal Indore Bench in the case of Narmada Gramin Bank has held that the claim can be allowed only on the basis of actual provision made in the books of accounts. The matter is pending before the Hon'ble High Court of Madhya Pradesh. 5. The Ld. CIT(A) upheld the contention of the Ld. AO and dismissed the appeal on this ground. 6. While filing the returns the assessee has specifically claimed the said deduction and ....
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....ve a detailed reply explaining the various claims. This fact would be clear from the subsequent entry in the order sheet, which specifically mentions that the details asked for have been furnished by the assessee. Thus it is very clear that the Ld. AO specifically asked for the details and after considering the details, he has passed the assessment order by making addition for amortization of securities. From the details of the order sheet entry, it is clear that the Ld. AO asked for the details after considering the specific deduction claimed in the return u/s 36(1)(viia) (Page 26 of PB). This fact has also been mentioned in the original assessment framed, which is evident from Para 6 on page 02 of the assessment order. Thus it is submitted that all the material facts were already before the Ld. A. O and have been considered while framing the assessment. The same fact about claiming the deduction u/s 36(1)(viia) has been mentioned in the assessment order for the AY 2009-10 and 2010-11 with the identical wordings. Thus it is submitted that the reopening of the assessment is bad in law since all material facts were submitted during the assessment proceedings. It is a mere change of ....
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....t ground for assessment year 2008-09 in favour of the assessee. 14. As regards the remaining Assessment Years 2009-10 to 2011- 12 are concerned, we find that the issue relating to claim of provision u/s 136(1)(viia) of the Act as well as the excess provision for non performing assets was the basis. Assessee claimed deduction u/s 136(1)(viia) of the Act only in the computation of income and no such provision was actually made in the profit and loss account. It is true that the details of the deduction claim u/s 136(1)(viia) was available on record but the legal angle of examining this claim was not discussed at length during the course of assessment u/s 143(3) of the Act. The claim of the assessee were based on certain judicial pronouncements which the Assessing Officer later on found to be favouring the revenue. This change of legality of the issue triggered the issuance of notice u/s 148 of the Act. It is not disputed that the notice issued u/s 148 of the Act for Assessment Year 2009-10 and 2010-11 are within the period of four years from the end of relevant assessment years. The reasons have duly been recorded and the need of issuance of notice was due to the alleged excess pr....
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....essee made a lower amount shown in the books of accounts but made higher claim as per limits prescribed u/s 36(1)(viia) of the Act. 19. We further find that the view of the Ld. A. O has been held to be correct by the Coordinate Bench in the case of M/s. Narmada Malwa Grameen Bank Vs ACIT 2(1), Indore (supra) observing as follows; "2. We have gone through the order of the Tribunal dated 29/03/2013 wherein the issue with regard to allowability of claim of deduction u/s 36(1)(viia) of the Act was decided after discussing various decisions of Hon'ble Supreme Court as well as High Court in para 11 to 16, the issue with regard to quantification of deduction u/s 36(1)(viia) was restored to the file of the Assessing Officer for recomputing the claim of deduction to the extent of amount written off in the books of account, even though such write off was not partywise. The contention of Ld. A. R was that full amount of provision for bad and doubtful debt should be allowed irrespective of entry made in the books of account. We are jot in agreement with the assessee's contention in so far as provision contained in clause (viia) of section 36 clearly starts with word "in respect of ....
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....s reason the addition/disallowance was made for Assessment Year 2008-09 to 2012-13 in the assessment framed u/s 143(3) of the Act and for Assessment Year 2011-12 in the reassessment proceedings u/s 147 of the Act for the amounts mentioned in the table provided in para 7 of this order. 23. The appeal filed by the assessee against the alleged disallowance did not find any favour from Ld. CIT(A) and now the assessee is in appeal before the Tribunal. 24. The Ld. Counsel for the assessee submitted that; "1. The assessee M/s Jhabua Dhar Kshetriya Gramin Bank (hereinafter called the Bank) is a Regional Rural Bank (RRB) sponsored by Bank of Baroda (a nationalized bank). The shareholdings are held by the Central Govt. , State Govt. and the Sponsored Bank M/s. Bank of Baroda. No shares are issued for any private contribution. All the RRBs' are declared as a scheduled bank by the Reserve Bank of India. The assessee is governed by RRB Act 1976. The NABARD and RBI are supervisory and controlling authorities. 2. During all these years, the assessee has made a provision for amortization of the premium paid on the purchase of the Govt. securities which are held as stock....
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....d AFS securities forming stock in trade of the bank, the depreciation / appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims. " 3. The Reserve Bank of India has classified the securities under two heads- Mark to Market norms and SLR Securities held under Held to Maturity. The Securities held by the Bank on the basis of Held to Maturity would mean that the valuation on the Book Value basis would be done and if the cost of acquisition is more than face value, then the premium paid should be amortised over a period remaining to maturity. In the instant case, the assessee has purchased the Govt. securities as a stock in trade and are held for the purposes of maintenance of SLR (Statutory Liquidity Ratio). They have been classified as 'Held on Maturity' . 4. While framing the assessments of the years, the Ld. AO disallowed the claim of assessee for amortisation of income. The Ld. AO observed that the securities are held up to the maturity and are in the nature of capital asset and as such they have to be valu....
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....FC Bank Ltd (2014), Bombay High Court, (2014) 366 ITR 505 (Bom) (ii) Commissioner of Income Tax Rajkot II V Rajkot Dist. Co-Op Bank Ltd (Guj HC) Tax Appeal No. 56 of 2013 (iii) ACIT V Suvarnyug Sahkari Bank Ltd, I. T. A. T. Pune Bench, ITA No. 1668/PN/2012 (iv) DCIT V Tarun Agarwala and Surya Prakashi Kesarwani, JJ HC, Allahabad (2015) 62 taxmann. com 248 (Allahabad) (v) ACIT V Prathma Bank I. T. A. T. Delhi Bench ITA No. 4090/Del/2013 (vi) Asstt. CIT v. Bank of Rajasthan Ltd. [IT Appeal Nos. 2246 to 2250 (Mum. ) of 2009, dated 22-12-2010] (vii) Catholic Syrian Bank Ltd v. Asstt. CIT [2010] 38 SOT 553 (Coch. ) (viii) Khanapur Co-op. Bank Ltd. v. ITO [IT Appeal No. 141 (PNJ) of 2011] (ix) Sri. Visweswaraya Co-op. Bank v. Jt. CIT [IT Appeal No. 1122 (Bang. ) of 2010, dated 11-5-2012] (x) Dy. CIT v. Nasik Merchants Co-op. Bank Ltd. [IT Appeal No. 1254 (PN) of 2011] (xi) Asstt. CIT v. Ahmednagar Shahar Sahakari Bank Ltd. [IT Appeal No. 298 (PN) of 2014, dated 30-3-2015], etc. 25. Per contra the Ld. Departmental Counsel supported the orders of lower authorities. 26. We have heard rival conten....
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....ular dated 26. 11. 2008. "6. On the other hand, the learned counsel Shri Tushar Hemani for the respondent placed heavy reliance on the said CBDT Circular dated November 26, 2008 and contended that the benefit of amortization had to be granted. The assessee as a cooperative bank was bound by the RBI directives. As per such directives, the assessee had to invest certain amounts in Government securities and to hold the same till maturity. In the process of acquisition, if there was any premium paid on the face value of the security, the loss had to be amortized. Paragraph (vii) of the CBDT Circular No. 17 of 2008 dated November 26, 2008 would apply. Such instruction reads as under: "(vii) As per RBI guidelines dated 16th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Head to Maturity (HTM), Held for Trading (HTF) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFT secur....
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....hat the assessee had created excess provision more than what has been prescribed under the Reserve Bank of India guidelines and they are not allowable as expenditure and further the liability as stated in notes on accounts is in the character of contingent liability which could not be allowed as admissible deduction. Ld. AO reversed the excess provision and added it back to the income thereby making an addition of Rs. 6, 13, 39, 660/- 32. Aggrieved assessee preferred appeal before the Ld. CIT(A) but failed to succeed. 33. Now the assessee is in appeal before the Tribunal. 34. Ld. Counsel for the assessee submitted that in the A. Y. 2009- 10 the Ld. AO has made the addition of Rs. 6, 13, 39, 600/- on account of disallowance of alleged excess provision for NPA. Ld. A. O made the addition on the basis of audit objection in sub para 2 of para 4 on notes to accounts wherein it has been stated that the provision of NPA amounting to Rs. 948. 62 Lacs was maintained as against the required provision under NPA norms of Rs. 335. 23 Lacs (P. Y. Rs. 1180. 31 Lacs). Bank has decided to retain provision made in past years amounting to Rs. 613. 39 lacs to be adjusted in future due to unce....
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....th the deduction allowable for the amount of any bad debts or part there of which is represented in the accounts of the assessee and provision of section 36(1)(viia) which relates to the provision for bad and doubtful debts to be made by certain category of banks including the assessee calculated on the basis of certain percentage of the total income as well as the average advances which can be claimed to the extent of which the assessee can claim the provisions. It is true that the banking companies have to work under the guidelines prescribed by Reserve Bank of India. However as held by Hon'ble Apex Court in the case of M/s. Southern Technologies Ltd V/s ACIT (320 ITR 577) that guidelines provided by RBI cannot over ride the provisions of Income Tax Act. RBI guidelines are for the purpose of maintaining the balance sheet and financial statements for the stake holders so as to give true and fair view of the financials of the bank. Claiming of deduction for bad and doubtful debts as well as provision for bad and doubtful debts for the borrowers involved in Debt Relief Scheme, 2008 needs to be examined in the light of provisions of Income Tax Act applicable to the assessee. We f....