TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 322
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....e case of The Karad Janata Sahakari Bank Ltd. relating to assessment year 2011-12 were heard together and are being disposed of by this consolidated order for the sake of convenience. However, the parties argued the issue raised in ITA No.167/PUN/2015, relating to assessment year 2011-12 in the case of Bhagini Nivedita Sahakari Bank Ltd. as the lead case since for the first time, the addition was made in the said case. Hence, reference is being made to the facts and issues in the said appeal. 3. The first issue raised by assessee in ITA No.167/PUN/2015, relating to assessment year 2011-12 vide ground of appeal No.1 reads as under:- 1. The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 95,66,809/- towards disallowance of deduction u/s 36(viia). 4. The first issue raised in the present appeal is against addition of Rs. 95,66,801/- by disallowing deduction claimed under section 36(1)(viia) of the Act. In all the appeals, other issues have also been raised, which we shall adjudicate after adjudicating the primary issue of claim of deduction under section 36(1)(viia) of the Act. 5. Briefly, in the facts of the case, the assessee was Co-operative society w....
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....ble was also totally different. The first limb related to 7.5% of total income of bank, which included income from rural as well as non-rural advances and in case the intention of law was to make it applicable only to rural advances, deduction of 7.5% of total income would be irrelevant. The second limb related to rural branches and deduction was separately allowable in prescribed manner. Then, reference was made to recent amendment by Finance Bill No.13 to section 36(1)(vii) of the Act, wherein Explanation 2 has been inserted. It was stressed that amendment clearly stated that provision for bad and doubtful debts account would be treated as single account relating to all types of advances i.e. rural and otherwise. Thus, it could be said that the deduction was allowable in case of provision made for non-rural advances also. The Assessing Officer rejected the plea of assessee on account of following points:- "4.2 The submission made by the assessee duly considered and found unacceptable as discussed under:- i. The Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. Vs. CIT has overruled the decision of Kerala High Court full bench in the case of CIT Vs. South Indian ....
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....ratio laid down by the Hon'ble Supreme Court, the Assessing Officer held that deduction under section 36(1)(viia) of the Act was available in respect of rural advances and since the bank was not having any rural advances, was not eligible for deduction under said section. Hence, deduction claimed under section 36(1)(viia) of the Act at Rs. 95,66809/- was disallowed. 7. Before the CIT(A), the learned Authorized Representative for the assessee reiterated its submissions made before the Assessing Officer and pointed out that the scope of section 36(1)(viia) of the Act was altogether different when compared to the provisions of section 36(1)(vii) and it had two distinct and totally independent limbs, wherein first limb provided for deduction @ 7.5% of total income and second limb provided for deduction @ 10% of aggregate average advances made by rural branches of the bank computed in the prescribed manner. It was further pointed out that the facts of case in the decision of Catholic Syrian Bank Ltd. Vs. CIT (supra) and facts of assessee bank were totally different, wherein Catholic Syrian Bank Ltd. had claimed deduction under section 36(1)(vii) of the Act towards actual write off ....
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....nch of Tribunal in ACIT Vs. Chaitanya Godavari Grameena Bank (2018) 93 taxmann.com 400 (Visakhapatnam - Trib.), wherein it was held that the assessee bank was entitled to claim the deduction under section 36(1)(viia) of the Act both in respect of rural or non-rural advances, to the extent of provision for bad and doubtful debts was so created. 10. The learned Counsel Mr. Pramod Shingte in Lokmangal Co-Operative Bank Ltd. pointed out that the issue raised in the present appeal is also same issue of claim of deduction under section 36(1)(viia) of the Act, under which there are two limbs provided for claiming the aforesaid deduction. He then referred to the decision of Special Bench of Cochin Tribunal in DCIT Vs. Catholic Syrian Bank Ltd. (2004) 88 ITD 185 (Coch.)(SB) and pointed out that Special Bench had decided the issue, against which the Hon'ble Supreme Court in Catholic Syrian Bank Ltd. Vs. CIT (supra) explained the law. He then referred to CBDT Circular No.464, dated 18.07.1986, under which clarification was given in respect of deduction for provision for bad and doubtful debts made by banks. 11. The learned Authorized Representative for the assessee expounded on the said....
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....n deciding the issue and in the absence of any decision of any other Court or of the jurisdictional High Court, the said reliance placed was held to be correct. Shri Kishore Phadke, the learned Authorized Representative for the assessee further referred to the decision of Pune Bench of Tribunal on the said proposition as laid down in ACIT Vs. Aurangabad Holiday Resorts (P) Ltd. (2009) 118 ITD 0001 (Pune-Trib.), wherein it was held that it was not open to subordinate Tribunal to disregard any of the judgments of even non-jurisdictional High Courts, which are binding on the Tribunal. Reference was also made to the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) to propose that when two interpretations were possible; one in favour of assessee must be adopted. The learned Authorized Representative for the assessee further stated that in the absence of any contrary decision by jurisdictional High Court or any other High Court (a) there was no need to make reference to larger Bench and (b) the ratio laid down by the Hon'ble High Court of Kerala was to be applied since the issue in present appeal stands fully covered by the said d....
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....lowing any deduction under the Chapter VI-A and secondly, it also refers to a deduction of an amount not exceeding 10% of aggregate average advances made by rural branches of such banks, which have been computed in prescribed manner. 15. The CBDT vide Circular No.464, dated 18.07.1986 had clarified the position for bad and doubtful debts made by the banks that under the existing provisions inserted by Finance Act, 1979 provision for bad and doubtful debts made by scheduled or non-scheduled Indian bank was allowed as deduction within prescribed limits. The limit prescribed at the relevant time was 10% of total income or 2% of aggregate average advances made by the rural branches of such banks, whichever was higher. There was representation to the Government that foreign banks were not entitled to any such deduction and further it was also felt that existing ceiling at the relevant time, should be modified. Accordingly, by Amending Act, the deduction presently available under section 36(1)(vii) of the Act was split into two separate provisions. One of these limbs was the deduction to an amount not exceeding 2% of aggregate average advances made to by rural branches of the bank conce....
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.... scope of said section has thus been enlarged w.e.f. 01.04.2007 and deduction is available not only to the scheduled or non-scheduled banks but to the Co-operative banks also i.e. the assessee before us. 16. The issue which arises before us is in relation to co-operative banks which do not have any rural branches. The question which is to be addressed is whether in the absence of any rural branches, can the benefit of deduction be allowed under section 36(1)(viia) of the Act and that also to the extent of 7.5% of total income. 17. We find that this issue has been elaborately considered and addressed by the Hon'ble High Court of Kerala in The Kodungallur Town Co-Op. Bank Ltd. Vs. ACIT (supra) and it has been held as under:- "9. Admittedly, appellants/assessees are cooperative banks. With introduction of Finance Act of 2007, coming into effect from 01.04.2007, one has to understand what was the position prior to 1.4.2007 and after 1.4.2007. During the relevant assessment year, admittedly the appellants/assessees were not entitled for any deduction provided under section 80P of the Act. Prior to 1.4.2007, they were enjoying the benefits provided under section 80P. With the introdu....
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....iia) defines what is a rural branch. It is with reference to a place and certain number of population. It refers to branch of a scheduled bank or a non-scheduled bank. Apparently, we do not find the term co-operative bank. Section 5(cci) of Banking Regulation Act though has brought in definition of co-operative bank, virtually every bank which is not a scheduled bank would fall under the definition of non-scheduled bank. Reading of definition of non-schedule bank along with meaning of rural branch under Explanation to Section 36(1) of the Act, clearly indicate that co-operative bank also falls under the category of non-schedule bank for the purpose of this Section. Therefore, reading of entire Section 36(1)(viia)(a) along with explanation would mean two kinds of deductions referred to in the section will be allowed to all those banks only if they satisfy the terms and conditions referred to in the provision. 13. Therefore, we are of the opinion, authorities below were justified in opining that benefit of deduction of 10% of the aggregate average advances is applicable to co-operative bank also provided their rural branches have advanced such amounts. Such rural branch means a br....
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....s. CIT (supra) relied upon by the Commissioner while invoking revisionary jurisdiction under section 263 of the Act. The Tribunal held that the Hon'ble Supreme Court had considered the issue whether the deduction was allowable to scheduled banks under section 36(1)(vii) of the Act in respect of bad debts written off and had held that the same shall be limited to the extent the said debts credit balance in the provision for bad and doubtful debts account made under clause (viia). It was further observed by the Tribunal that the assessments in the said case related to assessment year 2002-03 and prior years and the Apex Court had considered the law with reference to the fact situation; whereas the assessee before them was co-operative bank, which was included in the category of beneficiaries under clause (viia) by the Finance Act, 2007 w.e.f. 01.04.2007. The Tribunal further goes on to hold that the deduction provided in the first part of clause (viia)(a) of 7.5% of total income, either to enjoyed by the assessee since inclusion of co-operative banks within ambit of clause (viia)(a) by the Finance Act, 2007 is unconcerned with the advances made by rural branches of banks. Further....
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....jurisdictional High Court on the issue. The position as settled by the Hon'ble High Court is that deduction under section 36(1)(viia) of the Act is available to non-scheduled bank i.e. co-operative bank @ 7.5% of total income or in case there are rural branches, then further deduction of 10% of aggregate average advances as per prescribed procedure. 24. The issue before us is similar to the issue before the Hon'ble High Court of Kerala and though the decision is by non-jurisdictional High Court but in the absence of any decision to the contrary by the jurisdictional High Court, the decision of High Court is binding upon the Tribunal. In any case, no other decision of any High Court has been brought to our knowledge contradicting or favouring the view taken by the Hon'ble High Court of Kerala. In such circumstances, we are guided by the proposition laid down by the Hon'ble Bombay High Court in CIT Vs. Smt. Godavaridevi Saraf (supra), wherein it was held that until a contrary decision is given by any other Competent High Court, which is binding on Tribunal in the State of Bombay, it has to proceed on the footing with the law declared by the High Court, though of another State, is th....
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..... In this light, and bearing in mind the fact that limited question before. Their Lordships was whether or not decision of one of the High Court's is binding on another High Court, it would appear to us that ratio decidendi in Thana Electricity Co. Ltd. (supra), is on the non binding nature of a High Court's judgment on another High Court. In any case, this Division Bench did not, and as stated in this judgment itself, could not have differed with another Division Bench of the some strength in the case of Godavari Devi Saraf (supra). Therefore, it cannot be open to a subordinate Tribunal like us to disregard any of the judgments of the Hon'ble Bombay High Court, whether in the case of Thana Electricity Co. Ltd. (supra) or in the case of Godavari Devi Saraf. It is indeed our duty to loyally extend utmost respect and reverence to the Hon'ble High Court, and to read these two judgments by the Division Benches of equal strength of the Hon'ble jurisdiction High Court, i.e. in the case of Thana Electricity Co. Ltd. {supra) and Godavari Devi Saraf (supra), in a harmonious manner." 27. Then, analyzing the two decisions of Hon'ble Bombay High Court, it was held that wh....
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....The learned CIT(A) erred in law and on facts in confirming the addition of Rs. 45,000/- towards disallowance of amortization of premium on HTM securities. 4. The learned CIT(A) erred in law and on facts addition of Rs. 71,302/- towards unclaimed dividend in the hands of the appellant. 30. The issue in ground of appeal No.2 is against addition made on account of interest on NPAs. The said issue is squarely covered by the decision of the Hon'ble Bombay High Court in CIT Vs. Deogiri Nagari Sahakari Bank Ltd. reported in 379 ITR 24 (Bom). In view of the issue being covered, we find no merit in the aforesaid addition and the same is deleted. The ground of appeal No.2 raised by assessee is thus, allowed. 31. Now, coming to ground of appeal No.3 which is against addition of Rs. 45,000/- made on account of amortization of premium on HTM securities, the learned Authorized Representative for the assessee pointed out that similar issue has been decided in favour of assessee by Pune Bench of Tribunal in assessee's own case relating to assessment year 2009-10 in ITA No.690/PN/2013, order dated 27.11.2013. We find that the issue is further covered by the order of Hon'ble Bombay High Court ....