TaxTMI 
TaxTMI 
2019 (12) TMI 976
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....turn filed by the appellant on 20-03-2014. 2. The learned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in confirming the action of the assessing officer in disallowing the claim of loss of Rs. 1,56,71,108/- being irrecoverable amount of deposits placed by the appellantbank with Madhavpura Mercantile Co-operative Bank Ltd. 3. The learned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in holding that the explanation offered by the appellant for having claimed the amount of Rs. 1,56,71,108/- as business loss in A.Y. 2012-13 does not hold water. 4. The learned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in confirming the action of assessing officer in not allowing to carry forward and set off of loss of Rs. 2,31,857/- for A.Y. 2005-06 and Rs. 16,71,665/- for A.Y. 2006-07 by failing to appreciate the distinction between an exemption and a deduction provision. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. 2. The 1st interconnected issue raised by the assessee in ground numbers 1 to 3 is that the learned CIT (A) erred in confirming the ....
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.... Amount of funds transferred from the funds as per para 2 Total fund transferred to this fund Closing balance in this Fund i.e MMCB Investment Depreciation Fund 31.03.2011 Investment Depreciation reserve fund 11,71,000/- 51,00,000/- 51,00,000/- Bad and doubtful debt fund 39,29,000/- Thereafter the assessee has further credited the above funds with the following sources up to 31.03.2012:- Madhav-pura Mercantile Co-operative Bank Investment Depreciation Fund up to 31.03.2012 Date of deposit in the above fund Source of above fund Amount of funds transferred from the funds as per para 2 Total fund transferred to this fund Closing balance in this Fund i.e MMCB Investment Depreciation Fund 11.10.2011 Bad and doubtful debt fund 40,00,000/- 91,00,000/- 91,00,000/- up to date 05.12.2011 Bad and doubtful debt fund 45,00,000/- 1,36,00,000/- 1,5671108/- up to date From profit and loss a/c 20,71,108/- 1,56,71,108/- The AO on the basis of the above found that the provision for the loss on account of the FDR's in MMCBL has already been sourced from the investment depre....
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....rbed losses and the depreciation. Thus it cannot be said that the original return was not the return of loss. Furthermore the original return was filed within the time allowed under section 139(1) of the Act and therefore the same can be revised under section 139(4) of the Act. 4.1 The assessee on merit submitted that the FDR's in MMCBL was made in its normal course of business. The interest income from such FDR's in the past was offered to tax. The fixed deposits made with the MMCBL were representing the stock in trade for the assessee. As such the amount of interest income of the FDR's made with MMCBL is akin to the loan and advances given to the customers. Therefore the same is eligible for deduction. 4.2 The assessee also submitted that it has not claimed any deduction by way of provision for bad and doubtful debts at the rate of 7.5% of the current year income as provided under section 36(1)(viia) of the Act in the past except for the assessment year 2008-09, 2010-11 and 2011-12 which is very nominal in comparison to the provision for bad and doubtful fund. 4.3 The assessee also claimed that such business loss on account of FDR's made with MMCBL claimed in the year un....
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....ision on account of its doubtful investments and then claiming the entire investment made in MMCB again as an 'inherent loss' was not justified. Further, the appellant has not explained its understanding of what an 'inherent loss' is. The investments in MMCB were made for the first time in 2000-01. As far back as 2004, the RBI had issued a circular on 21 July 2004 to the banks that had deposited money with the MM_CB to treat their deposits to the bank as non-performing assets and submit the particulars of their deposits to the Reserve Bank. The appellant has not given any details of the same or of any communication in respect of its deposits with MMCB, to the RBI. In fact, it has been stated that provision was made for MMCB only partially from 1.4.2011. Thus the explanation offered by the appellant for having claimed the amount of Rs. 1,56,71,108/- as business loss in AY 2012-13, does not hold water. 4.2.6 In view of the discussion above, I am of the view that even on merits, the appellant's claim of loss is not allowable, and the AO was justified in not allowing the same and in making the impugned addition of Rs. 90,96,990/-. Grounds of appeal Nos 1 an....
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.... particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1)." 7.2 The above provision reveals that a return filed under section 139(3) of the Act is considered a return filed under section 139(1) of the Act and accordingly all the provisions of subsection (1) of 139 of the Act shall be applied to the return filed under section 139(3) of the Act. Thus there remains no ambiguity that a return filed under section 139(3) of the Act is considered a return filed under section 139(1) of the Act and accordingly we hold that the same can be revised under section 139(5) of the Act. 7.3 Similarly, we also note that there is no specific denial under section 80 of the Act that the return filed under section 139(3) of the Act, which is considered the return filed under section 139(1) of the Act, cannot be revised under section 139(5) of the Act. The relevant provisions of section 80 of the Act read as under: "Submission of return for losses. 80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed ^27 [in accordance with the provisions of ....
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....e Income-tax Act shall apply as if such return has been filed under section 139(1). This position is clear from the expression ". . . all the provisions of this Act shall apply as if it were a return under sub-section (1)". In other words, a return filed under section 139(3) is deemed to be a return filed under section 139(1). The provision contained in section 139(3) makes it clear that all the provisions of this Act shall apply to such a return as if it were a return under section 139(1). In view of such a specific provision, there is no reason to exclude the applicability of section 139(5) to a return filed under section 139(3). In view of the above we hold that the assessee cannot be denied the benefit of the loss to be allowed carried forward under the provisions of subsection 139(3) read with section 80 of the Act in a situation where the loss was claimed in the revised return of income. On this technical count, the assessee succeeds. 8. Now coming to the 2nd question whether the assessee is eligible for deduction for the FDR's written off against the business income of the assessee, in this regard that the genuineness of the loss has not been doubted by the au....
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....be said that the funds of the bank which were not lent to borrowers but were laid out in the form of deposits in another bank to add to the profit instead of lying idle necessarily ceased to be a part of the stock-in-trade of the bank, or that the interest arising therefrom did not form part of its business profits. Under the byelaws one of the objects of the appellant bank was to carry on the general business of banking and therefore, subject to the Co-operative Societies Act, it had to carry on its business in the manner that ordinary banks do." 8.2 We also note that the investment written off by the insurance company was allowed as deduction treating the same as business loss. In this regard we find support and guidance from the order of Delhi ITAT in the case of DCIT Vs. Oriental General Insurance Company Ltd. reported in 92 TTJ 300 wherein it was held as under: "In the instant case, the entries made in the assessee's books of account in that behalf were strictly in accordance with the guidelines issued by General Insurance Corporation. Those guidelines permitted the assessee to book a loss which had, for all practical purposes, been suffered on account of depreciat....
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.... a very clear finding for the disallowance for set off for Asst. Years 2005-06 and 2006-07. It is seen that the income of the appellant, which is a cooperative bank was not taxable upto the year 2006-07 because such income was deductible u/s SOP of the Act. Thus the business losses of AY 2006-07 and earlier years cannot be set off against the income of the succeeding assessment years. The Hon'hle Supreme Court of India in the case of C1T vs. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC) has also observed that loss from a source which is not taxable cannot be carried forward. In view of the same, the action of the A.O is confirmed and ground of f appeal No.2 is dismissed. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 12. The learned AR before us submitted that the impugned losses were brought forward from the earlier assessment years. 13. On the other hand, the learned DR vehemently supported the order of the authorities below. 14. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the loss can be carried forward with respect....