TaxTMI 
TaxTMI 
TaxTMI 
2020 (8) TMI 195
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....unt of Principal NPA of Rs. 32,42,000/-. 2. On the facts and in the circumstances of the case the ld. LD. CIT (A) has erred in deleting the disallowance made by the AO on account of Time Barred Interest RES of Rs. 3,58,96,329/-. 3. The appellant craves liberty to raise additional ground/s and to modify/amend the ground of appeal at the time of hearing." The hearing of the appeal is concluded through Video Conference due to prevailing condition of COVID 19 pandemic. 2. The assessee is a Cooperative Land Development Bank filed its return of income for the year under consideration on 13.10.2010 declaring loss of Rs. 16,89,180/- which was processed under section 143(1) on 18.08.2011. Thereafter the AO reopened the assessment by issuing no....
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....n assessee's case being a primary Cooperative Agricultural and Rural Development Bank, then the order of the LD. CIT (A) is contrary to section 36(1)(viia) of the Act. He has referred to the assessment order and submitted that the AO has given a clear finding that the assessee is not covered under section 36(1)(viia) of the Act. Thus the ld. D/R has contended that the addition deleted by the LD. CIT (A) based on misunderstanding of the provision is not sustainable in law. He has relied upon the judgment of the Hon'ble Kerala High Court in case of Art Leasing Ltd. vs. CIT, 187 Taxman 29 (Ker.). He has relied upon the order of the AO. 4. On the other hand, the ld. A/R of the assessee has submitted that the account of NPA is recognized as....
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....l and rural development bank], an amount 22[not exceeding 23[eight and one-half per cent]] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding 24[ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : 25[Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of ....
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.... of provisions for bad & doubtful debts which were not allowable. Accordingly she has made an addition of total amount of Rs. 3,91,38,329/- in the case. From a perusal of the details available and filed in the course of the appellate proceedings, it is observed that the appellant is a primary cooperative agricultural & Rural Development Bank which is covered under provisions of section 36(1)(viia) of the I.T. Act, 1961. The bank follows a double entry system where while on the one hand the provision for NPA accounts & time barred loans on NPA account is debited, at the same time on the credit side, interest done on NPA loan account is also appearing. These amounts are much higher than the expenditure for provisions during the year. Th....
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....s. Bad debt, if any, arises out of advances made in the earlier years would be covered under clause (viia) of section 36(1) of the I.T. Act." Thus the LD. CIT (A) has held that the assessee a primary Cooperative Agricultural & Rural Development Bank is covered under the provisions of section 36(1)(viia) of the Act. After giving a finding, the LD. CIT (A) held that the assessee is entitled for deduction. The LD. CIT (A) has discussed the quantum of deduction. Thus the finding of the LD. CIT (A) is based on misunderstanding of the provisions which is in fact not applicable in the facts of the assessee's case. Accordingly, the order of the LD. CIT qua this issue is set aside. Ground No. 2 is regarding addition made on account of Time Barred ....
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....ofit & Loss account. Further, the details filed by the assessee are not part of the audited books of account being Schedule to the Balance Sheet but it is prepared subsequently without certified by the Auditors. Even otherwise, the possibility of over-lapping between the deduction under section 36(1)(vii) and 36(1)(viia) is not ruled out when it comes to the cases of bank. It is settled proposition of law that deduction under section 36(1)(vii) is allowable in respect of any bad debts written off as irrecoverable in the books of account for the relevant accounting year but only to the extent such bad debt exceeds the credit balance in the provisions for bad and doubtful debt account made under clause 36(1)(viia). Therefore, to avoid the dou....