TaxTMI 
TaxTMI 
2023 (1) TMI 426
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....appreciation of facts, the appeal being ITA No. 296/Srt/2022 for the A.Y. 2013-14 is treated as a "lead case". In this appeal, the revenue has raised following grounds of appeal: "On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in directing the AO to allow deduction claimed by the assessee of Rs.4,90,98,930/- @ 10% of average advances made by rural branches of the assessee bank u/s.36(1)(viia) of the Act and @15% of net profit on account of Statutory Bad debt reserve provision, holding that the assessee co-operative bank falls under the category of non-scheduled bank and eligible for above deduction without appreciating the Explanation (ia) below section 36(1)(viia) of the Act. It has also been held by Ld. CIT(A) that rest while in the annual report as a proposed appropriation subject to approval in general body meeting of the members and as such disclosure and treatment is as per norms and practice followed by all cooperative banks as governed by State cooperative act. So far as objection of assessing officer is that in the profit and loss accounts of the year no such provision is made by the assesse, is concerned, we find that Hon'b....
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....2. 3. On the other hand, the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that making of provision for bad and doubtful debts equal to the amount mentioned in the section 36(1) (viia) is must for claiming such deduction. There is no finding of ld CIT(A) that the assessee has made provisions in its books of accounts. As per the definition of rural branch in explanation (ia) to Section 36(1) of the Act covers only branch of a scheduled bank situated at a specified place. Such fact is not examined by the assessing officer. The Assessing Officer rightly restricted only 7.5% of total gross income. Though, the assessee contended that they are non-scheduled bank and therefore 10% of advances of rural bank would be eligible for deduction. The ld. CIT-DR and ld. Sr.DR for the revenue submit that the language of Section 36(1) clearly prescribed that any provision for bad and doubtful debts made by a scheduled bank not being a bank incorporated by or under the law of a country outside India or a non-scheduled bank or a cooperative bank other than a primary agriculture credi....
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....ower authorities carefully. We find that the assessee claimed deduction of Rs. 6,66,39,443/- under section 36(1)(viia). On show cause notice for justification of such claim, the assessee filed its reply dated 28.12.2015, contents of which is extracted by assessing officer in para-4 of his order. To support their claim, the assessee relied on CBDT Circular No. 10 of 2008, decision of Cochin Tribunal in Kannur District Cooperative Bank Limited (2012) 136 ITD 102 dated 23.03.2012 and Kerala High Court in Kannur district Co-operative Bank Limited Vs CIT (2014) 365 ITR 343 (Kerala). The explanations and submissions of the assessee was not accepted by the assessing officer by taking view that the case law relied by the assessee is not of the jurisdictional High Court. The assessing officer also held that for the purpose of this section, the legislature has placed co-operative bank as a different category bank than schedule bank. The assessing officer held that the assessee made a provision of bad and doubtful debt of Rs. 5.00 Crore and in the computation of income the assessee further claimed and amount of Rs. 1.66 Crore on account of Statutory bad debts reserve provision made @ 15% of n....
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....but providing for bad and doubtful debts from the profit and loss accounts. The assessee also relied on the decision of Rural Electrification Corporation Limited (2009) 312 ITR 122 (AAR) and Delhi Tribunal in Power Finance Corporation (2006) 10 SOT 190 (Delhi). The assessee also stated that no such disallowance was made in AY 2007- 08 and 2008-09 in the assessment order passed under section 143(3). On the basis of afforesaid submission, the assessee claimed that they are eligible for deduction of 10% both as co-operative bank and also as non-schedule bank which include co-operative bank and thus covered by section 36(1)(viia) read with definition of rural branch given in Explanation thereto. We find that that ld CIT(A) after considering the submission of the assessee held that both the issue raised by the assessee is decided by Tribunal in favour of the assessee. The ld CIT(A) quoted the relevant part of decision of Tribunal in his order. On careful perusal of grounds of appeal and the assessment order, we find that the grounds of appeal raised by the revenue are covered by the decision of Tribunal in assessee's own case for A.Y. 2009-10 to 2012-13 and 2014-15 (supra). We find that....
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....cision of Indore Bench in Jhabua Dhar Kshatriya Gramin Bank in ITA No. 106 to 114/Ind/2017 dated 06/09/2018 which in turn relied on order in Narmada Malwa Gramin Bank Vs ACIT in MA No. 104/Ind/2012 arising out of ITA No. 162/Ind/2011 dated 16/04/2013. 26. We have considered the rival submissions of the parties and have gone through the orders of the authorities below carefully. The Assessing Officer disallowed the claim of deduction under Section 36(1)(viia) by taking a view that the definition of 'rural branch' in explanation (ia) does not cover co- operative banks. The legislature has placed cooperative bank as a different category than non-scheduled bank. Accordingly, deduction of provision for bad and doubtful debts with respect to advance of rural branch is not allowable to the assessee-bank. As recorded above, before the ld. CIT(A), the assessee filed detailed written submission. We find that the ld. CIT(A) on appreciation of submission of assessee and considering the decision of Kannur District Co-operative Bank (supra) held that under Banking Regulation Act, 1949, "The banking company" also includes "Cooperative Bank" and further held that as per definition of "Non-schedu....
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....Act, 2007 to Section 36(1)(viia) w.e.f 01/04/2007 wherein cooperative bank other than primary agricultural credit society or a primary cooperative agriculture and rural development bank, were brought under the provision of Section 36(1)(viia) for claiming deduction in respect of provisions made for bad and doubtful debts. Thus, in view of aforesaid factual discussion and the legal view taken by the Kerela High Court in Kannur District Cooperative Bank (supra), we find that the order of ld. CIT(A) is based on proper appreciation of amended provision of Section 36(1)(viia) which we affirm. 28.So far as objection of ld. CIT-DR and his reliance on the decision of Indore Bench in Jhabua Dhar Khatriya Gramin bank (supra) is concerned, we find that the ratio of finding of Tribunal is not applicable on the facts of the present case. In the said case the Tribunal relied on the earlier case law in Narmada Malwa Gramin Bank Vs ACIT (ITA No. 162/Ind/2011 dated 16.04.2013), wherein the issue was restored to the file of assessing officer to re-computing the claim of deduction to the extent of amount written off in the books of accounts. Thus, the finding in the said decision is not at all appl....
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.... Rs. 7.34 crores. Therefore, the deduction is disallowed/sustained by the ld. CIT(A) on factually wrong basis that the issue is covered against the assessee in A.Y. 2008-09. The ld. AR submits that the issue was not even enhanced by the ld. CIT(A) in his order. Thus, on the principle of consistency, this claim is to be allowed. Since the parties have allowed the position to be sustained by not challenging the order on that issue. To support his submission, the ld. AR relied on the decision of Hon'ble Supreme Court in Radhasoami Satsang Vs CIT (1992) 193 ITR 321 (SC). 31.On the other hand, the ld. CIT-DR for the Revenue supported the order of ld. CIT(A). The ld CIT-DR for the revenue further submits that the assessing officer clearly held that no provision in the profit and loss account has been made by the assessee. 32. We have considered the rival submissions of both the parties and have gone through the orders of the authorities below. The Assessing Officer disallowed the claim of deduction under Section 36(1)(viia) by taking a view that the definition of rural branch in explanation (ia) does not cover cooperative banks. It was recorded by assessing officer while disallowing ....
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.... contention of ld. AR of the assessee that transfer to statutory bad debts reserve were subject to approval in general body meeting of the members and as such disclosure and treatment is as per norms and practice followed by all cooperative banks as governed by the State Cooperative Act. We find that merit in the submissions of the ld AR for the assessee and find that as per section 67A of Gujarat Cooperative Society Act, every society, working in the State of Gujarat, which earned profit from its transactions, shall maintain a bad debts reserve funds. As per sub-section (2) of section 67A, every year, the society shall carry at least 15% of the net profit to the debts reserve funds. All such funds shall be certified by the certified auditors and the expenses incurred in recovering the same shall first be written off as per section 67A(3). It is settled position under law that co-operative banks are primarily a co-operative society. We also noted that the financial statement of the assessee is not only subject to the statutory audit but also subject to the approval of the Registrar of Co-operative society. Thus, considering the aforesaid factual and in view of the statutory provisi....
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.... the Hon'ble Supreme Court in Catholic Syrian Bank Limited Vs CIT (2012) 18 taxmann.com 282/ 343 ITR 270-SC also held that legislative intent of the provisions and unambiguous language of the circulars with reference to the amendments to section 36 of the Act is that the deduction on account of provisions for bad and doubtful debts under section 36(1)(viia) is distinct and independent of the provisions of section 36(1)(vii) relating to allowance of the bad debts. After introduction of section 36(1)(viia) by the finance Act, 1979, with effect from April 1,1980, Circular No. 258, dated June 14, 1979, was issued by the Central Board of Direct Taxes to clarify the application of the new provisions. The provisions were introduced in order to promote rural banking and assist scheduled commercial banks in making adequate provision from their current profits for risks in relation to their rural advances. The deductions were to be limited as specified in the section. The circular mentions that the provisions of new clause (viia) of section 36(1), relating to the deduction on account of provisions for bad and doubtful debts, is distinct and independent of the provisions of section 36(l)(vii)....