TaxTMI 
TaxTMI 
2024 (9) TMI 721
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....sessee read as under: "1. Your Appellant submits that the Assessing Officer as well as the Commissioner of Income Tax (Appeals)-1 erred in not giving effect to the Hon'ble ITAT directions in ITA No. 1481/h/2013 & 88/H/2014 dated 9-10-2014. 2. Your Appellant submits that the Assessing Officer not given effect to the CIT(A) - III, order in ITA No. 0257/Addl.CIT,R-2/CIT(A)-III/2011-12, dated 16-08-2013 and the Hon'ble ITAT directions in ITA No. 1481/h/2013 & 88/H/2014 dated 9-10-2014, consequentially the Consequential order dated 31-3-2016, is bad in law. 3. Your appellant submits that the amounts written off as debts have been confirmed by the predecessor's order, CIT(A)-III, and the amounts have been actually written off in the books as bad debts, the Assessing Officer as well as CIT(A)-I ought to have verified as per the ITAT directions, whether provisions of section 36(viia) r.w.s 36(2)(v) have been complied with effect from 1-4-2007 and allow the bad debts written off. 4. Your Appellant submits that the Assessing Officer having not filed an appeal against CIT(A)-III finding that the amount of Rs. 173,15,46,253/-, written off under the Agricu....
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.... section 36(1)(viia) made and allowed by the Assessing Officer in the earlier assessment years, otherwise the entire amount written off ought to be allowed as deduction under section 36(1)(vii) of the Act." 4. Ld. AR submitted that additional ground so filed are admissible in view of judgment rendered by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). The prayer for admission of additional ground noted above which are not in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional ground are legal in nature for which relevant facts are stated to be emanating from the existing records. 5. Facts of the case, in brief are that, the assessee is a Scheduled State Cooperative Bank for the State of Andhra Pradesh. The assessee is committed to agricultural and rural development through the Cooperatives. The cooperative credit system in Andhra Pradesh with the assessee at its apex level is a federal system consisting of a family of 13 affiliated District Cooperative Central Banks (DCCBS), which in turn, h....
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.... "We (APCOB) have charged the amount of Rs. 173,15,46,253/- to their Profit and Loss account and credited the accounts of respective DCCB's. These amounts represent amounts advanced to DCCB's during normal course of business of banking and accrued interest. It is the practice of APCOB to recognize interest on advances on accrual basis and credit to the revenue account every year. The account with DCCB is a running account. Therefore the entire amount written off under waiver scheme is a portion of the amount recoverable from the DCCB. Therefore, it is purely a debt written off in the books. APCOB also submits that they were charging interest from DCCB's by calculating on daily product basis at the rate mutually agreed upon. Therefore it is submitted that all amounts released to DCCB's including the farmer loans have been subjected to interest and the same have been recognized as income in the past. Therefore, the entire write off of the amounts under the debt relief scheme including the other interest and incidental charges if any squarely covered by the provision of section 36(vii) as bad debts. It is submitted that provisions of section 3....
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....en off of Rs.173,15,46,253/- be allowed U/s. 36(1)(vii) r.w.s. 36(2)(v) of the Income Tax Act". The above argument of the assessee is not acceptable. As per the directions of the ITAT, the Assessing Officer has to satisfy himself about the fulfillment of the conditions stipulated in Section 36(1)(viia) and Section 36(2)(v). On the own admission of the assessee, APCOB has never made any provision under the said Section in the books of accounts till date. In the computation of the income for the A.YS.2007-08 & 2008-09 APCOB has made an adjustment for the provision U/s. 36(1)(viia). Therefore, there is violation of provision of Section 36(1)(viia). The assessee cannot claim that the conditions stipulated U/s. 36(1)(viia) are fulfilled without creating any provision in the books of account. It cannot be said that the condition are fulfilled by reducing the amount in the computation of income statement without creating any provision in the books of account. This view is also supported by various judicial pronouncements. As per Section 36(2) (v) no deduction for Bad Debt or part thereof can be allowed where such debt or part of debt relates to advances made by an assess....
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....Feeling aggrieved by the order passed by Ld. AO, the assessee filed appeal before the Ld. CIT(A), who dismissed the claim of the assessee as per his observation under para No.9 of his order, which is reproduced as under: "9. The submissions of the appellant have been carefully considered. The issue before me, is whether Rs.1,73,15,46,253/- written off under the Scheme of ADWDRS should be allowed u/s.36(2)(v) r.w.s.36(1)(viia). It is no doubt that under ADWDRS, the appellant's loans to marginal farmers were written off and the same was reimbursed by the Government. The appellant submitted before me, that the reimbursement by the Government of India through NABARD, are as follows: S. No. Date Remarks Amount (In Rs.) 1 17.10.2008 1st Instalment 4,30,20,89,938 2 29.10.2008 2nd Instalment 88,000 3 03.11.2008 3rd Instalment 2,35,44,75,000 Total A.Y. 2009-10 6,65,66,52,938 4 19.06.2009 4th Instalment 1,44,49,45,000 5 29.06.2009 5th Instalment 5,51,05,55,000 6 07.10.2009 6th Instalment 4,18,27,38,000 7 22.01.2010 7th Instalment 1,59,92,300 8 26.02.2010 8th In....
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....rite off the loans to the farmers. The relief was supposed to given to the farmers who have taken loans from the banks to the accounts and most of the case, these loans have become bad and termed as Non Productive Assets (NPA). As per the Banks Accounting System, write off of NPAs are a regular exercise, however, write off are without foregoing the right to recovery. Further write off generally carried out against accumulated provisions made for such loans which go bad. recovered, the provisions made for those, flow back into profit & loss account of the Bank. The Government reimbursements are actually a sort of collection of recoveries. Hence, whatever received by the Bank under "Agricultural Debt Waiver and Debt Relief Scheme" has to flow into the Profit & Loss account. In this particular case, the appellant has received Rs.6,65,66,52,938/- for the AY 2009-10. Neither appellant has brought in this amount of subsidy/ reimbursement into the Profit and loss account nor has accounted the write off against this. The claim of the appellant that loans given to marginal farmers has become bad and were part of the scheme of ADWDRS, it does not qualifies as bad debts as per Income Tax purp....
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....plete picture of the reimbursement of these NPAS. I direct the Assessing Officer to verify the receipts from Government of India under the Scheme of Agricultural Debt Waiver and Debt Relief Scheme 2008 for the AY 2009-10 and AY 2010-11. In case, these amounts have been received and not offered to tax as Income, then the Assessing Officer may include the amounts as Income, if any as per Law. I uphold the addition and the stand taken by the Assessing Officer." 6.2 Feeling aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld.AR submitted that the assessee had not claimed any deduction on account of provision for bad and doubtful debt u/s 36(1)(viia) of the Act. Instead the assessee had write off the debt of Rs.173,15,46,253/- in its books of account and claimed the deduction u/s 36(1)(vii) of the Act. Further, the Ld. AR submits that Section 36(1)(vii) and 36(1)(viia) are independent provisions. The only connection between these two sections are that the same amount cannot be allowed as a deduction twice merely because they are overlapping to some extent. The deduction on account of doubtful debts are allowed to all the assessee under section 36(1)(vi....
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....d to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. As far as the question of double benefit is concerned, the Legislature in its wisdom introduced Section 36(2)(v) by the Finance Act, 1985 with effect from 01.04.1985. Section 36(2)(v) concerns itself as a check for claim of any double deduction and has to be read in conjunction with Section 36(1)(viia) of the Act. It requires the assessee to debit the amount of such debt or part thereof in the previous year to the provision made for that purpose. 18 ....... 19 ...... 20 ....... 21 ....... 22 ....... 23 ....... 24 ...... 25. The language of Section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It applies to all banks, commercial or rural, scheduled or unscheduled. It gives a benefit to the assessee to claim a deduction on any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. This benefit is subject only to Section 36(2) of the Act. It is obligatory upon the assessee to prove to the assessing officer....
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....al amount of debt written off by the assessee after reducing the amount received from government under ADWDRS should be allowed as deduction u/s 36(1)(vii) of the Act. 6.4 Per contra, the Ld. DR placed heavy reliance on the order of authorities below and requested to uphold the order of the revenue authorities. The Ld. DR opposed to the allowability of the additional ground raised by the assessee regarding applicability of section 36(1)(vii) to their case. 6.5 We have heard the rival contentions and gone through the records in the light of submissions made by the either side. For the purpose of better understanding of the case it is necessary to go through the relevant section i.e.36(1)(vii), 36(1)(viia) and 36(2)(v), which are to the following effect : "Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]: [Provided ....
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.... Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head "Profits and gains of business or profession." ] Explanation. For the purposes of this sub-clause, "relevant assessment years" means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;] (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);] [(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) :] [Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of Ap....
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....ngs respectively assigned to them in the Explanation to sub-section (4) of section 80P;] (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- [(i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part there of is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;] (ii) if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the 42[Assessing] Officer had not allowed it to be ded....
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....een remanded back by the tribunal for examining the single issue, new ground cannot be agitated in the remand proceedings before the tribunal. 6.8 We have heard the rival contention of the parties and perused the material available on record. Admittedly as per the CBDT Circular No. 14 (XL-35) dated 11/04/1955, it is a duty of the Ld. AO to apprise the rights of the assessee . Further more the coordinate Bench of ITAT in the case of M/S. Omega Biotech Ltd., Ghaziabad vs Ito, ITA No.2570/Del./2015 dated 12/04/2019, had held that the assessee is entitled to take the legal ground even in the second round of litigation . Respectfully relying upon the judgement of the coordinate Bench of ITAT in the case of M/S. Omega Biotech Ltd., Ghaziabad vs Ito (Supra), the additional ground raised by the assessee is admitted. Having admitted the additional ground raised by the assessee, which is relating to entitlement of the assessee u/s 36(1)(vii) of the Act to claim deduction on account of the bad debts actually written off in their books of account, since this issue has been raised before us for the first time and has not been considered by the lower authorities, therefore we deem it appropri....
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....e absence of any specific directions issued by the ITAT the same cannot be considered while completing the Set-aside assessment. In view of the above the claim of the assessee is rejected". 7.1 Feeling aggrieved by the order passed by Ld. AO, the assessee filed appeal before the Ld. CIT(A), who dismissed the claim of the assessee as per his observation under para no. 10 of his order, which is reproduced as under: "10. Ground No.7: Addition of Rs.5,11,09,716/- towards Profit on sale of investments 10.1 The assessee has claimed that they had debited Rs.5,11,09,716/- in the profit and loss account towards Profit on sale of investments. assessee submitted that while passing original assessment order, the Assessing Officer has not considered the re- revised computation of income in which the profit on sale of investments of Rs.5,11,09,716/- was excluded. The assessee has claimed that they had excluded Profit on sale of investments of Rs.5,11,09,716/- from the taxable income since the same does not part of the taxable income. The appellant raised this issue firstly before the CIT(A), Hyderabad. The appellant submitted that it relates to the calculation mistake made b....
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.... Jai para Bolic Springs Ltd 306 ITR 42 (Del) e) The appellant submitted audited profit and loss account and revised computation of Income for the AY 2009-10. 10.4 The submissions of the appellant have been carefully considered. The Assessing Officer has categorically said in the Consequential order dated 31.03.2016 that this issue was brought before to the Assessing Officer through a letter dated 07.12.2011 and revised 'computation of total Income' was filed. While passing the consequential order dated 18.10.2013, the Assessing Officer stated that the assessee could not produce any evidence regarding the issue i.e., how Rs.5,11,09,716/- was arrived at. In absence of any supporting evidences, the claim of the appellant that there is a mistake in saying that there was nil income by sale of investments. During the consequential order dated 31.03.2016, the Assessing Officer said that the Tribunal has not given any direction, hence the claim of the appellant was rejected. In the appeal No. ITA: No.1481/Hyd/2013 & ITA No.88/Hyd/2014 dated 09.10.2014, this issue is In Ground No.8 raised by the appellant and the Tribunal give directions as follows: "Accor....
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....f investments during the year. Total amount of decrease has been Rs.18,28,70,000/- and the profits have been Rs.5,1109,716/-. The appellant has only submitted that this is not his part of business income. Appellant has calculated depreciation on this and claimed under Profit and loss account. During the year, the appellant has claimed Rs.7,05,18,382/- as depreciation of the investments. Appellant has not given notes on accounts while submitting the annual reports. As per the guidelines, the appellant is directed by. "NABARD by letter dated 27.06.2008, to submit the disclosure as per the following format: Particulars Outstanding during the year (Rs. In Crores) As on March, 31 Securities sold under reports Minimum Maximum Daily Average Securities purchased under reverse repo Appellant did not submit any such disclosure in the above format, as per the information submitted. Hence before me, no further information regarding the sale has been given. Even if, the contention of the appellant s accepted that no profits has been there, this has not been....
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....le of the Ld. AO for deciding the issue afresh on merits after affording the opportunity of hearing to the assessee. Accordingly, the ground of the assessee is allowed for statistical purposes. 7.5 In the result, the Second issue of the assessee is allowed for statistical purposes. 8. The Third issue of the assessee relates to disallowance of Rs.7,05,18,382/- on account of depreciation claimed on investment. The brief facts with regard to this ground are that, the assessee had claimed Rs.7,05,18,382/- on account of depreciation on investment. However the Ld. AO completed the assessment by disallowing the said claim of the assessee for Rs.7,05,18,382/- on account of depreciation claimed on investment as per his observation under para no.3 of his consequential order dated 31/03/2016, which is reproduced as under : "3. DISALLOWANCE OF INVESTMENT DEPRECIATION OF RS. 7,05,18,382/- AND PROFIT ON SALE OF INVESTMENTS OF Rs. 5,11,09,716/-. On this issue it was stated that a similar issue was restored by the Tribunal to the file of the Assessing Officer in assessee's own case for the A.Y. 2008-09 for the deciding the same afresh. Accordingly the Tribunal directed ....
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....ide assessment for the A.Y. 2008-09 was completed on 30.03.2015. Wherein it was held that the assessee claimed of notional decrease in the value of investment cannot be accepted as expenditure incurred by the assessee. The assessee has been disclosing the investment under current category following the prudential norms prescribed by the NABARD. However, the guidelines for prudential norms cannot be overriding the Income Tax Act as envisaged in the Apex Courts judgment in the case of Southern Technologies Ltd. Vs. JCIT(320 ITR 577). The assessee, if required by the prudential norms can make a provision for diminished value as part of appropriation but it cannot equate the investment in bonds to the stock in trade for claiming the diminished value as expenditure. In view of the above the claim of depreciation was disallowed. On the above order for the A.Y. 2008-09 the assessee preferred appeal before the CIT(A) and the same is pending. In view of the above mentioned facts and also pending finalization of the appeal by the CIT(A), the deduction claimed for the A.Y. 2009-10 amounting to Rs. 7,05,18,382/- is not treated as allowable". 8.1 Feeling aggrieved by the order passe....
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....e guidelines of NABARD and claiming depreciation. As seen from the script wise details of securities the securities are neither held for trading nor available for sale. As such the investment made in the securities is to be treated as capital investments, and not as stock in trade. - It was already decided by various judicial pronouncements mentioned in the assessment order for the A.Y. 2008-09 that the guidelines issued by RBI or NABARD cannot over ride Income Tax provisions meant for computing the income of the assessee. In view of this, the depreciation claimed for the A.Y. 2008-09 was disallowed. - For the assessment for the A.Y. 2008-09 completed on 30.03.2015, wherein it was held that the assessee's claim of notional decrease in the value of investment cannot be accepted as expenditure incurred by the assessee. - The assessee has been disclosing the investment under current category following the prudential norms prescribed by the NABARD. However, the guidelines for prudential norms cannot be overriding the Income Tax Act as envisaged in the Apex Courts judgment in the case of Southern Technologies Ltd. Vs. JCIT(320 ITR 577). ....
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.... (SC) d) Southern Technology Ltd Vs. JCIT (2010) 320 ITR 577/187 Taxman 346 11.4 The appellant submitted the following evidences, before me : - Copies of guidelines of NABARD. - Summary of investment in Non-SLR investments and - Depreciation during the FY 2008-09, Statement of Reserve funds for the years 2004-05 to 2008-09 and - Valuation working and details of investments for 31.03.2005 to 31.03.2009. - RBI letter dated 25.04.2005, NABARD Circular No.100/DOS- 15/2208 dated 27.06.2008, CBDT Circular No.599 dated 24.04.1991 and Circular No.665 dated 05.10.1993. 11.5 The submissions of the appellant have been carefully considered. The appellant submitted following: SLR Investments Sl. No. Type of Security Book Value Face Value Market Value i) Central and State Govt. Securities 961,95,49,039 957,19,66,000 986,92,24,060 ii) Other Trustee Securities 23,00,00,000 23,00,00,000 24,94,53,250 iii) Other Institutions (Debentures) 0 0 0 iv) Total 984,95,49,039 980,19,66,000 10,11,86,77,310 NON-SLR iNVESTMENTS Sl. No. Issuer Amount ....
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....estments by banks to comply with SLR investments would constitute their stock in trade and depreciation in value of the same is an allowable deduction. However, in case of Non-SLR investments, the investments are treated as Stock-in- trade and no such depreciation should be allowed. Since the appellant has submitted before me, the depreciation calculated for Non-SLR investments, a provisions of Rs.37,11,75,325/- towards depreciation has been made as per the Notes on Accounts, the appellant is not entitle for depreciation of Stock-in-trade, which is as follows: CONSOLIDATED BREAK UP OF INVESTMENTS DEPRECITION POSITION FOR THE FY 2008-09 (In Rs.) Sl. No. Particulars Face Value Book Value Market Value Depreciation 1 GOI Dated Securities 4,86,89,00,000 4,87,22,20,767 4,96,48,95,860 9,25,06,020 2 State Govt. Dated Securities 4,70,30,66,000 4,74,73,28,272 4,90,43,28,200 2,36,30,867 3 Trustee Securities 2,33,00,00,000 23,00,00,000 24,94,53,250 0 4 Bonus Non Approved Securities 2,18,60,60,000 2,18,60,60,000 1,95,10,20,704 23,84,75,500 5 Shares 1,80,90,000 2,18,60,60,000 1,95,10,20,70....
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....e allowed as deduction while computing business income of a banking company. In light of the above, it is clear that the appellant has not differentiated the nature of the investments under Non-SLR. Hence it cannot be said that these investments are stock in trade / capital assets. In this juncture, I uphold the stand taken by the Assessing Officer, the depreciation claimed by the appellant on unspecified category of Non-SLR investments is not allowed" . 8.2 Feeling aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld.AR submitted that the assessee has been disclosing the investments in the annual accounts as per the RBI/NABARD circulars. He also submitted that the depreciation have been claimed on Non-SLR investments, which are classified as current assets (Stock in trade) and have been valued at cost or market value whichever is lower. Therefore, he prays for allowance of the depreciation on investment on account of valuation of current assets. 8.3 Per contra, the Ld. DR placed heavy reliance on the order of authorities below and requested to uphold the order of the revenue authorities. The Ld. DR also submitted that in this case the ....