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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM:
This appeal filed by the Revenue is directed against the order of the CIT(A),
Trivandrum dated 30/11/2018 and pertains to the assessment year 2010-11.
There was a delay of 02 days in filing the appeal before the Tribunal. The
ld. DR submitted that the delay was due to administrative reasons and was not
deliberate. Hence, it was prayed that the Tribunal may condone the delay of 02
days in filing the appeal and the appeal may be disposed of on merits.
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2.1 We have heard the rival submissions. There was a short delay of 02 days
in filing the appeal before the Tribunal due to administrative reasons. In our
opinion, there is good and sufficient cause for filing the appeal belatedly.
Accordingly, we condone the delay of 02 days in filing the appeal and admit the
appeal for adjudication.
The Revenue has raised the following grounds of appeal:
The Ld. Commissioner of Income-tax (Appeals), Thiruvananthapuram erred in relying on the decision of jurisdictional Tribunal's order in assessee's own case for A Y 2008-09 and in deleting the disallowance made by the Assessing Officer u/s 36(1)(viii) r w s 41(4A) of the Act.
The Ld. CIT(A), while relying on the decision of the jurisdictional Tribunal in assessee's own case for A Y 2008-09, ought to have noticed that the Tribunal have relied on the circular dated 26.04.1994 of IDBI issued to all State Industrial Development Corporation in order to understand and interpret the scope of section 41(4A) which was introduced w.e.f. 01.04.1998.
The Ld. CIT(A) ought to have found that u/s 41(4A), which was introduced with effect from 01.04.1998, "any withdrawal from Special Reserve" is deemed to be income chargeable to Tax.
The Ld. CIT(A) ought to have noticed that the interpretation put on section 41(4A) by the jurisdictional Tribunal in the decision for A Y 2008-09 was wrong and against the intention of the legislature.
The appeal filed by Revenue against the order of the jurisdictional Tribunal in assessee's own case for A Y 2008-09 on which Ld. CIT(A) relied upon is pending before the Hon'ble High Court of Kerala and the Ld. CIT(A) should have awaited decision of the Hon'ble jurisdictional High Court.
For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of appeals, Trivandrurn on the above points may be set aside and that of the Assessing Officer restored.
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The facts of the case are that the assessee filed return of income for AY
2010-11 on 01/10/2010 declaring total income of Rs.15,29,66,8132/- and
subsequently revised on 09/02/2012 declaring income of Rs.13,90,61,200/-. The
assessment u/s. 143(3) of the Act was completed on 18/03/2013 by assessing
total income at Rs.16,40,56,560/-. The assessment order was set aside by the
CIT, Trivandrum on 30/03/2015 u/s. 263 of the Act. The Assessing Officer
completed the assessment u/s. 143(3) r.w.s. 263 of the Act by assessing the
total income at Rs.19,29,01,572/- under section 36(1)(viii) r.w.s. 41(4A) of the
Act.
On appeal the CIT(A) deleted the addition made by the Assessing Officer
u/s. 36(1)(viii) r.w.s. 41(4A) of the Act by following the order of the Tribunal in
the assessee’s own case for the assessment year 2008-09 in ITA Nos. 354 &
380/Coch/2013 dated 06/11/2013.
Against this, the Revenue is in appeal before us.
The Ld. AR relied on the order of the CIT(A).
We have heard the rival submissions and perused the record. We are of the
opinion that the issue is covered by the decision of the Tribunal in assessee’s
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own case in ITA Nos. 354 & 380/Coch/2013 dated 06/11/2013 wherein it was
held as under:
"7.7 However, we are unable to agree with the view expressed by Ld CIT(A). The financial statements are prepared on the basis of books of account for various purposes. The method of presentation of the financial statements would vary according to the needs of the user of the same. So long as they tally with the books of account, generally no fault is found with regard to the method of presentation.
7.8 The assessee has furnished a copy of guidelines issued by IDBl. As per the said guidelines, the assessee is required to classify its assets, mainly loans and advances, into four categories, viz., Standard assets, Sub- standard assets, Doubtful assets and Loss assets. The purpose of classification of the assets in the above categories appears to be to ascertain about the intrinsic strength of those assets. We notice that the IDBI has also specified the criteria or basis for classifying the assets in the four categories stated above. According to the said guidelines, the assessee is also required to make provisions against the assets classified as Sub- standard, Doubtful and loss category, possibly these categories bear risk of recovery. According to the said guidelines, the SIDCs are required to determine the amount of provision for bad and doubtful debts. According to the guidelines issued by IDBI, the amount available in the Special Reserve Account u/s 36(1)(viii) of the Act is admissible for provision purposes. The meaning of this guideline, in our view, is that the SIDCs can take into account the amount available in the Special Reserve Account while determining the amount of provision. Let us explain this by a small example. Let us assume that one SIDC has determined the amount of "Provision for bad and doubtful debts" as per the guidelines issued by IDBI at Rs.10 crores. Normally, the said SIDC is required to make provision for Rs.10.00 crores in its books of account. Let us assume that the amount available in Special Reserve Account of that SIDC is Rs.4.00 crores. Since the guidelines issued by IDBI permits utilisation of the amount available in Special Reserve Account for making provisions, it will be sufficient compliance of the guidelines, if the SIDC makes provision for Rs.6.00 crores only, instead of Rs.10.00 crores, i.e. (10.00 (-) 4). The provision for bad and doubtful debts is created only to safeguard the financial institution against bad debts, i.e., the possible bad debts risk is evened out to a number of years. Hence, in our view, the permission given by IDBI for utilising the amount available in Special Reserve Account for making provision does not mean that the SIDC has actually utilised the Special Reserve Account. The said relaxation only allows the SIDC to determine the amount of "Provision for bad and doubtful debts" that is required to be made as per the guidelines issued by IDBI, i.e., in terms of IDBI guidelines, the
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provision for bad and doubtful amount shall be computed by aggregating the amount available in Special Reserve account with the amount available in Provision for bad and doubtful account.
7.9 Accordingly, in our view, the provisions of sec. 41 (4A) would not apply so long as the SIDC maintains the Special Reserve Account intact in its books of account. The method of presentation of the same in the Balance Sheet also, in our view, does not matter for the purposes of sec. 36(1)(viii) r.w.s. sec. 41 (4A) of the Act. In the instant case, the Ld CIT(A) has given a finding that there is no debit in the "Special Reserve Account", meaning thereby the assessee did not make use of any amount from the said account. Hence, the assessee has not utilised any amount available in Special Reserve account, as presumed by the tax authorities. Hence, in our view, there is no reason to invoke the provisions of sec. 41 (4A) of the Act, on the basis of Balance sheet, wherein certain adjustments have been made by the assessee for the purpose of presenting it to the shareholders and the regulator. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the impugned addition of Rs.53.96 crores."
8.1 In view of the above, we do not find any infirmity in the order of the
CIT(A) in deleting the addition by following the above order of the Tribunal in
assessee’s own case. Accordingly, the grounds taken by the Revenue are
dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on this 18th June, 2019.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 18th June, 2019 GJ Copy to:
I.T.A. No. 115/Coch/2019
M/s. Kerala State Industrial Development Corporation Ltd., Keston Road, Kowdiar, Trivandrum-695 003. 2. The Assistant Commissioner of Income-tax, Circle-1(1), Trivandrum. 3. The Commissioner of Income-tax(Appeals), Trivandrum. 4. The Pr. Commissioner of Income-tax, Trivandrum. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin