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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S. SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the order of Ld. CIT(Appeal)-1, Nashik dated 24.11.2016 for the assessment year 2013-14 as per following grounds of appeal on record:
“1. On the facts and in the circumstances of the case and in law Lower Authorities have erred in disallowing a claim of provision for bad and doubtful debts of Rs.61,53,089/-made u/s.36(1)(vii)(a) by disregarding the fact that the entries for provision are already passed in the books of
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accounts, your appellant is entitled for the deduction on the entire provisions as claimed. 2. On the facts and in the circumstances of the case and law Lower Authorities have erred in making an addition of Rs.31,60,959/- being dividend received from mutual fund by denying the exemption and further erred in treating this amount as profit on sale/redemption of mutual fund as business income. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time of hearing, in the interest of natural justice.”
At the time of hearing, the Ld. AR of the assessee submitted that he is
not pressing ground No.2. Taking the said submission on record, we dismiss
ground No.2 in grounds of appeal as ‘not pressed’.
With regard to ground No.1, the brief facts are that the assessee has
claimed a provision of Rs.61,53,089/- in respect of provision created for bad
and doubtful debts u/s.36(1)(viia) of the Income Tax Act, 1961 (hereinafter
referred to as ‘the Act’) . It was noticed that the assessee had debited nothing
i.e. Nil to the Profit & Loss account in respect of such provision. As the claim
in Profit & Loss account was less than what the assessee had claimed in the
return of income, the Ld. AR was asked to explain vide hearing dated
01.02.2016, why the excess claim of provision should not be disallowed. In
response, the Ld. AR submitted that the assessee has debited provision in
respect of standard assets amounting to Rs.20,00,000/-. The claim of the
assessee is that this provision too is part of the provision for bad and
doubtful debts and the same should be allowed u/s.36(1)(viia) of the Act. This
contention of the assessee was not acceptable to the Assessing Officer and he
disallowed the entire amount of Rs.61,53,089/- in respect of provision
created for bad and doubtful debts u/s. 36(1)(viia) of the Act.
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During First Appellate proceedings, the Ld. CIT(Appeal) upheld the
addition made by the Assessing Officer for the reasons recorded in his order
which is on record.
At the time of hearing, the Ld. AR of the assessee apprised the Bench
that the issue with regard to the provision created for bad and doubtful debts
and the allowability thereof u/s. 36(1)(viia) of the Act is covered in favour of
the assessee by the decision of the Co-ordinate Bench of the Tribunal, Pune
in assessee’s own case in ITA No.2647/PUN/2016 for the assessment year
2012-13. In that case, there was also provision against standard assets for a
sum of Rs.20 Lakhs. The Co-ordinate Bench of the Tribunal, Pune observed
that the assessee did not make a provision of Rs.20 Lakhs in its books of
account, even though it was characterized as having been made for ‘standard
assets’, for which no separate deduction was claimed. In view of the matter,
Revenue Authorities were directed to grant deduction being a sum of
provision created in the books of account for a sum of Rs.20 Lakhs, as
against the deduction claimed in the computation of income at
Rs.44,94,267/-. The appeal of the assessee was, thus, partly allowed.
The Ld. D.R, on the other hand, has placed reliance on the orders of the
Authorities below.
We have perused the case record and considered the judicial
pronouncement placed before us. In the Co-ordinate Bench decision in ITA
No.2647/PUN/2016 for assessment year 2012-13, the assessee had claimed
deduction as per books of account at Rs.44,94,267/- which was disallowed
by the Revenue Authorities with respect to section 36(1)(viia) of the Act. The
Tribunal therein dealt with the same issue which is as under:
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“3. The first ground is against the confirmation of disallowance of Rs.44,94,267/- claimed by the assessee u/s.36(1)(viia) of the Income-tax Act, 1961 (hereinafter also called as ‘the Act’).”
Thereafter, the Tribunal has held as under:
“5. We have heard both the sides and gone through the relevant material on record. Section 36(1)(viia) provides for granting deduction in respect of any provision for bad and doubtful debts made, inter alia, by a Co-operative Bank at the given percentage. Section 36(2)(v) provides that where provisions of section 36(1)(viia) apply, ‘no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provisions for bad and doubtful debts account made under that clause’. It becomes apparent from the mandate of section 36(2)(v) that the making of a provision for bad and doubtful debts is sine qua non for claiming deduction u/s.36(1)(viia) of the Act. Pages 14 to 16 of the paper book are a copy of assessee’s Profit and loss account, which shows that the assessee made a `Provision against standard assets’ for a sum of Rs.20 lakhs. In the computation of total income, whose copy has been placed at page 8 of the paper book, the assessee suo motu added back the amount of such provision for the purposes of computation of total income. It, therefore, becomes apparent that the assessee did make a provision of Rs.20 lakhs in its books of account, even though it was characterized as having been made for ‘standard assets’, for which no separate deduction was claimed. The statute requires creation of provision as a mandatory pre-condition for claiming deduction u/s.36(1)(viia). Merely because a different nomenclature was given to the provision of Rs.20 lakhs, for which no separate deduction was claimed, the same does not shed the character of a provision relating to the debts of the assessee bank meant for the purpose of section 36(1)(viia). In our considered opinion, the assessee cannot be debarred from claiming deduction u/s.36(1)(viia) to the extent of such provision made in the books of account to the tune of Rs.20 lakhs. We, therefore, direct to grant deduction, being a sum of provision created in the books of account for a sum of Rs.20.00 lakhs, as against the deduction claimed in the computation of income at Rs.44,94,267/-. 6. In the result, the appeal is partly allowed.”
It is evident from the aforesaid decision that even though the provision
of Rs.20 Lakhs was made by the assessee which was characterized as having
been made for ‘standard assets’, for which no separate deduction was claimed
by the assessee. Therefore, view taken by the Tribunal to allow deduction to
the extent of Rs.20 Lakhs u/s.36(1)(viia) of the Act as against deduction
claimed at Rs.44,94,267/- in the computation of income.
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In the present year also, it is not disputed that the assessee has made provision of Rs.20 Lakhs on ‘standard assets’ and there is no separate deduction claimed on this head by the assessee. Therefore, respectfully following the decision of our Co-ordinate Bench, Pune in assessee’s own case, we set aside the order of Ld. CIT(Appeal) and direct the Assessing Officer to allow deduction to the extent of Rs.20 Lakhs u/s.36(1)(viia) of the Act as against the deduction claimed at Rs.61,53,089/- in the computation of income by the assessee. Hence, ground No.1 raised in appeal by the assessee is partly allowed.
In the result, appeal of the assessee is partly allowed. 9.
Order pronounced on 24th day of January, 2019.
Sd/- Sd/- R.S. SYAL PARTHA SARATHI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 24th January, 2019. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
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Date 1 Draft dictated on 23.01.2019 Sr.PS/PS 2 Draft placed before author 23.01.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order