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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: Shri Kul Bharat, Hon’ble & Shri Manish Borad, Hon’ble
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE Before Shri Kul Bharat, Hon’ble Judicial Member and Shri Manish Borad, Hon’ble Accountant Member
ITA No. 36/Ind/2017 A.Y. 2013-14
Vikramaditya Nagrik Sahkari Bank Maryadit Ujjain ::: Appellant Vs ACIT Ujjain ::: Respondent Appellant by Shri S.S. Deshpande Respondent by Shri R.P. Mourya Date of hearing 6.3.2018 Date of pronouncement 20.3.2018
O R D E R PER SHRI MANISH BORAD, AM
This appeal of the assessee relating to the
assessment year 2013-14 is directed against the order of
the Commissioner of Income Tax (Appeals), Ujjain, dated
11.11.2016 which is arising out of the order u/s 143(3) of
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 the Income Tax Act (in short referred as ‘Act’) Act dated
9.12.2015 framed by the ITO, Circle 1(1), Ujjain.
Briefly stated, the facts of the case, as culled out from
record, are that the assessee is a cooperative society
engaged in the banking business. The return of income was
filed on 30.9.2013 declaring income at Rs.1,72,18,260/-.
Case selected for scrutiny through CASS. Notices u/s
142(1)( and 143(2) of the Act were served on the assessee.
The Assessing Officer observed that the assessee has
claimed expenditure under the head contingency provision
for standard assets at Rs. 2,00,000/- u/s 36(1)(viia) of the
Act. The Assessing Officer was of the view that under the
provisions of section 36(1)(viia) of the Act the assessee can
claim provision for bad and doubtful debts and not for the
contingency for standard assets and accordingly disallowed
the provision for standard assets at Rs. 2 lacs assessing
the income at Rs.1,74,18,260/-. Aggrieved, the assessee
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 preferred appeal before the Commissioner of Income Tax
(Appeals) but the Commissioner of Income Tax (Appeals)
also held that contingency provision has been made for
performing assets and not for bad and doubtful debts
thereby dismissing the appeal of the assessee.
Now the assessee is in appeal before the Tribunal.
The learned counsel for the assessee submitted that in
the profit and loss account the assessee has not claimed
any other expenditure under the head “provision for bad
and doubtful debts” and only an amount of Rs.2 lacs has
been claimed as ‘contingency provision for standard assets’
which actually is provision for bad and doubtful debts only.
He further submitted that as per the provisions of section
36(i)(viia) of the Act the assessee is entitled to provision for
bad and doubtful debts to the extent of 7.5% of the total
income computed before making any deduction under
Chapter VIA and under this clause and, therefore, the 3
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 claim of the assessee should have been allowed by both the
authorities below.
On the other hand, the learned DR supported the
orders of the authorities below and submitted that the
alleged provision is not for bad and doubtful debts but for
contingency of standard assets which is not covered u/s
36(1)(viia) of the Act.
We have heard the rival contentions and perused the
material placed on record. The sole grievance of the
assessee revolves around the disallowance of Rs.2 lacs
confirmed by both the lower authorities relating to
“provision for contingency of standard assets” claimed by
the assessee u/s 36(1)(viia) of the Act. Before proceeding
further we would like to reproduce the provision of section
36(1)(viia) of the Act as under :-
“Other deductions.
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 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—
xxxx xxxx xxxx
(viia) 98in respect of any provision for bad and doubtful debts made by— (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank, an amount not exceeding 99[seven 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 ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : 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 the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five per cent", the words "ten per cent" had been substituted : Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: 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."
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 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” 7. On perusal of the above provision and in the given facts
of the case, wherein the assessee, which is a cooperative
bank carrying on banking business, we find that the
assessee is eligible to claim “provision for bad and doubtful
debts” to the extent of 7.5% of the total income before
making any deduction under this clause and under
Chapter VIA. Further in the profit and loss account except
for the alleged “provision” for Rs. 2 lacs, no other provision
for bad and doubtful debts has been claimed. We find force
in the contention of the learned counsel for the assessee
that the phrase “contingency provision for standard assets”
is basically a provision for bad and doubtful debts only
which is in general a regular feature of the banking
business. It is also pertinent to mention that even though
the assessee was eligible to claim much higher amount as
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017 an expenditure of “provision for bad and doubtful debts”, it
only claimed Rs. 2 lacs. We, therefore, in the facts and
circumstances of the case, are of the opinion that in the
instant appeal the contingency provision for standard
assets is basically in the nature of bad and doubtful debts
only and the assessee has rightly claimed the expenditure
u/s 36(1)(viia) of the Act. We, therefore, allow the sole
ground raised by the assessee.
In the result, the appeal of the assessee stands allowed.
Pronounced in open Court on 20 March, 2018. Sd/- sd/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER
20 March, 2018 Dn/- Copy to – Appellant/Respodent/Pr.CIT/CIT(A)/DR/Guard File By order Private Secretary
Vikramaditya Nagrik Sahkari ITA No. 36/Ind/2017