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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI S.S.GODARA, JM & SHRI DR. DIPAK P. RIPOTE, AM
आदेश / ORDER PER S. S. GODARA, JM :
This assessee’s appeal for A.Y. 2011-12 is directed against the CIT(A)-7, Pune’s order dated 03/03/2020 passed in case No. PN/CIT(A)-7/Cir-2/ 10149/2018-19 involving proceeding u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short "the Act”. Heard both the parties. Case file perused.
2 ITA No.583/PUN/2020 A.Y. : 2011-12 Mahesh Urban Co-Operative Bank Ltd.,
Learned counsel submits at the outset that the assessee does not wish to press for its former twin substantial grounds. Rejected accordingly.
The assessee’s 3rd and 4th substantive grounds challenge correctness of both the lower authorities action invoking section 40(a)(ia) interest payment disallowance of Rs.2,25,308/- on account of non-deduction of TDS regarding payments made to members /non-members. Suffice to say, hon’ble apex court’s recent landmark decision in the Mavilavi Service Co-operative Bank Ltd. V/s. CIT (2021) 431 ITR page 1 (SC) has settled the law regarding the alleged distinction between members and nominal-members; as the case may be, regarding section 80P deduction claim, against the department.
The factual position is hardly different on merits as well wherein Mr.Desai strongly supported the learned lower authorities’ conclusion that the assessee had failed to deduct TDS on its interest payments. We find no merit in the Revenue’s instant arguments as we are in assessment year 2010- 11 whereas “a cooperative bank” has been excluded from the purview of section 194(A)(3)(v) vide Finance Act 2015 w.e.f. 01.06.2015 only. This tribunal’s Special Bench decision is The Virudhunagar Central District Co- Operative Bank Ltd., V/s. ITO, ITA NO. 2055 & 2056/CHNY/2014; dated 09/10/2014 (Chennai) has followed hon’ble Madras high court’s judgment M/s. Coimbatore District Central Co-Operative Bank Ltd. V/s. ITO, Tax case (Appeal) Nos. 588-645/2015 dated 15/10/2015 while adjudicating the very issue against the department. This is coupled with the fact that hon’ble jurisdictional high court in (2004) 134 taxmann.com 1 (BOM) Jalgaon district
3 ITA No.583/PUN/2020 A.Y. : 2011-12 Mahesh Urban Co-Operative Bank Ltd.,
Central Co-operative Bank Ltd., V/s Union Of India has quashed the CBDT’s circular dated 11.09.2002 as ultra vires violating section 119 of the Act. Their lordship’s further decisions in ITA No. 100001 of 2014 dated 16.12.2015 in The Bailhongal Urban Cooperative Bank Ltd., V/s. CIT and Tax Appeals No. 3 to 9 and 11 of 2015 dated 07.03.2017 in Saraswat co-operative Bank V/s. ITO take note of forgoing legislation developments to hold that a co-operative bank/ assessee has no liability to deduct TDS on interest payments made to members. We thus delete the impugned section 194A r.w.s. 40 (a)(ia) disallowance of Rs.2,25,308/- in very terms therefore. The assessee’s third substantive grievance is accepted.
Next comes section 36(i)(viia) bad debts deduction disallowance of Rs.1,64,515/- affirmed by the CIT(A)’s order is under :-
“10. Ground No. 6 of the appeal relates to disallowance of provision made for bad & doubtful debts.
10.1 The AO noticed that the appellant had made a provision u/s. 36(1)(vii)(a) of the Act of Rs. 5,00,000/- towards reserve for bad & doubtful debts in the P & L A/c. However, in the computation of income the appellant had claimed an amount of Rs. 6,64,515/- which is in excess by Rs. 1,64,515/- of the provision made in the P & L A/c. The AO accordingly disallowed the excess amount of Rs. 1,64,515/-.
10.2 The appellant claimed that the cooperative banks have been made taxable with effect from AY 2007-08 and they were also in section 36(l)(vii)(a). In view of cooperative banks being governed by the Banking
4 ITA No.583/PUN/2020 A.Y. : 2011-12 Mahesh Urban Co-Operative Bank Ltd.,
Regulation Act, it was making provisions for NPAs even in earlier years prior to AY 2007-08 and the question of disallowance or allowance was not relevant prior to AY 2007-08 in the absence of non inclusion in section 36(l)(vii)(a). In view of this, it was claimed that the appellant bank had huge balance lying in provision for bad & doubtful debts and therefore in the books of account provision was made only for the difference/short provision for the current year. It was claimed that the section 36(l)(vii)(a) provides for an upper limit of the provisions, the claim made by the appellant in the computation should be allowed. The appellant relied on the decision of the ITAT, Ahmadabad in the case of DCIT vs. Sarvodya Sahakari Bank reported in 48 taxmann.com 82 (Ahd).
10.3 The various claims made by the appellant have been examined. It is a fact that the appellant Co-operative Bank was entitled for deduction of income u/s 80P of the Act till AY 2007-08 and since its income was allowed as deduction, no separate deduction was allowed u/s 36(l)(viia) with respect to provision for bad and doubtful debts. The appellant was creating provision for bad and doubtful debts even in the years during which Section 80P was applicable in view of the Banking Regulation Act. As section 36(l)(viia) was not applicable to co-operative banks in those years, the provision so made was not allowable as deduction. Therefore, the appellant would have added back the provision while computing the income. However, its whole income from the banking business was allowed as deduction. In view of this, the provisions made prior to AY 2007-08 cannot be treated on the same footing as those made subsequent to that year. Even though technically, the provisions made prior to 2007-08 have not been allowed as deduction, its allowance as deduction u/s 36(l)(viia) in the post AY 2007-08 would tantamount to double deduction. The disallowed provision has been allowed as a income deduction in the years prior to
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AY 2007-08 u/s 80P and the same amount is now being sought to be claimed as deduction u/s 36(l)(viia). Therefore, in my considered view, the provisions made prior to AY 2007-08 cannot be allowed as deduction u/s 36(l)(viia). Therefore, the action of the AO in disallowing the above amounts is upheld. Accordingly, the ground no. 6 is dismissed.”
Learned Counsel could hardly dispute correctness of the CIT(A)’s findings regarding non-applicability of impugned provision prior to assessment year 2007-08. The assessee fails in its instant substantive ground therefore.
Delay of 61 days in the instant appeal instituted on 02.11.2020 is condoned since falling in Covid-19 pandemic outbreak period.
This assessee’s appeal is partly allowed in above terms. Order pronounced in the Open Court on this 29th day of August, 2022.
Sd/- Sd/- (DR.DIPAK P.RIPOTE) (S.S. GODARA) लेखध सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य/JUDICIAL MEMBER पपणे / Pune; ददनधांक / Dated : 29th August, 2022. Ashwini
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आदेश की प्रनतनलनप अग्रेनषत / Copy of the Order forwarded to : अपऩलधथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A)-7, Pune. 4. The Pr.CIT-6, Solapur. 5. नवभधगऩय प्रनतनननध, आयकर अपऩलऩय अनधकरण, “ए” बेंच, पपणे / DR, ITAT, “A” Bench, Pune. गधर्ा फ़धइल / Guard File. आदेशधनपसधर / BY ORDER, 6. // True Copy // Senior Private Secretary आयकर अपऩलऩय अनधकरण, पपणे / ITAT, Pune.
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S.No. Details Date Initials 1 Draft dictated on 23.06.2022 2 Draft placed before author 26.08.2022 Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement on 7 Date of uploading of Order 8 File sent to Bench Clerk 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