TUMKUR DCC BANK LIMITED ,TUMKUR vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 , TUMKUR

The assessee is a co-operative bank registered under Karnataka Co-operative Society’s Act and is carrying on the business of banking.

We shall first take up the appeal filed by the assessee for assessment year 2014-15. The Ground No.1 is general in nature. The Ground No.2 relates to the addition of un-reconciled amount of share application account titled as “Share Suspense Account”. The facts are that the Balance sheet of the assessee disclosed a sum of Rs.226.24 lakhs under the head Share Suspense account, which represented the share application money collected by the assessee. The AO asked the assessee to furnish the break-up details of this amount and noticed that there was a difference of Rs.1,45,449/-. The assessee could not explain the difference and hence the AO added the same to the total income of the assessee. The Ld CIT(A) also confirmed the same.

We heard the parties on this issue and perused the record. There should not be any dispute that the initial responsibility to prove the cash credits lies upon the assessee. The assessee has collected Share application money from its customers. Pending allotment of shares, it is kept in Share Suspense Account. Hence the assessee should be in a position to furnish the details thereof. Admittedly, the assessee could not furnish the details to the tune of Rs.1,45,449/-, meaning thereby, the assessee has failed to offer any explanation with regard to this credit. Hence, we are of the view that the Ld CIT(A) was justified in confirming this addition.

Ground No.3 relates to the disallowance of Contribution to Co- operative Education Fund. The assessee appropriated a sum of Rs.15.68 lakhs, being 2% of the profit, to Co-operative Education Fund and it was paid to Karnataka Co-operative Federation Ltd. The assessee claimed the same as deduction with the contention that the same is paid as per the requirement of Karnataka Co- operative Societies Act towards education fund. The assessee placed its reliance on the decision rendered by Hon’ble Karnataka High Court in the case of CIT vs. Pandavapura Sahakara Sakkare Kharkhane (174 ITR 475) in support its claim. However, the AO took the view that the contribution to Education Fund is only appropriation of profit and the same cannot be deducted while computing Total Income. He also held that the contribution so made is not wholly related to the business of the assessee and hence not allowable u/s 37(1) of the Act. By taking support of the decision rendered by Hon’ble Supreme Court in the case of Poona Electricity Supply Company Ltd vs. CIT (57 ITR 521), the AO observed that the income tax is charged on Real Income. Accordingly he disallowed the above said claim of the assessee.

The Ld CIT(A) noticed that the Hon’ble Karnataka has rendered decision in favour of the assessee in the case of Pandavapura Sahakara Sakkare Kharkhane (supra) by following the decision rendered by Hon’ble Supreme Court in the case of Poona Electricity Supply Company (supra). However, the Hon’ble Supreme Court has distinguished the above said decision in a later judgement rendered in the case of Vellore Electricity Corporation Ltd vs. CIT (1997)(227 ITR 557). Since the decision rendered by

We heard the parties on this issue and perused the record. The Ld A.R fairly admitted that an identical issue was considered by the co-ordinate bench in the assessee’s own case in ITA Nos.1532 & 1533/Bang/2016 dated 31-01-2019 relating to assessment years 2009-10 and 2010-11and the Tribunal has decided this issue against the assessee by following the decision rendered by Hon’ble Supreme Court in the case of Vellore Electric Corporation Ltd (surpa) and the decision rendered by Hon’ble Rajasthan High Court in the case of Jodhpur Co-operative Marketing Society (140 Taxman 541). However, he submitted that neither the AO nor the Tribunal has examined the issue under the principle of diversion of overriding title.

We heard Ld D.R and perused the record. We notice that the co-ordinate bench has already considered an identical issue in the assessee’s own case in an earlier year, referred above and has decided the same against the assessee. Consistent with the view taken by the co-ordinate bench, we confirm the order passed by Ld

Ground No.4 relates to the disallowance of Rs.1,93,915/- treating the same as Capital Expenditure. The AO noticed that the assessee has incurred expenses on construction of compound wall to the tune of Rs.1,93,915/- and claimed the same as “Repairs & Maintenance” expenses. The AO held the same as Capital expenditure and accordingly disallowed the same. The Ld CIT(A) confirmed the same by observing that the Compound wall entails enduring benefit to the assessee.

We heard the parties on this issue and perused the record. Before us, no material was placed to contradict the decision taken by Ld CIT(A). There should not be any dispute that the compound wall is a permanent structure giving enduring benefit to the assessee. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the disallowance of the same holding it as Capital expenditure.

Ground No.5 relates to the addition of amount relating to “Reversal of NPA provisions”. During the year relevant to AY 2012- 13, the assessee reversed part of NPA provision created in earlier years and credited the same to the Profit and Loss account of the assessee. The amount so credited was Rs.526.47 lakhs. The assessee reduced the same from Net profit while computing total income, admittedly, with the contention that the same is not taxable.

Before the AO, the assessee submitted that the NPA provision reversed during the previous year was related to asst. year 2006-07 and earlier years. It was submitted that the assessee was not subjected to tax up to asst. year 2006-07 in view of availability of deduction u/s 80P of the Act. Accordingly it was submitted that the above said NPA provision cannot be considered as allowed as deduction while computing total income of the assessee and hence the provision reversed and credited to profit and loss account of the year under consideration should not be taxed. It was further submitted that the Income-tax Act has enacted specific provisions whenever the legislature wanted to tax particular receipts. In this regard reference was made to the provision of sec. 41(4) wherein the taxability of income realized out of bad debts allowed in the earlier years is provided. Similarly provisions of sec. 41(4A) provided for taxability of special reserve created u/s 36(1)(viii) in the year in which the reserves are withdrawn. Similarly the assessee referred to the provisions of sec. 32A relating to investment allowance which contained provisions to tax the amount of deduction allowed in the earlier years, if the assessee failed to fulfill the conditions in the

The AO observed that whole of the assessee’s income has been exempted u/s 80P of the Act and hence the question as to whether the deduction was claimed or not claimed does not arise in the hands of the assessee. Accordingly, he took the view that reversal of NPA provision is benefit received by the assessee from business and hence taxable u/s 28(iv) of the Act. Accordingly, he rejected the claim of the assessee and assessed the NPA provision reversal of 526.47 lakhs. The ld CIT(A) also confirmed the view taken by the AO by observing that the assessee had claimed deduction u/s 80P of the Act in the earlier years, wherein the provision for bad and doubtful debts was claimed. Since the claim so made by the assessee to be in excess, it has reversed the same and hence the amount so reversed should be taxed.

The Ld A.R submitted that the assessing officer has accepted that the reversal of NPA provision cannot be considered as cessation of liability within the meaning of sec.41(1) of the Act. He further submitted that the provisions of sec.41(1) cannot be applied to this reversal of NPA provision, since the assessee did not get any benefit by way of remission or cessation of liability. He submitted that the Hon’ble Supreme Court has held in the case of CIT vs. Sugauli Sugar Works (P) Ltd (1999)(236 ITR 518) that the liability

The Ld A.R submitted that the AO has invoked the provisions of sec.28(iv) of the Act to tax the impugned amount. However, the Hon’ble Supreme Court has held in the case of Commissioner Vs. Mahindra and Mahindra Ltd (2018)(404 ITR 1) that the benefit or amenity referred in sec.28(iv) should result in cash receipt by the assessee. Since the reversal of NPA provision will not result in cash receipt, the provisions sec. 28(iv) will also not be applicable.

He further submitted that the assessee was not liable to tax up to the assessment year 2006-07, since it was entitled to deduction u/s 80P of the Act. Hence the reversal of provision relating to AY 2006-07 and earlier years should not be brought to tax.

We heard Ld D.R and perused the record. Before proceeding to address this issue, we should understand the nature of “provision for NPA” created in the books of accounts. The assessee

It is pertinent to note that the reviewing of “debtors’ balances” is carried out every year. A debtor account, which was considered to be doubtful of recovery in one year, may turn out to be a good account in the subsequent years. In that kind of situation, the provision created earlier shall be reversed in the subsequent year. One of the methods of reversal is by crediting the amount to the credit of Profit and Loss account and equal amount is reduced from the “Provision for bad and doubtful debts”. The issue before us is about the amount so credited to the Profit and Loss account by reducing the amount of Provision for bad and doubtful debts. The contention of the assessee is that the same is

From the foregoing discussions, it can be noticed that the “provision for bad and doubtful debts” is in the nature of “Provision made for diminution in the value of assets”. It is akin to depreciation, which is also provided for diminution in the value of assets. These kinds of provisions are categorised as “non-cash expenditure”, meaning thereby, though these items are claimed as expenditure, they do not involve cash outgo as in the case of other expenses. Amount claimed as expenditure towards “Provision” is normally reduced from the value of corresponding asset. Sometimes, the same is disclosed as provision in the Liability side of Balance Sheet instead of reducing the same from the value of concerned asset. It is pertinent to note that the Provision for bad and doubtful debts and depreciation are accounted for in the books of accounts under accounting principle of “Prudence”, i.e., to provide for known losses.

We have noticed earlier that the “Provision for bad and doubtful debts” can be disclosed in the Balance Sheet either as a liability in the Liability side of Balance Sheet or it may be reduced from the corresponding “Asset account” in the Asset side of balance sheet. It is only two different ways of presentation. Whatever may be the method of presentation in the Balance Sheet, it is a provision created for diminution in the value of assets. A “liability” under accounting principles represents amounts required to be repaid. For example, if trading goods are purchased on credit terms, the

We may illustrate this principle by giving certain examples. Example 1:- In the first year, the provision for NPA is created for Rs.1000/-. In the second year, on review of the assets, it was noticed that the Provision for NPA required is Rs.1200/-. There are two methods of accounting this kind of situation. The assessee may debit Profit and Loss account with incremental amount of Rs.200/- only (or) The assessee may reverse Rs,1000/- created in the earlier year by crediting the same to the Profit and Loss account and debit the Profit and Loss account with Rs.1200/- with the new provision. The net effect of this second method of accounting also the same, i.e., it results in net debit of Rs.200/- to Profit and Loss account.

Accordingly, when the assessee reverses a part of Provision for bad and doubtful debts, it actually denotes that there is improvement of asset quality and it does not result in cessation of any liability. Similarly, when the assessee reverses entire provision made and creates a fresh provision, it represents different method of presenting them in the accounts. Hence it cannot be said to be a case of cessation of liability, as rightly observed by the assessing officer.

We have already noticed that the Provision for bad and doubtful debts represent non-cash expenditure and further it is provided for in the books of accounts under the principles of prudence to account for the diminution in the value of assets. As noticed earlier, any reversal of the provision would signify only improvement in the quality of asset. Since the amount of provision initially provided for is no longer is required, the same is reversed and credited to the Profit and Loss account. Hence the question of obtaining any benefit does not arise when the provision for bad and doubtful debts initially created is reversed. It is nothing but an accounting adjustment made on account of fluctuation in the “value of assets”. Hence the provisions of sec.41(1) shall not apply to it at all. Before us, the Ld A.R contended that the provisions of sec.41(1) shall apply only if the benefit is derived by way of cash or cash equivalent. Accordingly, he contended that the reversal of provision did not give cash or cash benefit to the assessee and hence the

We have already expressed the view that the Provision for bad and doubtful debts and reversal thereof represent accounting adjustments to take care of fluctuation in the value of assets. The question of receipt of benefit by way of cash or cash equivalent may arise only if the concerned expenditure was incurred by way of cash. Here is a case where there assessee is reducing the value of its asset under accounting principles of Prudence. The cash outgo initially was for acquiring an asset and not for the purpose of incurring expenditure. Hence the question of applying provisions of sec.41(1) and sec.28(iv) of the Act does not arise here.

Before the tax authorities, the assessee has contended that the reversal of NPA provision does not result in accrual of any income. To support this contention, it was submitted that the legislature should contain specific provision to bring such kind of receipts to tax. Reference of tax authorities was invited to the provisions of sec.41(4), 41(4A), 32A, etc. For the reasons discussed in the earlier paragraphs, we are of the view that the contentions of the assessee are misplaced.

The assessee has submitted that the NPA provision reversed during the year under consideration represents provision created in AY 2006-07 and earlier. It was also contended that its income was not taxed up to assessment year 2006-07 and hence the reversal of

In view of the foregoing discussions, we are of the view the reversal of NPA provision cannot be excluded while computing profits and gains of business under Income tax Act. Accordingly we reject this ground of appeal of the assessee and confirm the order passed by Ld CIT(A) on this issue for the reasons discussed above.

Ground No.6 relates to the deduction claimed u/s 36(1)(viia) and 36(1)(vii) of the Act. The assessee has raised three sub- grounds below this ground. At the time of hearing, the Ld A.R submitted that ground no.6.1 is academic in nature. Accordingly it does not require adjudication. The Ground no.6.2 relates to the restriction of deduction claimed u/s 36(1)(viia) to the actual amount of provision debited to the Profit and Loss account. The assessee

The Ld A.R fairly conceded that this issue has been decided against the assessee by the co-ordinate bench in the case of Syndicate Bank vs. DCIT (2013)(26 ITR (Trib.) 501)(ITAT – Bang.). We notice that the co-ordinate bench has expressed the view that the deduction u/s 36(1)(viia) should be restricted to the amount of provision actually made in the books of account. Since the assessee did not make any provision in the books of accounts for bad and doubtful debts, following the above said decision of co- ordinate bench, we reject this ground.

In ground No.3, the assessee is contending that the deduction u/s 36(1)(viia) of the Act should have been allowed for further sum of Rs.4,51,982/-. The Ld A.R explained that the assessee had created provision of Rs.19,71,906/- as Special Reserve. The assessee claimed the same u/s 36(1)(viii), which was allowed to the

We have noticed that the AO has already taken the view that the provision created u/s 36(1)(viii) is towards special reserve and the same cannot be considered for deduction u/s 36(1)(viia) of the Act, which is a deduction allowable for creation of provision for doubtful debts. We agree with the reasoning given by the AO. A provision created for diminution in the value of assets cannot be equated with the Reserve created for specific purposes. Accordingly, we reject this ground of the assessee.

We shall now take up the appeal filed for AY 2013-14. The first issue relates to the claim of non-taxability of “Reversal of NPA provisions” of Rs.200.00 lakhs credited to the Profit and Loss account. The assessee advanced identical contentions before the AO, i.e., it pertained to the provision created for AY 2006-07 and earlier years; there is no specific provision under the Act to tax the same, etc. We have considered an identical issue in AY 2012-13 supra and rejected the ground of the assessee in the earlier paragraphs. Following the same, we reject this ground of the assessee.

The next ground relates to the deduction claimed u/s 36(1)(viia) and 36(1)(viii) of the Act. The assessee claimed deduction to the extent permissible under the above said provisions. The AO

The Ld A.R, as in the case of AY 2012-13, fairly conceded that this issue has been decided against the assessee by the co- ordinate bench in the case of Syndicate Bank vs. DCIT (2013)(26 ITR (Trib.) 501)(ITAT – Bang.). Accordingly, following the above said decision of co-ordinate bench, we reject this ground.

We shall now take up the appeal filed by the assessee for AY 2014-15. The first issue urged in Ground no.2 relates to the deduction claimed towards contribution to Co-operative Education Fund. An identical issue was considered by us in AY 2012-13 in the earlier paragraphs, wherein we have followed the decision rendered by the co-ordinate bench in the assessee’s own case in ITA Nos.1532 & 1533/Bang/2016 dated 31-01-2019 relating to assessment years 2009-10 and 2010-11 and rejected this ground of the assessee. We have noticed that the co-ordinate bench had decided this issue against the assessee by following the decision rendered by Hon’ble Supreme Court in the case of Vellore Electric Corporation Ltd (surpa) and the decision rendered by Hon’ble Rajasthan High Court in the case of Jodhpur Co-operative Marketing Society (140 Taxman 541). Following the same, we reject this ground of the assessee.

The next issue urged in Ground no.3 relates to the reversal of excess provision made towards rural advances of Rs.300.00 lakhs. During the year under consideration, the assessee debited the profit and loss account towards Provision for rural advances to the tune of Rs.673.12 lakhs. The assessee also claimed to have reversed the provision for rural advances created in the year relevant to AY 2013-14 to the tune of Rs.300.00 lakhs and credited the same to the Profit and Loss account. The assessee claimed the amount so credited to the P & L account as not taxable, as there is no specific section in the Act to bring such kind of items to tax. Reference was made to the provisions of sec.41(4), 41(4A) etc., as in AY 2012-13. The AO, however, took the view that the assessee has created only net provision of Rs.373.12 lakhs (673.12 less 300.00) and accordingly, the net amount claimed was only Rs.373.12 lakhs. Accordingly he rejected the claim for exemption of Rs.300 lakhs. The Ld CIT(A) also confirmed the same.

We heard the parties on this issue and perused the record. We have dealt with the manner of creation of “provision for bad and doubtful debts” in AY 2012-13 in the earlier paragraphs. We have also observed that the reversal of provision for NPA represents improvement in the quality of assets. By giving two examples, we have also explained as to how this provision can be depicted in the books of accounts. In the instant year, the assessee has debited the Profit and Loss account with Rs.673.12 lakhs and credited the same with Rs.300.00 lakhs. The other way of presentation is to debit the Profit and Loss account with the net debit of Rs.373.12 lakhs. Thus, we notice that the assessee has claimed exemption of

The next issue urged in Ground no.4 relates to the claim of exemption of Reversal of NPA provision of Rs.39.92 lakhs relating to AY 2006-07 and earlier years. Identical issue was considered by us

We shall now take up the appeal filed for AY 2015-16.

The assesse is challenging the validity of reopening of the asst. The facts relating to this issue are stated in brief:- The assessee filed its return of income for asst. year 2015-16 on 24/9/2015 which was processed u/s 143(1) of the Act. The Revenue carried out a survey operation u/s 133A of the Act in the premises of the assessee on 28/12/2016. It was noticed that the assessee has credited a sum of Rs.952.57 lakhs on account of reversal of NPA provision in the financial year relevant to asst. Year 2015-16. It was seen that the assessee has reduced that amount from the net profit while computing the total income. Similarly the assessee has reduced a sum of Rs.174.28 lakhs, which was credited to profit and loss account relating to reversal of general reserve. It was also noticed that the assessee has claimed deduction of 18.44 lakhs from the net profit on account of payment of cooperative education fund. It was noticed that all these deductions have been disallowed in the earlier years while completing the assessments of those years. Accordingly the AO reopened the assessment, as the above said deductions have led to escapements of income. Before the ld CIT(A), the assessee has challenged the reopening of assessment, but did not get favourable order from him.

The ld AR submitted that the AO has issued notice u/s 148 of the Act on 19/1/2017 and he has reopened the assessment in order to carry out further investigation in the matters and to verify the details. Accordingly the ld AR submitted that reopening is not valid. In this regard he placed reliance on the following case law. a) CM Mahadeva Vs. CIT, 404 ITR 747 (Kar) b) Nive Trading Ltd., Vs. UOI, 375 ITR 308 (Bom)

We have heard ld DR and perused the record. We have noticed that the return of income filed by the assessee was processed u/s 143(1) of the Act. From the reasons recorded by the AO, which is extracted in the assessment order, we noticed that the assessee has claimed certain deductions which were not allowed in the earlier years. During the year under consideration, the return of income of the assessee was processed u/s 143(1) of the Act and hence there was no occasion for the AO to examine these claims of the assessee. Accordingly the AO took the view that the deductions so claimed by the assessee are not allowable and the same has led him to form the view that there is escapement of income which is chargeable to tax for asst. year 2015-06. We noticed that the ld CIT(A) has taken support of the decision rendered by Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Broker Pvt. Ltd., 291 ITR 500 and has held that the AO has reason to believe that there was escapement of income. We further noticed that the ld CIT(A) has taken support of decision rendered by Hon’ble High Court of Karnataka in the case of Rinco Chakaravarthy (2012) 20 taxmann.com 609 and also various other decisions. Accordingly he has confirmed the validity of reopening of assessment. In our

The next issue relates to disallowance of contribution made to cooperative education fund.

An identical issue was considered by us in AY 2012-13 in the earlier paragraphs, wherein we have followed the decision rendered by the co-ordinate bench in the assessee’s own case in ITA Nos.1532 & 1533/Bang/2016 dated 31-01-2019 relating to assessment years 2009-10 and 2010-11 and rejected this ground of the assessee. We have noticed that the co-ordinate bench had decided this issue against the assessee by following the decision rendered by Hon’ble Supreme Court in the case of Vellore Electric Corporation Ltd (surpa) and the decision rendered by Hon’ble Rajasthan High Court in the case of Jodhpur Co-operative Marketing Society (140 Taxman 541). Following the same, we reject this ground of the assessee.

The next issue relates to addition relating to reversal of excess provision of NPA made in the earlier years. During the year under consideration the assessee has credited the profit and loss account with Rs.952.57 lakhs as relating to reversal of excess provision for bad and doubtful debts made in the earlier year. The breakup of the above said amount was explained as under by assessee.

The AO noticed that, out of 837.33 lakhs referred above, a sum of Rs.575.24 lakhs represented provisions created during the years 2006-07 to 2008-09 by debiting profit and loss account. While computing the total income of those years, the same was added back to income of the assessee and some other figure was claimed as deduction in those years. Hence, the AO asked the assessee to furnish the details relating to reversal of excess provision. However, the assessee did not furnish the details. Accordingly the AO took the view that it may not be possible for him to verify claim of the assessee without examining the details that were called for by him in order to verify whether these provisions was made as per sec. 36(1)(viia) of the Act. Accordingly, the AO disallowed the claim of Rs.575.24 lakhs. With regard to the balance amount of 262.08 lakhs out of 837.33 lakhs, the assessee claimed that the above said amount represented provision for bad and doubtful debts created prior to 2006-07. It was submitted that the assessee was not liable to pay tax in view of provisions of sec. 80P of the Act in those years hence reversal of NPA provision pertaining to those years should not be subjected to tax. The AO noticed that

The ld CIT(A) confirmed the order passed by AO on this issue and hence the assessee is challenging the said decision of CIT(A).

We heard the parties and perused the record. We have considered an identical issue in asst. year 2014-15 and the same has been dealt in paragraph 36 to 38 (Supra). Following the decision so taken, we confirm the order passed by the ld CIT(A) on this issue.

The next issue relates to disallowance of Rs.11.42 lakhs made by the AO in the absence of provision made for claiming deduction u/s 36(1)(viia) of the Act. The ld AR submitted that this issue has been decided against the assessee in the earlier years and accordingly we reject the same.

The next issue relates to addition of Rs.174.28 lakhs being the amount credited to profit and loss account form the general reserve. The facts relating to the same are stated in brief. The AO noticed that the assessee has reduced following amounts from the Net Profit while computing total income for AY 2015-16 claiming that these amounts were transferred from General Reserve:-

With regard to the amount of Rs.67,68,105/-, the assessee submitted that it had received financial assistance from Karnataka State Co-operative Bank from time to time for computerisation of the bank. The amount so received was credited in the ledger account titled as “Computer assistance from Apex Bank”. It was submitted that the un-utilized amount of Rs.67,68,105/- was transferred to General Reserve on 20-07-2013 and it was transferred to Profit and Loss account during the year under consideration. The AO asked the assessee to furnish details and proof for claim that financial assistance was received from Apex Bank, i.e., Karnataka State Co-operative Bank from time to time. The assessee, however, produced a letter dated 31.12.2002 and on examination of the same, the AO noticed that the assessee is required to use the funds within six months from the date of sanction and further, the assistance can be used only for the purposes for which it was sanctioned. The AO also noticed that the assessee has not reduced the value of assets with the amount of assistance received while claiming depreciation, which was in

We heard the parties on this issue and perused the record. Admittedly, the assessee has received financial assistance from Karnataka State Co-operative Bank for the purpose of computerization. According to the AO, the assessee can use the financial assistance only for the purpose of computerisation. Since the assistance was received for acquiring assets, the same should have been reduced from the cost of asset for the purpose of claiming depreciation as per sec. 43(1) of the Act. However, the assessee has fairly admitted that it did not reduce the amount of financial assistance from the value of assets, meaning thereby, the assessee has claimed higher amount of depreciation. Further the assessee also could not furnish details and proof of financial assistance received except furnishing copy of a letter. Under these set of facts, the AO has held that the above said amount of Rs.67.68 lakhs is liable for taxation.

We find ourselves in agreement with the tax authorities. Though the assessee claims that the financial assistance received is a capital receipt, yet it could not furnish the details and proofs

The next item relates to the amount of Rs.100.00 lakhs, being the amount relating to Branch computerisation fund. From the assessment order, we notice that the assessee has appropriated the above said amount in FY 2005-06 out of its profits and credited the same to “Branch Computerisation Fund”. In FY 2013-14, this account was closed by transferring the balance to General Reserve. During the year under consideration, the above said amount of Rs.100.00 lakhs was transferred to Profit and Loss account from General Reserve Account. The assessee, as stated earlier, reduced

We heard the parties on this issue and perused the record. In the earlier paragraphs, while dealing with the taxability of “Reversal of NPA provisions”, we have held that the assessee was not liable to tax in view of availability of deduction u/s 80P of the Act upto AY 2006-07. Otherwise the profit of the assessee has entered Gross Total income, meaning thereby, the assessee’s income should be considered as having been computed in accordance with the provisions of the Act upto AY 2006-07. Further there is difference between deduction provisions, i.e., deduction allowed under Chapter VIA (which includes sec.80P) and the exemption provisions. Hence the AO was not justified in holding that the income of the assessee was exempt in FY 2005-06. The assessee claims that the amount of Rs.100.00 lakhs was appropriated by it from profits towards Branch computerisation Fund. If it is an appropriation made out of profits already subjected to tax, then the transfer of the same to P & L account via General Reserve is not liable to tax. On the contrary, if the assessee has claimed the same as deduction while arriving at the Net Profit, then the reversal of the same is liable to be taxed. Since the relevant details are not available on record, we restore this issue to the file of the AO for examining it in the light of discussions made supra.

The next item relates to the assessment of sale of value of jeep. The assessee transferred a sum of Rs.6,60,000/- from General Reserve. It claimed that it received financial assistance of Rs.9,92,685/- from the Apex Bank for purchase of vehicle. The said vehicle met with an accident and hence the assessee received compensation from insurance company and later the vehicle (Jeep) was also sold. Accordingly a sum of Rs.6,60,000/- representing above said receipts was shown as Jeep Income. However, the assessee could not furnish any detail relating thereto. The AO noticed that the vehicle was removed from fixed assets during the year ending 31.3.2010. In the absence of relevant details, the AO expressed the view that the explanations of the assessee could not be accepted. Accordingly he held that the amount of Rs.6,60,000/- should be assessed to tax and accordingly assessed the same. The Ld CIT(A) also confirmed the same.

We heard the parties and perused the record. From the details discussed by the AO, we notice that these transactions pertain to the financial year ending 31.3.2010. Both the parties are not sure as to whether the financial assistance received was reduced from the cost of asset and whether the sale proceeds were reduced from the WDV etc. Since it is clear that these transactions pertain to the financial year ending 31.3.2010 and since the amount represents insurance claim & sale proceeds, we are of the view that the same may not be proper to subject the same to tax during the year under consideration. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.

In the result, the appeals filed by the assessee for assessment years 2012-13 to 2014-15 are dismissed and the appeal filed for AY 2015-16 is treated as partly allowed for statistical purposes.

Date of Dictation ………………………………………

Date on which the typed draft is placed before the dictating Member ……………………. 3. Date on which the approved draft comes to Sr.P.S .……………………………. 4. Date on which the fair order is placed before the dictating Member ……………….. 5. Date on which the fair order comes back to the Sr. P.S. ………………….. 6. Date of uploading the order on website…………………………….. 7. If not uploaded, furnish the reason for doing so ………………………….. Dictation note enclosed ………………………. 8. Date on which the file goes to the Bench Clerk ………………….. 9. Date on which order goes for Xerox & endorsement…………………………………… 10. Date on which the file goes to the Head Clerk ……………………. 11. The date on which the file goes to the Assistant Registrar for signature on the order ………………………………. 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order …………………………. 13. Date of Despatch of Order. ……………………………………………..