ASSTT. COMMISSIONER OF INCOME TAX, JALANDHAR vs. M/S PUNJAB GRAMIN BANK, KAPURTHALA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A No. 648/(Asr)/2016 Assessment Year: 2013-14 PAN: AAALP0309F Asst. C. I. T., Vs. M/s. Punjab Gramin Bank Circle-IV, Jalandhar. Jalandhar Road, Kapurthala. (Appellant) (Respondent)

I.T.A No. 655/(Asr)/2016 Assessment Year: 2013-14 PAN: AAALP0309F M/s. Punjab Gramin Bank Vs. Asst. C. I. T., Jalandhar Road, Kapurthala. Circle-IV, Jalandhar. (Appellant) (Respondent)

Appellant by : Sh. S. S. Kanwal (D.R.) Respondent by: Sh. Ranjan Sehgal (C.A.) Date of Hearing: 21.11.2017 Date of Pronouncement: 03.01.2018

ORDER PER T. S. KAPOOR (AM): These are cross appeals filed by assessee as well as by revenue

against the order of Ld. CIT(A), Jalandhar dated 17.10.2016 for Asst.

Year: 2013-14.

adjournment, however the Ld. AR objected to the adjournment

application and submitted that these cases were covered in favour of

assessee by the order of Hon'ble Tribunal itself in the case of assessee

2 ITA Nos.648&655(Asr)/2016 Assessment Year: 2013-14 and our attention was invited to the order of the Tribunal at P.B. page 1,

2, 6 and 1, 2, 10 respectively and relevant findings of the Tribunal were

read.

assessee, therefore the adjournment application was rejected and the

cases were taken as heard.

placed on record. In the appeal filed by assessee, the only issue raised by

it is that the authorities below had not allowed payment of premium paid

to LIC for covering leave encashment of its employees. We find that this

issue was already adjudicated by Hon'ble Tribunal in the case of

assessee itself by order dated 15.03.2017 in ITA Nos. 583

&584/Asr/2015. The findings of the Hon'ble Tribunal are contained in

para 14 wherein the Hon'ble Tribunal had remitted the issue back to the

office of Ld. CIT(A). The relevant findings of the Tribunal as contained in

14 are reproduced below:

“14. Now coming to the appeals filed by assessee, we find that Assessing Officer had disallowed the payment made to LIC and Bajaj Alianze u/s 37(1) of the Act, holding the same to be not expanded ‘wholly and exclusively” for the purposes of business. The Ld. CIT(A) while confirming the disallowance has not considered the claim of the assessee u/s 37(1) of the Act and has confirmed the addition by holding that the provisions of section 43B(f) were applicable to the assessee. However, the claim of the assessee in its written submissions is that assessee had not created the provisions and in fact had made the payment and therefore the provisions of section 43B(f) of the Act were not applicable, it was also required that Ld. CIT(A) had confirmed the disallowance u/s 43B (f) without affording opportunity to the Assessee. Therefore, we deem it appropriate to remit this issue to the office of Ld. CIT(A) who should examine the claim of the assessee u/s 37(1) of the Act as the Assessing

3 ITA Nos.648&655(Asr)/2016 Assessment Year: 2013-14 Officer had made the disallowance u/s 37(1) of the Act. The Ld. CIT(A) should also hear the assessee on the applicability of provisions of section 43B(f) of the Act. In view of the above, the appeals filed by assessee are allowed for statistical purposes.”

In view of the above precedent we set aside the appeal of the

assessee to Ld. CIT(A) who should examine the claim of assessee u/s

37(1) of the Act and should also hear the assessee on the applicability of

provisions of 43B(f) of the Act.

Now coming to the appeal filed by revenue, we find that the only

issue raised by revenue is the action of Ld. CIT(A) by which he has

allowed relief of Rs.80,85,000/- on account of the provisions for bad &

doubtful debts on standard assets. This issue is also covered in favour of

assessee by the order dated 22.06.2016. The findings of the Hon'ble

Tribunal are contained in para 8 onwards, for the sake of completeness,

the findings of the Hon'ble Tribunal are reproduced below:

“8. We have heard the rival parties and have gone through the material on record. We find that the assessee had created a provision of Rs.50,00,000/- which included a sum of Rs.13,25,000/- as provisions for bad and doubtful debts and the balance amount of Rs.36,75,000/- was provision against standard assets and the entire amount was claimed as deduction under section 36(1)(viia) of the Act. The Assessing Officer was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure. The ld. CIT(A), however, allowed relief to the assessee by holding that the claim of the assessee fall into the main provisions of section 36(1)(viia). To resolve the dispute it is important to visit the provisions of section 36(1)(viia) of the Act and which for the sake of convenience are reproduced below. “36(1)(viia) In 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 outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an

4 ITA Nos.648&655(Asr)/2016 Assessment Year: 2013-14 amount not exceeding ten percent 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 percent 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 percent”, the words “ten percent” 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 business or profession.” From the above provisions it can be seen that deduction u/s 36(1)(viia) of the Act is allowed in respect of provisions for bad and doubtful debts This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section(1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1)(viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section

5 ITA Nos.648&655(Asr)/2016 Assessment Year: 2013-14 36(1)(viia) of the Act. The learned CIT(A) has passed a very exhaustive and speaking order and we do not find any infirmity in the same.”

Therefore, following the above we dismiss the appeal filed by

revenue.

purposes and whereas the appeal filed by revenue is dismissed.

Order pronounced in the open court on 03.01.2018

Sd/- Sd/-

(N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03.01.2018. /GP/Sr. Ps. Copy of the order forwarded to: (1) The Assessee: (2) The (3) The CIT(A), (4) The CIT, (5) The SR DR, I.T.A.T., True copy

By Order