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Facts
The assessee, Raiganj Central Co-Operative Bank Ltd., filed appeals against orders of the CIT(A) for AYs 2012-13 and 2013-14. The appeals concerned various additions and disallowances made by the AO, including issues related to the change of the assessee's status from a cooperative society to a company, imposition of dividend distribution tax, disallowance of provisions for overdue interest and bad debts, and disallowance of audit fees and rent.
Held
The Tribunal held that the assessee's status should be considered a cooperative society, not a company, based on previous orders. Consequently, the imposition of dividend distribution tax was found to be inapplicable. The issue regarding the calculation of deduction for provisions for bad and doubtful debts was remanded to the AO for recomputation as per Rule 6ABA. Several grounds related to disallowances of audit fees and rent were partly allowed or remanded for further examination. The surcharge was also held to be not applicable to cooperative societies for the relevant AYs.
Key Issues
Whether the assessee's status as a cooperative society is correctly maintained and whether various additions, disallowances, and penalties are justified based on the Income Tax Act and relevant rules.
Sections Cited
115-O, 115-P, 40(a)(ia), 36(1)(viia), 36(1)(vii), 194J, 194-I, 271C, 194LBB, 194J, 194-I, 36(1)(va)
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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
These appeals filed by the assessee are against the separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AYs 2012-13 & 2013-14 dated 07.03.2024 and 26.09.2024, respectively. Since the issues are common, all the three appeals were heard together and are being decided vide this common order for the sake of convenience and brevity. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
The assessee is in appeal before the Tribunal raising the following grounds of appeal: ITA No. 974/KOL/2024:
“1. THAT on the facts of the case, the order of the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC) is arbitrary, illegal and bad in law.
THAT on facts of the case the Ld. Commissioner of Income Tax (Appeals)- NFAC has grossly erred in law and not justified by upholding the order passed u/s.143(3) of the Income Tax Act, 1961 on 25.03.2015 by the Ld. Deputy Commissioner of Income Tax, Circle-2, Jalpaiguri without adjudicating the grounds of appeal in spite of clear direction in set aside order of this Hon'ble Court in ITA No.1685/Kol/2017 Assessment Year 2012-13 dated 27-11-2019 in appellant's own case against the earlier order of the Ld. CIT (Appeals)-Jalpaiguri in appeal No.34/JAL/CIT(A)/JAL/2015- 16 upholding the aforesaid order passed u/s.143(3) of the Income Tax Act, 1961. 3. That on the facts of the case the Ld. CIT (Appeals)-NFAC has grossly erred in law and not justified by upholding the change of Status of the appellant under the Income tax Act, 1961 from "Co-operative Society" to "Company" disregarding the order of this Hon'ble Court in appellant's own case in A.Y. 2007-08, Α.Υ. 2009-10 and A.Y. 2010-11 and confirmed by the Hon'ble Juri ictional High Court, though aforesaid orders were on record.
THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the imposition of dividend distribution tax of Rs.9,68,963/- under section 115-O of the Income Tax Act, 1961 and interest thereon Rs.4,06,965/- under section 115-P of the Act considering the appellant as a Domestic Company instead of Co-operative Society, which is illegal, arbitrary and bad in law.
THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the addition of Rs. 1,55,91,319.99 debited in profit & loss account for Provision for overdue Interest which are deductible under the Income Tax Act, 1961. 6. THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the deduction of Rs. 1,26,30,371/- instead of correct amount of Rs. 3,87,16,463.61 which was resulting in short deduction of Rs. 2,60,86,093/- u/s 36(1)(viia) of the Income Tax Act, 1961 due to wrong method adopted to determine the average outstanding of advances of rural branches, which is contrary to method prescribed under Rule 6ABA of the Income Tax Rules, 1962. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
THAT on the facts of the case, the Ld. CIT (Appeals)-Jalpaiguri, has grossly erred in law and not justified by upholding the deletion of Panjipara Branch of the appellant from the list of Rural branches while calculating the deduction allowable under section 36(1)(viia) of the Income Tax Act, 1961. 8. THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the addition of Audit Fees Rs.2,55,400/- u/s.40(a)(ia) of the Income Tax Act, 1961 debited in profit & loss account.
THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the addition of Rs.2,55,000/- u/s.40(a)(ia) of the Income Tax Act, 1961 debited in profit & loss account for Rent.
THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC has grossly erred in law and not justified by upholding the application of Surcharge @5% amounting to Rs.11,32,939/-, though no surcharge was applicable to co- operative societies for the A.Y. 2012-13.” ITA No. 975/KOL/2024:
“1. THAT on the facts of the case the order of the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC) is arbitrary, illegal and bad in law.
THAT on facts of the case the Ld. Commissioner of Income Tax (Appeals)- NFAC has grossly erred in law and not justified by upholding the order passed u/s. 143(3) of the Income Tax Act, 1961 on 28.03.2016 by the Ld. Deputy Commissioner of Income Tax, Circle-2, Jalpaiguri without adjudicating the grounds of appeal according to merits and documents in hand.
That on the facts of the case the Ld. CIT (Appeals)-NFAC has grossly erred in law and not justified by upholding the change of Status of the appellant under the Income tax Act, 1961 from "Co-operative Society" to "Domestic Company" disregarding the order of this Hon'ble Court in appellant's own case in A.Υ. 2007-08, Α.Υ. 2009-10 and A.Y. 2010-11 and confirmed by the Hon'ble Juri ictional High Court though copies of those orders were on records.
THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the imposition of tax of Rs. 10,33,634/- on distributed profit under section 115-0 of the Income Tax Act, 1961 and interest thereon Rs 4,44,463/- under section 115-P of the Act considering the appellant as a Domestic Company instead of Co-operative Society, which is illegal, arbitrary and bad in law.
THAT on the facts of the case, the Ld. CIT (Appeals)-JNFAC, has erred in law and not justified by upholding the addition of Audit Fees Rs.2,08,540/- u/s.40(a)(ia) of the Income Tax Act, 1961 debited in profit & loss account. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
THAT on the facts of the case, the Ld. CIT (Appeals)-JNFAC, has erred in law and not justified by upholding the disallowance of Employees' Contribution to P.F. Rs.22,85,735/-u/s.36(1)(va) of the I. T. Act, 1961 and adding the same with returned income without considering the facts, provisions of law and decisions of High Courts and other information in hand.
THAT on the facts of the case, the Ld. CIT (Appeals)-JNFAC, has erred in law and not justified by upholding the disallowance of WBSCB Core Banking Project expenses of Rs.11,50,2013/-u/s.40(a)(ia) of the I. T. Act, 1961. 8. THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has erred in law and not justified by upholding the deduction of Rs.5,24,52,578/- instead of correct amount of Rs. 5,83,40,045/-, which was resulting in short deduction of Rs.58,87,467/-u/s.36(1)(viia) of the Income Tax Act, 1961 due to wrong method adopted to determine the average outstanding of advances of rural branches, which is contrary to method prescribed under Rule 6ABA of the Income Tax Rules, 1962. 9. THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC has grossly erred in law and not justified by upholding the deletion of Panjipara Branch of the appellant from the list of Rural branches while calculating average outstanding of advances of rural branches to determine the maximum amount of deduction allowable under section 36(1)(viia) of the Income Tax Act, 1961. 10. THAT on the facts of the case, the Ld. CIT (Appeals)-NFAC, has grossly erred in law and not justified by upholding the application of Surcharge @ 5% amounting to Rs.7,19,847/- though no surcharge is applicable to co- operative societies for the A.Y. 2013-14,
THAT your petitioner reserves the right to add/delete/modify ground(s) and/or modify arguments, submit documents before the final disposal of this appeal.” ITA No. 2237/KOL/2024:
“1. THAT on the facts of the case, the order dated 26-09-2024 confirming the penalty of Rs.11,73,586/- under section 271C of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Income Tax Department, Delhi for the A.Y. 2013-14 is completely arbitrary, unjustified and bad in law.
THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, has grossly erred in law and not justified by confirming penalty of Rs. 10,33,634/- for non-deduction of income tax at source on distributed profit under section 194LBB of the Act though said Section 194LBB was ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. came into operation from 01st day of June, 2015 i.e. not applicable for A.Y. 2013-14 and applicable to Investment Fund only.
THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, has grossly erred in law and not justified by confirming penalty of Rs.21,480/- for non-deduction of TDS under section 194J of the Income Tax Act, 1961. 4. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, has grossly erred in law and not justified by confirming penalty of Rs.1,18,472/-for non-deduction of TDS under section 194I of the Income Tax Act, 1961 though TDS was actually made and paid to the credit of Central Government.
THAT your petitioner reserves the right to prefer further ground(s) and/or delete/modify ground(s)/arguments, submit documents before the final disposal of this appeal.” A. We shall first take up the appeal in ITA No. 974/KOL/2024 for adjudication.
Brief facts of the case are that the assessee is a bank and its juri iction of work is confined to the district of South Dinajpur and North Dinajpur. The banking business of the cooperative bank for banking company is not limited to its members but it has also been doing substantial business for general public and others. The assessee had e-filed its return of income on 29.09.2012 showing total income of ₹2,73,06,120/- which was selected for scrutiny through Computer Assisted Scrutiny Selection (in short 'CASS'). The assessee furnished response to the statutory notices issued and the total income was assessed at ₹8,81,59,618/- after making additions on account of overdue interest and NPA provision, disallowance u/s 40(a)(ia) r.w.s. 194J of the Act, disallowance u/s 40(a)(ia) r.w.s. 194-I of the Act, addition on account of provision for bad and doubtful debts u/s 36(1)(via) of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who, vide order dated 07.03.2024 dismissed the appeal of the assessee. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined.
Ground Nos. 1, 2 and 7 of appeal were not pressed, therefore, are hereby dismissed as “not pressed”.
Ground No. 3 relates to the Ld. CIT(A) not being justified in upholding the change of the status of the assessee under the Income Tax Act, 1961 from Cooperative Society to Company, disregarding the order of the Tribunal in the case of assessee for AYs 2007-08, 2009-10 and 2010-11, which has been confirmed by the Hon'ble Juri ictional High Court, though the aforesaid orders were on record. The Ld. AO held that since the assessee is carrying on business of banking legate the commercial banks, the assessee was to be treated as a company. It was submitted that the Ld. CIT(A), without adjudicating the grounds of appeal for the impugned assessment year, simply reproduced the Banking Regulation Act, 1949, the provisions of the Income-tax Act, 1961 etc. and dismissed the grounds of appeal raised by the assessee. It was submitted before us that similar issue has been decided in favour of the assessee in ITA No. 1886/KOL/2024 for AY 2015-16. Our attention was drawn to page 9 para 7, 8 and 9 of the order.
1 It was stated that in the subsequent assessment order also the status has been taken as a domestic company instead of a Cooperative Society, which is not in accordance with the facts of the case.
2 The Ld. DR relied upon the order of the Ld. CIT(A) in this regard. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
3
We have considered the facts of the case, the submissions made and the documents filed. Similar issue came up in appeal in ITA No. 1886/KOL/2024 for AY 2015-16 dated 23.05.2025 wherein the issue has been decided in favour of the assessee and the relevant extract from the order of the Tribunal is as under:
“7. In the paper book filed before us, the assessee has enclosed a copy of the common order in ITA No. 895/KOL/2012 for AY 2007-08 and ITA No. 49/KOL/2013 for AY 2009-10 dated 07.04.2015 of ‘C’ Bench, ITAT, Kolkata wherein it has been held as under in para 3:
“3. We have heard rival submissions and gone through facts and circumstances of the case. Now, before us, Ld. Counsel for the assessee could not demonstrate how the assessee's status is that of Cooperative Society instead of Company. Ld. Counsel for the assessee stated that in the original assessment framed u/s 143(3) of the Act vide order dated 07.08.2006, wherein assessee is assessed as cooperative society. We have gone through the original assessment order framed u/s 143(3) of the Act dated 07.08.2006 wherein the status of the assessee was assessed as cooperative society. We have also gone through the impugned assessment order framed by AO u/s 147 read with section 143(3) of the Act wherein the status of the assessee is taken as company without any basis. Change of status is not permissible under the law unless and until a cogent reasoned order is passed on the same. Here, the assessee's change of status from a cooperative society to company is without any basis. Hence, we restore the status of the assessee as cooperative society and this issue of assessee's appeal is allowed.”
Similarly, in AY 2010-11 the assessee also relied upon the assessee’s appeal for AY 2007-08 and AY 2009-10 in ITAT No. 162 of 2015, and the judgment of the Hon'ble Juri ictional High Court dated 17.04.2017 wherein the issue of change in status has been decided in favour of the assessee and the relevant para of the order is as under: “Alter hearing rival contentions, we find that the assesse’s appeal is covered in favour of the assessee and against the Revenue by the decision of the Hon'ble Juri ictional High Court in the assessee's own case for the Assessment Year 2007-08 and Assessment Year 2009-10 in ITAT No. 162 of 2015, Judgement 17/04/2017, where in the Hon'ble High Court confirmed the order of the Tribunal dt. 07/04/2015 in ITA. No. 895/Kol/2012 for the Assessment Year ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. 2007-08 & ITA. No. 149/Kol/2013, for the Assessment Year 2009- 10, wherein it was held that the there is no basis for the Assessing Officer to change status of the assessee from a co-operative society to a company”
Since the issue is decided in favour of the assessee by the order of the Coordinate Benches of the Tribunal in AYs 2007-08, 2009-10 and 2010-11, therefore, following the order of the coordinate benches, the change of status of the assessee from cooperative Society to cooperative bank is held to be not justified. The order of the Hon'ble High Court of Calcutta has also been enclosed from pages 19 to 25 of the paper book in which the order of the Hon'ble Tribunal has been upheld as the Department had only pressed the question nos. 1 and 2 for being answered on admission of the appeal which related to rectification u/s 154 of the Act and deleting the disallowance made u/s 154 of the Act. Therefore, as regards the change of status of the assessee from a cooperative Society to a cooperative bank, the same was allowed by the Tribunal in favour of the assessee and the same was not contested before the Hon'ble High Court and has reached finality. Hence Ground No. 2 of the appeal is allowed.”
4 Hence, following the decision in the assessee’s own case for AY 2015-16, this issue is decided in favour of the assessee and this ground of appeal is allowed and the status of the assessee is to be treated as a Cooperative Society.
Ground No. 4 is regarding the imposition of dividend distribution tax amounting to ₹9,68,963/- which is related to Ground No. 3 as on the change of status, the Ld. AO was of the view that the dividend of ₹59,72,961/- declared @ 10% to the shareholders from 11.09.2021 was liable to be subjected to dividend distribution tax which was levied and the Ld. AO’s view has been confirmed by the Ld. CIT(A).
1 The Ld. AR submitted that this issue has also been decided in favour of the assessee in assessee’s own case for AY 2015-16 as per para 10 of the order which is as under:
“10. The dividend distribution tax u/s 115-O of the Act and interest u/s 115P of the Act is applicable only to a domestic company and since the ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. assessee is not a domestic company therefore, there was no liability for levying of any dividend distribution tax u/s 115-O of the Act and consequential interest u/s 115P of the Act. Thus, Ground No. 3 is also allowed in favour of the assessee, more so when the same has been allowed in favour of the assessee by the coordinate bench of the Tribunal A.Y. 2010- 11.”
2 Hence, following the finding in ITA No. 1886/KOL/2024 for AY 2015-16, Ground No. 4 of the appeal is also allowed in favour of the assessee and it is held that the assessee is not liable for payment of dividend distribution tax.
Ground No. 5 relates to the Ld. CIT(A) erring in law and not being justified in upholding the addition of ₹1,55,91,319/-. It was submitted by the Ld. AR vide written submission filed that the Ld. AO has not deliberated on this issue and the Ld. CIT(A) has also not adjudicated this issue at all.
1 In the written submissions filed, it is stated that the appellant in its written submission before the Ld. CIT(A) dated 12-07-2023 (Paper Book Page Nos. 40 to 41) made a detailed submission and cited the decisions of various case laws. The Ld. CIT(A)-NFAC in page 51 of his order mentioned "vide Grounds No. 03, 04, & 05, the appellant has challenged the disallowance by the AO, of deduction u/s. 40(a)(ia) of the Income-tax Act, 1961." It is stated that Ground No.3 before him was not at all relating to disallowance by the Ld. AO of deduction u/s.40(a)(ia) of the Act but relating to Provision for Overdue Interest of Rs. 1,55,91,319. 99. Reliance has also been placed on the decisions of the Hon'ble ITAT, Mumbai Bench "H", Mumbai in ITA Nos. ITA 3267/Mum/2019 Α.Υ. 2013-14 ITA 3268/Mum/2019 Α.Υ. 2014-15, ITA 3269/Mum/2019 A.Y. 2015-16 in Kotak Mahindra Bank Ltd, ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. The Ld. AR submitted this interest was not realised and the matching provision was adopted in the profit and loss account. Since the interest was not recoverable, therefore, no real income arose to the assessee. The Ld. AR relied upon the decision of Kotak Mahindra Bank (supra) dated 16.02.2023 and a copy of the order was also enclosed. Our attention was drawn to page 6 of the order.
2
We have considered the facts of the case, the submissions made and the documents filed. The assessee did not file before us a complete copy of the order relied upon. Further, neither the amount appears in the computation of income in the assessment order, nor any such ground of appeal appears to have been raised by the assessee before the Ld. CIT(A), hence there does not appear to be any justification for seeking any decision on this issue from the appellate authority. Hence, this ground of appeal is liable to be dismissed and the assessee may adopt any other alternate remedy available for getting the relief. However, in case this issue was raised before the Ld. AO, we grant the liberty to the Ld. AO to decide the same as per law if it has not been decided earlier. Hence, this ground of appeal is partly allowed for statistical purposes.
Ground No. 6 relates to short deduction of ₹2,60,86,093/- u/s 36(1)(viia) of the Act being provision for bad and doubtful debts and the short deduction being due to incorrect method adopted to determine the average aggregate advances (AAA) of rural branches which is contrary to the method prescribed under Rule 6ABA of the Income Tax Rules, 1962. 10.1 In the written submissions filed, it is stated that as per the Ld. A.O., AAA is to be calculated only on the basis of fresh advances made ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. during the month and opening outstanding advances at the beginning of each month is not to be taken into consideration in calculating closing outstanding advances at the end of each of month due to wrong interpretation of Rule 6ABA of the I.T. Rules, 1962. It is also submitted that the Ld. CIT(A)-NFAC cited decision of some case laws which related to deduction u/s.36(1)(vii) for Bad Debts but none of which related to Provision for Bad & Doubtful Debts u/s. 36(1)(viia) of the Act and he has not deliberated on the issue of calculating AAA under Rule 6ABA of the Income Tax Rules, 1962. The Ld. CIT(A)-NFAC has given his observation starting from page No. 106 to 113 of his order and cited the decisions of some Hon'ble High Courts. He has observed " With regard to Ground No. 06 adduced by the appellant, the following order of the Hon'ble Kolkata High Court is relevant to the instant case of the appellant and as per the decision which is reproduced hereunder for reference, the appellant is a Co-operative Bank." But the Ld. CIT(A)- NFAC has never mentioned which decision of the Hon'ble Kolkata High Court was relied upon. Furthermore, the decisions of the case laws cited by the Ld. CIT(A)-NFAC were not akin to the present issue in hand and were primarily relating to allowability of bad debts u/s.36(1)(vii) of the Act and whether deduction for bad debts can be claimed, if not written off from books of account; and had no relation with allowability of deduction u/s.36(1)(viia) of the Act for Provision for Bad & Doubtful Debts and Rule 6ABA. In the written submissions filed, it is submitted by the assessee that as per Rule GABA of 1.T. Rules, 1962, AAA is to be calculated by aggregating the closing outstanding advances at the end of each of month divided by the nos. of month comprising in the aggregate and the closing outstanding advances at the end of each month is to be calculated after taking into account the (opening ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. outstanding advances at the beginning of each month plus fresh advances made during month less advances recovered during the month). It is submitted that the Ld. AO has allowed deduction u/s.36(1)(viia) for Provision for Bad & Doubtful Debts but for a lesser amount. The dispute is only relating to the the method of calculating the amount of outstanding aggregate average advances (AAA) of rural branches. As per the Ld. AO, it is only the fresh advances made during the month that should be considered for calculation of AAA which is contrary to the method prescribed under Rule 6ABA of the Income Tax Rules, 1962. The AAA of the appellant as per rule 6ABA was Rs.12498.05 lakhs (Page No.62 of Paper Book) but the Ld.AO considered a sum of Rs.7222.01 lakhs as total loan disbursed during the year and on that basis, AAA was arrived at Rs.601.84 lakhs. As a result, huge difference arose and short deduction of Rs.2,60,86,093/- was made. During the year, the claim for deduction u/s.36(1)(viia) was Rs.3,87,16,464/- which was far less than 10% of AAA Rs.12498.05 lakhs being 1249.80 lakhs subject to further amount of 7.50% of the net profit before deduction u/s.36(1)(viia) of the Act. The appellant has relied upon the following decisions: of 2016 Equivalent citations: AIRONLINE 2018 CAL 335 Large ... on 5 January, 2018 ITA No. 915/Bang/2017 A.Y. 2012- 13 ITA No. 845/Bang/2017 A.Y. 2012-13 ITA No. 1647/Bang/2016 A.Υ. 2011-12 ITA No. 1651/Bang/2016 Α.Υ. 2011-12 ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. I.T.A. No.1017 to 1019/Bang/2015 (Assessment Years: 2006-07 to 2008-09) iv) State Bank of India (successor of State Bank of Patiala) vs. ACIT, Circle-Patiala ITA No.510/Chandi./2017, ITAT (Special Bench) Mumbai.
2 It was submitted that only the advances at the end of each month were adopted for the purpose of calculation and the Ld. AO has not considered the opening balance of the advances and has also not given credit for 10% of the rural advances and the deduction has been computed at a lower amount, which has been upheld by the Ld. CIT(A).
3 We have considered the facts of the case, the submissions made and the documents filed. The provisions of section 36(1)(viia) of the Act are as under: “36(1)(viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank [not being [***] a bank incorporat-ed 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 [eight 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:] ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. [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 fore-going 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.”] [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;]
3 Rule 6ABA of the Income Tax Rules, 1962 relied upon by the assessee is as under: “[Computation of aggregate average advances for the purposes of clause (viia) of sub-section (1) of section 36. 6ABA. For the purposes of clause (viia) of sub-section (1) of section 36, the aggregate average advances made by the rural branches of a scheduled bank shall be computed in the following manner, namely :— (a) the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year shall be aggregated separately; (b) the sum so arrived at in the case of each such branch shall be divided by the number of months for which the outstanding advances have been taken into account for the purposes of clause (a); (c) the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank. Explanation.—In this rule, "rural branch" and "scheduled bank" shall have the meanings assigned to them in the Explanation to clause (viia) of sub- section (1) of section 36.] ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
4 Since the allowance is to be worked out as per rule 6ABA of the Income Tax Rules, 1962, therefore, the decision of the Ld. CIT(A) on this issue is hereby set aside and this issue is remanded to the Ld. AO for recomputation of the deduction as per rule 6ABA of the Income Tax Rules, 1962 r.w.s. 36(1)(viia) of the Act and this ground of appeal is allowed for statistical purposes in favour of the assessee. The Ld. AO is directed to recompute the deduction u/s 36(1)(viia) of the Act by applying Rule 6ABA of the Income Tax Rules, 1962. 11. Ground Nos. 8 and 9 relate to disallowance u/s 40(a)(ia) of the Act on account of non-deduction of TDS. The provisions of section 40(a)(ia) of the Act are as under:
“40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,- (a) in the case of any assessee- (ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, [has not been paid on or before the due date specified in sub-section (1) of section 139:] [Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, [thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid:] [Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub- clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the [***] payee referred to in the said proviso.] Explanation.-For the purposes of this sub-clause,- ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. (i) “commission or brokerage” shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (iii) “professional services” shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) “work” shall have the same meaning as in Explanation III* to section 194C; [(v) “rent” shall have the same meaning as in clause (i) to the Explanation to section 194-I; (vi) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;]”
1 It is submitted that if tax is directly paid by the recipient, the assessee shall not be deemed to be in assessing default and as such, no disallowance is called for. Ground No. 8 relates to audit fee of ₹2,55,400/-. Since the required details have not been made available as to whether the recipients of pay tax on this amount, therefore, this issue is remanded to the Ld. AO and the assessee is directed to furnish necessary evidence regarding the payment of tax on this amount by the payees and this ground of appeal is allowed for statistical purposes.
2 Regarding Ground No. 9 relating to disallowance of rent paid for ₹2,55,000/- for non-deduction of TDS, the Ld. DR submitted that no ratio was specified and relied upon the Ld. AO’s order and the Ld. CIT(A)’s finding. However, this issue also came up in Kotak Mahindra Bank (supra).
2 Before us, no further evidence could be filed by the assessee. It was stated that the rent had been paid to 2 landlords, Shri Amar Chand Jain and Smt. Sukhraj Devi Dugar @ ₹1,27,500/- each, and the amount was below the threshold limit of ₹ 180,000/- for deduction of TDS and ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. therefore, no TDS was required to be made. The Ld. AO added the amount as the shares of each co-owner was not specified in the agreement. It is stated that it is common law that the shares are not specified, all are entitled to equal share of the property and it has been requested that the assessee inadvertently omitted to include the agreement in the paper book but prays to allow to submit the relevant agreement. However, in view of the proviso to section 40(a)(ia) of the Act, the Ld. AO is directed to delete the addition in the event of the assessee filing evidence for payment of tax on this amount by the payees or furnishing the copy of the agreement, which shall be examined by the AO for deleting the addition as per law. Hence, this ground of appeal is allowed for statistical purposes.
Ground No. 10 relates to surcharge being levied @ 5% and it is stated that no surcharge was applicable for a cooperative Society for AY 2012-13. However, this ground was neither raised before the Ld. CIT(A) nor has been adjudicated by him. It is stated that since the status of the assessee is cooperative society, for the impugned assessment year no surcharge of income tax was applicable in case of the cooperative societies but the same was charged by the Ld. AO.
1 The Ld. DR could not counter this submission of the Ld. AR.
2 We have considered the facts of the case, the submissions made and the documents filed. As per the Finance Act applicable for A.Y. 2012-13, no surcharge was leviable in the case of a cooperative society and since the status of the assessee was taken as that of a company such as was levied. However, since the status is held to be that of a cooperative society, for the impugned assessment year, this ground of appeal is allowed and the Ld. AO is directed to compute the tax on the ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. total income assessed without levying any surcharge and this ground of appeal is allowed.
In the result, the Appeal filed by the assessee in ITA No. 974/KOL/2024 is partly allowed for statistical purposes. B. Now we shall take up ITA No. 975/KOL/2024 and ITA No. 2237/KOL/2024 which are cross appeals filed by the assessee as well as the Revenue. We shall 1st take up the assessee’s appeal in ITA No. 975/KOL/2024. 14. Ground nos. 1, 2 and 9 were not pressed, therefore, these grounds are dismissed as not pressed.
Ground Nos. 3 and 4 of the appeal relate to the Ld. CIT(A) erring in upholding the change of status of the assessee under the Income Tax Act, 1961 from cooperative Society to domestic company and upholding the imposition of dividend distribution tax u/s 115-O at ₹10,33,634/- and interest u/s 115-P at ₹4,44,463/- thereon.
1 In view of the findings in the previous paragraph nos. 7.4 and 8.2 of this order, both these grounds of appeal are allowed.
Ground No. 5 relates to the Ld. CIT(A) erring in upholding the addition on account of disallowance of audit fees of ₹2,08,540/- u/s 40(a)(ia) of the Act debited in the profit and loss account.
1 The assessee claims that the issue may be sent back to the AO for verification of the documents as the statutory auditors of the assessee are appointed sometime after the year end unlike the statutory auditors of the company, who are appointed in the annual general meeting held well before the year. The assessee was liable to deduct TDS, even if the amount was credited to the suspense account and the auditors were ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. not known. However, in view of the finding in the previous paragraph no. 11.1 of this order. On similar issue, this ground of appeal is allowed for statistical purposes and the issue is set aside to the Ld. AO for verification and deletion of this amount as per law.
Ground No. 6 relates to the Ld. CIT(A) erring in upholding the disallowance of Employees' Contribution to P.F. of ₹22,85,735/-u/s 36(1)(va) of the Act and adding the same with the returned income. However, it is stated in the written submission filed that this issue has not been adjudicated by the Ld. CIT(A). In the written submissions filed, it is stated that out of the total amount of Rs.22,85,735/- contribution for the month of February, 2013 amounting to Rs.3,28,498/- was deposited on 19-03-2013 within the grace period up to 20-03-2013, so this amount of Rs.3,28,498/- is allowable. It is further stated that similar issue was recently decided by the coordinate Bench of the Tribunal in the appellant's own case in ITA No. 1886/Kol/2024 for A.Y. 2015-16 and ITA No.1923/Kol, 2024 for A.Y. 2014-15 in favour of the appellant. (Page No. 15, Sl. No.15 Ground No.10 of the Order).
1 Since the issue needs examination, the findings of the Ld. CIT(A) on this issue are set aside and the matter is remanded to the Ld. AO for examining the provisions of the relevant Acts and to consider whether the payments were made in time so as to allow the deduction to the assessee. The assessee is directed to produce the challans and other evidence for the payment of salary and the payment of ESI/PF to the concerned authorities. In view of the decision of the Hon'ble Supreme Court in the case of Checkmate Services P. Ltd vs. CIT [2022] 143 taxmann.com 178 (SC), the employees' contribution is to be treated as the income of the assessee if it is not deposited within the due date. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. However, the Ld. AO shall examine the facts of the case again and if the payments have been made within the due dates as per the provisions of the Provident Fund Act/ESI Act, he is directed to allow the same as a deduction u/s 36(1)(va) of the Act to the extent of such payments and the rest of the additions shall be confirmed. Accordingly, this ground of appeal is partly allowed for statistical purposes.
Ground No. 7 relates to the Ld. CIT(A) erring in not upholding the disallowance of WBSCB Core Banking Project expenses of ₹11,50,2013/- u/s 40(a)(ia) of the Act. It is stated that the Ld. CIT(A) has not adjudicated this ground.
1 The Ld. AR submitted that WBSCB had deducted and deposited TDS to the credit of Central Government and our attention was drawn to page 2 to 16 of the paper book filed. In the written submissions filed, it is stated that the fact of the case was that for implementation of core banking project of all District Central Co-operative Banks (DCCB) of West Bengal, a consortium was formed under the leadership of the West Bengal State Co-operative Bank Ltd. (WBSCB), being apex co-operative bank of the State for the main purpose of proper and efficient implementation of the project and cost reduction. The said WBSCB was entrusted with the responsibility to supervise the project for its efficient implementation and was also responsible for making payment to TCS Ltd. as per terms of agreement with TCS and for that purpose a Memorandum of Understanding among the constituents was signed. The appellant Bank being a DCCB is also a party to the said MOU (Paper Book Page No. 64-82). The said WBSCB made payment to TCS after making TDS for self and on behalf of other constituents to the MOU and recovered the proportionate amount along with TDS so made from other ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. constituents. The WBSCB has duly deposited the TDS so made on behalf of all constituents to the MOU and issued a confirmation in this regard (page No 2-16 of the paper book for additional evidence). But due to some urgent official need, the A/R could not appear and explained the fact to the A.O. on 18/03/2016 but no further opportunity was given, so it cannot be said that the payment was made without TDS.
2 We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). This issue is also remanded to the Ld. AO to verify the claim made by the assessee regarding deposit of TDS and the assessee shall file necessary evidence before the Ld. AO who shall examine the same and delete the addition in case TDS has been made and deposited as per law. Hence, Ground No. 7 is partly allowed for statistical purpose
Ground No. 8 relates to the Ld. CIT(A) erring in upholding the deduction of ₹5,24,52,578/- instead of correct amount of ₹5,83,40,045/-, which was resulting in short deduction of ₹58,87,467/- u/s 36(1)(viia) of the Act due to wrong method adopted to determine the average outstanding advances of rural branches, which is contrary to the method prescribed under Rule 6ABA of the Income Tax Rules, 1962
1 This issue has been decided in the previous para no. 10.4 of this order for AY 2012-13. In view of the finding as above, this ground of appeal is allowed for statistical purposes.
Ground No. 10 relates to the Ld. CIT(A) erring in upholding the application of Surcharge @ 5% amounting to ₹7,19,847/- though no surcharge is applicable to co-operative societies for the AY 2013-14. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
1 This issue has also been decided in the previous para no. 12.3 of this order for AY 2012-13. In view of the finding above, this ground of appeal is allowed.
Ground No. 11 being general in nature does not require any separate adjudication.
In the result, the appeal filed by the assessee in ITA No. 975/KOL/2024 is partly allowed for statistical purposes. C. Now, we shall take up the assessee’s appeal in ITA No. 2237/KOL/2024 for adjudication.
Ground No. 1 relates to confirmation of the penalty of ₹11,73,586/- u/s 271C of the Act by the NFAC, Delhi for the AY 2013-
Ground No. 1 is general in nature and does not require any separate adjudication.
Ground No. 2 relates to the Ld. CIT(A) erring in confirming the penalty of ₹10,33,634/-for non-deduction of income tax at source on distributed profit under section 194LBB of the Act. It is stated that this issue has not been specifically adjudicated by the Ld. CIT(A).
In the written submissions filed, it is stated that the provisions of section 194LBB of the Act came into operation with effect from 01-06- 2015 and were not applicable for the A.Y. 2013-14. Furthermore, this section is applicable to an Investment Fund specified in clause (a) of the Explanation 1 to section 115UB and to a co-operative society. It is already upheld that the status of the appellant under the Act is co- operative society and not either a domestic company or an Investment Fund specified in clause (a) of the Explanation 1 to section 115UB of ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. the Act. So penalty u/s.271C for non-deduction of TDS u/s.194LBB of the Act is not tenable and required to be deleted.
2 We have considered the facts of the case, the submissions made and the documents filed. The provisions of section 194LBB of the Act are as under: “194LBB. Where any income, other than that proportion of income which is of the same nature as income referred to in clause (23FBB) of section 10, is payable to a unit holder in respect of units of an investment fund specified in clause (a) of the Explanation 1 to section 115UB, the person responsible for making the payment shall, at the time of credit of such income to the account of payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, 31[deduct income-tax thereon,- (i) at the rate of ten per cent, where the payee is a resident; (ii) at the rates in force, where the payee is a non-resident (not being a company) or a foreign company : Provided that where the payee is a non-resident (not being a company) or a foreign company, no deduction shall be made in respect of any income that is not chargeable to tax under the provisions of the Act.] Explanation.-For the purposes of this section,- (a) “unit” shall have the meaning assigned to it in clause (c) of the Explanation 1 to section 115UB; (b) where any income as aforesaid is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee, and the provisions of this section shall apply accordingly.]”
3 Since the provisions were not applicable for AY 2013-14, therefore, Ground No. 2 of the appeal is allowed.
Ground No. 3 relates to the Ld. CIT(A) erring in confirming the penalty of ₹21,480/- for non-deduction of TDS under section 194J of the Act. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
1 The issue is remanded to the Ld. AO to examine upon furnishing the evidence by the assessee as to whether the payee had paid the tax on the amount received and thereafter, the amount should be excluded from the computation of the penalty. Accordingly, Ground No. 3 of the appeal is allowed for statistical purposes.
Ground No. 4 relates to the Ld. CIT(A) erring in confirming the penalty of ₹1,18,472/- for non-deduction of TDS under section 194-I of the Act though TDS was actually made and paid to the credit of Central Government.
1 It was stated that the TDS was actually made and paid to the credit of the Central Government. The assessee submitted that the fact of this case is elaborately discussed in Ground No. 7 of the quantum appeal for AY 2013-14. WBSCB has deposited necessary TDS on the amount paid to TCS on behalf of the appellant but the relevant confirmation was not issued by the WBSCB during the course of appeal proceeding. For this reason, the appellant failed to submit the same before the Ld. CIT(A)-NFAC. Since, TDS was made on the amount of ₹11,50,213/- and deposited by WBSCB on behalf of the appellant, there was no violation of section 194J of the Act and no penalty u/s 271C of the Act is imposable.
2 The assessee is directed to furnish evidence in this regard before the Ld. AO and the Ld. AO is directed to delete this amount from the penalty imposed. Hence, this ground of appeal is also partly allowed for statistical purposes.
In the result, the appeal filed by the Revenue in ITA No. 2237/KOL/2024 is partly allowed for statistical purposes. ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd.
In the result, the appeals filed by the assessee in ITA Nos. 974/KOL/2024 and 975/KOL/2024 as well as the appeal filed by the assessee in ITA No. 2237/KOL/2024 are partly allowed for statistical purposes. Order pronounced in the open Court on 11th January, 2026. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 11.02.2026 Bidhan (Sr. P.S.) ITA No.: 974, 975 & 2237/KOL/2024 Assessment Year: 2012-13 & 2013-14 Raiganj Central Co-Operative Bank Ltd. Copy of the order forwarded to:
Raiganj Central Co-Operative Bank Ltd., Ukilpara, P.O.- Raiganj, Uttar Dinajpur, West Bengal, 733134. 2. D.C.I.T., Circle-2, Jalpaiguri.
J.C.I.T. (TDS), Range-6, Siliguri.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order