THE MAHENDERGARH CENTRAL COOPERATIVE BANK LTD.,MAHENDERGARH vs. ACIT, REWARI

The brief facts of the case are that the assessee is a cooperative bank engaged in the business of accepting deposits and giving loans as per the guidelines of NABARD. The return of income was filed at an income of Rs. 95,12,238/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the bank had debited an amount of Rs. 1,39,64,857/- in the Profit/Loss Account as one time scheme interest relief. The Assessing Officer noted that this amount was huge as compared to the interest income of Rs. 16,26,99,047/- earned and credited in the profit & loss account. The Assessing Officer asked the assessee to justify the amount claimed as one time scheme interest relief and it was submitted before the Assessing Officer that the bank had not waived off any principal amount but had only waived the amount due towards interest which was in terms of the Circular issued by the Registrar of Cooperative Societies, Haryana bearing Memo No. 3/7/2007/Credit-5/3598-3658 dated 21.03.07. The assessee submitted before the Assessing Officer that this One Time Scheme was floated in order to attract the defaulting members/borrowers to settle their loan accounts by discounting their interest component and that the same was an allowable expenditure. However, the Assessing Officer made an addition of Rs. 1,39,64,857/- by disallowing the entire amount claimed as OTS interest relief by noting that the assessee bank had waived off the amount on its own without making any effort to recover the interest.

2.1 Aggrieved, the assessee approached the Ld. CIT (Appeals) who also upheld the action of the Assessing Officer. Now, the assessee has approached the ITAT and has challenged the confirmation of the disallowance by the Ld. CIT (Appeals).

The Ld. AR submitted that the Ld. CIT (A) had erred in confirming the disallowance by rejecting the contention of the assessee and further that these expenses had been incurred in terms of the guidelines issued by the Registrar of Societies, Haryana vide Circular bearing Memo No. 3/7/2007/Credit- 5/3598-3658 dated 21.03.07. The Ld. AR also submitted that the assessee had submitted copy of the Circular as well as the ledger accounts of the borrowers who had been given the benefit of interest waiver and the Assessing Officer had simply disregarded the assessee’s contentions and had disallowed the entire amount without examining and verifying the details submitted by the assessee.

Ld. Sr. DR supported the orders of both the lower authorities.

We have heard the rival submissions and have perused the material available on record. A perusal of the order of the Assessing Officer shows that the Assessing Officer has disallowed the entire amount claimed as expenditure on the ground that the impugned amount was huge as compared to the interest receipts credited by the assessee in its profit and loss account. The Assessing Officer has disallowed the assessee’s claim at the threshold itself without examining the details in this regard and also without examining as to whether the provisions of the afire mentioned Circular, as being relied upon by the assessee, were applicable in the assessee’s case or not. It is also apparent that the Assessing Officer has also not examined whether the assessee had claimed the deduction of one time interest waiver as per the provisions of the aforesaid circular or not. The Ld. CIT (Appeals), while dismissing the assessee’s appeal, has dismissed the assessee’s appeal on the ground that no follow up action had been taken up by the assessee bank to recover the outstanding amount. Therefore, it is very much apparent that none of the lower authorities have examined the deduction claimed by the assessee in light of the terms of the aforesaid Circular issued by the Registrar of Cooperative Societies, Haryana. In view of these facts, it is our considered opinion that in the interest of justice, the matter should be re-examined by the Assessing Officer.

In the result, the appeal of the assessee stands allowed for statistical purposes.