ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, KALABURAGI, KALABURAGI vs. THE DISTRICT CO-OPERATIVE CENTRAL BANK LTD BIDAR, BIDAR

PER WASEEM AHMED, ACCOUNTANT MEMBER:

2.1 The necessary facts are that the assessee is a co-operative bank and engaged in the banking activities. The AO during the assessment proceedings disallowed the deduction claimed by the assessee for Rs. 1050 Lacs representing the provision for non performing assets and standard assets, which was not eligible for deduction u/s 36(1)((viii)(a) of the Act. However, the ld. CIT (A), on appeal filed by the assessee, observed that the amount eligible for deduction u/s 36(1)(viia) of the Act stands at Rs. 10738.75 lakhs, whereas the assessee has claimed the deduction only for Rs. 1050 lakhs, which is lower than the eligible amount for deduction u/s 36(1)(viia) of the Act. Accordingly, the ld. CIT- A deleted the disallowance made by the AO and allowed the ground of appeal of the assessee.

We have heard the rival contentions of both the parties and 7. perused the materials available on record. In the present case, the assessee has claimed deduction for ₹ 10.50 crores under the provisions of section 36(1)(viia) of the Act which was denied by the AO during the assessment proceedings in the absence of supporting documents. However, the ld. CIT-A found that necessary details was furnished by the assessee with respect to the deduction claimed by the assessee vide letter dated 22nd April 2021 which was submitted online dated 23rd April 2021 whereas the assessment was framed under section 143(3) of the Act dated 27th April 2021. The ld. CIT-A also observed that assessee was eligible for deduction under section 36(1)(viia) of the Act amounting to ₹ 10738.75 lakhs whereas the deduction claimed by the assessee was of ₹ 1050 lakhs only.

7.1 From the preceding discussion, we note that the deduction claimed under section 36(1)(viia) of the Act has two components as detailed below: i. ₹ 1000 lakhs representing the provision for doubtful debts. ii. ₹ 50 lakhs representing the provision for standard assets.

7.2 As far as the amount of eligible deduction calculated by the assessee for ₹ 10,738.75 lacs is concerned, no dispute has been raised by the ld. DR appearing on behalf of the revenue. Thus, the deduction claimed by the assessee by creating the provisions under section 36(1)(viia) of the Act with respect to the doubtful assets for ₹ 1000 lacs cannot be denied as it is within the provisions of law.

7.3 However, with respect deduction of ₹ 50 lakhs representing the provision against the standard assets, though the same is within the . maximum eligible amount of ₹ 10738.75 lakhs, a question arises whether the assessee can claim the deduction under section 36(1)(viia) of the Act for the same being standard assets. In this regard, we note that the Indore Tribunal in the case of ACIT v. Jila Sahakari Kendriya Bank reported in 158 taxman.com 40 has observed as under: 10. Thus, the impugned issue is settled in favour of assessee by various decisions of ITAT Benches including the co-ordinate bench of ITAT, Indore. Respectfully following the same, we too hold that the provision made by assessee qua standard assets is allowable u/s 36(1)(viia) and therefore the Ld. CIT(A) has rightly deleted the disallowance made by AO. However, during hearing, we raised a specific query to Ld. AR that the assessee has claimed a total deduction of Rs. 10,00,00,000/- but the section 36(1)(viia) allows deduction upto a certain limit prescribed therein; whether the AO has verified that the deduction of Rs. 10,00,00,000/- is within permissible limit prescribed in section? Ld. AR fairly agreed that it is not reflected in the orders of lower-authorities. Ld. AR, however, raised a plea that the assessee was entitled to much higher deduction but claimed only Rs. 10,00,00,000/-. In absence of any finding on this aspect by lower-authorities, we are unable to accept such a pleading of Ld. AR. Therefore, in the circumstance, though we agree in principle that the provision made for standard assets is also eligible for deduction yet we are of the view that there is a strong necessity to verify whether the claim made by assessee is within the permissible limit prescribed in section 36(1)(viia) or not; therefore it would be appropriate to refer this issue back to the file of Ld. AO for the limit purpose of such verification. The Ld. AO will verify the permissible limit and allow deduction within such limit. We order accordingly. We also direct the assessee to provide necessary information/calculation to Ld. AO to enable him to make such verification. These grounds are, thus, allowed in terms indicated here.

7.4 From the above, it is transpired that the assessee is entitled for deduction with respect to the provisions made for the standard assets under the provisions of section 36(1)(viia) of the Act as long as it is within the permissible limit prescribed under the provisions of section 36(1)(viia) of the Act. In the given case, the ld. CIT-A has categorically observed that assessee was eligible for the deduction . under section 36(1)(viia) of the Act for the higher amount than the deduction actually claimed which has not been disputed by the ld. DR appearing on behalf of the Revenue. Accordingly, we do not find any infirmity in the finding of the ld. CIT-A. Hence the ground of appeal filed by the revenue is hereby dismissed.

Order pronounced in court on 16th day of July, 2024