M/S. THE MAYURBHANJ CENTRAL CO-OPERATIVE BANK LIMITED,CUTTACK vs. DCIT, BALASORE

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IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.387/CTK/2015 Assessment Year : 2011-2012

The Mayurbhanj Central Co- Vs. DCIT, Balsore Circle, operative Bank Limited, Balasore. At/pi: Baripada, Mayurbhanj PAN/GIR No.AAAAM 7185 K (Appellant) .. ( Respondent)

ITA No.393/CTK/2015 Assessment Year : 2011-2012

DCIT, Balsore Circle, Vs. The Mayurbhanj Central Co- Balasore. operative Bank Limited, At/pi: Baripada, Mayurbhanj PAN/GIR No.AAAAM 7185 K (Appellant) .. ( Respondent)

Assessee by : Shri Ambica Prasad Mohanty, AR Revenue by : Shri D.K.Pradhan, DR

Date of Hearing : 09/08/ 2017 Date of Pronouncement : 10 /08/ 2017

O R D E R Per N.S.Saini, AM These are cross appeals filed by the assessee and the revenue

against the order of the CIT(A)-Cuttack dated 19.6.2015 for the

assessment year 2011-12.

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CIT(A) was not justified in deleting the provisions for standard assets to

the tune of Rs.14,92,017/- ignoring the provisions of I.T.Act, 1961.

the assessee had deducted provision for standard assets amounting to

Rs.14,92,017/- in its profit and loss account and claimed the same as

expenses. The Assessing Officer observed that under the provision of

section 36(1)(vii) of the Act, bad debt actually written off from the books

of assessee is admissible for deduction. But the provision made for

standard asset is not deductible in view of the decision of Hon’ble

Supreme Court in the case of Southern Technology Ltd vs JCIT (2010)

320 ITR 577 (SC).

Officer is unlawful in disallowing provision for standard asset which has

been credited in the books as per the mandatory guidelines of SBI for the

assessee bank and qualifies as a part of provision for bad and doubtful

debts. The assessee further submitted that in its own case for the

assessment year 2008-09, the Cuttack Bench of the Tribunal in ITA

No.383/CTK/2012 dated 30.10.2012 decided that the provision for

standard asset for co-operative bank should be allowed. He placed

reliance on the following part of the order of the Tribunal:

” "In the case, the Standard Assets, provision allowed to be created as a percentage of the outstanding Loans & Advances is much less compared

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to that for the other types of Loans & Advances classified as substandard or loss Assets by the bank as per the guidelines of RBI. It is not a liability, much less a contingent or unaccrued one. It is only a provision for loss towards bad & doubtful debts, as per the prudential norms prescribed by RBI for the banks, which is mandatory in nature. In view thereof, the decision of Hon'ble Apex Court in the case of Indian Molasses & Co. V. CIT (Supra) which was on different set of facts is not applicable to the instant case of the assessee. We find that in the said case it has been held that provision for contingent or unaccrued labiality is not allowable as deduction. The learned AR of the assessee relied on the decision of lTAT, Amristar Bench in the case of DCIT v. The Gurdaspur Central Co-op Circle Pathankot Bank Ltd. in ITA No.99/ASR/2011/ dt. 07.05.2012 ( copy placed in the paper book ), wherein the Tribunal has upheld the order of the CIT(A) in deleting disallowance under the head "Provisions on Standard Assets". The relevant portion of that order in paragraph 4 is quoted hereunder:

"4. Before the Ld. CIT(A), the assessee submitted written submissions which are reproduced in CIT(A)'s order in para 5 on pages 8 & 9. The Ld. CIT(A) vide para 7 of his order deleted the addition observing that the AO had given no reasons for the disallowance of expense. Thereafter, the Ld. CIT(A) on the basis of submissions made before him by the Ld. Counsel for the assessee that the expense is debited notionally @ 0.1 % to 0.4% of such assets to maintain and retain all standard assets, as per Master Circular on Income Recognition Asset Classification, Provisioning and other related matters issued by the Bank of India. He further mentioned that u/s. 35A of the Banking Regulation Act, 1949, the Reserve Bank of India has been empowered to issue directions to all the banks as to regulate the banking business in the public interest or in the interest of banking policy. After discussing what has been submitted by the assessee before him, the Ld. CIT(A) observed that the assessee had no option but to claim the same and the claim, even if notional, exclusively laid out for the purpose of smooth running of banking business and there is no reason not to allow the same to the assessee. It is a statutory claim to allow the same to the assessee. It is a statutory claim allowable on the analogy of 30% deduction allowed in respect of income under the head house property, without making it necessary to shown the evidence of such expense having been actually incurred. The AO had failed to appreciate that section 36(l)(viia) is amended by the Finance Act, 2007 to include co-operative banks for the purpose of deduction under this section retrospectively from 1st April, 2007 and subsequent years. This amendment was brought to give relief to the Co-operative banks which have been withdrawn as a deduction under section 80 P. Referring to the Rule 6ABA, it was observed that deduction under section 36(l)(viia) is a notional deduction, which is within the limits of the said section. Accordingly, the Ld. CIT(A) deleted the addition."

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We find that the facts of the instant case being similar with that of The Gurdaspur Central Co-op Circle, Pathankot Bank Ltd. (Supra ) and following the decision of the IT AT, Amirtsar, it must be held that the learned CIT(A) is not justified in confirming the disallowance made under the head "Provisions on Standard Assets" and therefore, we direct the Assessing Officer to delete such disallowance and allow the claim of the assessee in this regard.”

of the assessee and deleted the addition.

order of the CIT(A) is in consonance with the order of the Tribunal in

assessee’s own case for the assessment year 2008-09. Ld D.R. could not

point out any distinguishing features to not to follow the above quoted

order of the Tribunal. Therefore, we find no good reason to interfere with

the order of the CIT(A), which is hereby confirmed and ground of appeal

of the revenue is dismissed.

the addition of Rs.1,24,912/-.

that the assessee had provision for bad and doubtful debts of

Rs.1,24,912/-, which was not allowable deduction in the meaning of

provision of sections 28 to 42 of the Act.

of the lower authorities by brining any positive material on record. We,

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therefore, find no good reason to interfere with the order of the CIT(A)

and dismiss the ground of appeal of the assessee.

the CIT(A) erred in sustaining the addition of Rs.6,40,042/-.

that the assessee has made provision for U/R account of Rs.6,40,042/-

which is not allowable deduction according to the provisions of section 28

to 42 of the Act.

of Rs.9,78,102/- was reversal of last year’s provision. This year’s

provision of Rs.6,40,042/- has been reversed in the subsequent year.

that there is no reason for allowance of this provision in the impugned

year.

authorities.

provision of Rs.6,40,042/- during the year under consideration and in the

earlier year, provision of Rs.9,78,102/- which is no longer required was

reversed and shown as income of the assessee. The contention of the

assessee is that as the assessee is not claiming any deduction on account

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of provision keeping in view of the fact that the earlier year’s provision of

Rs.9,78,102/- has been credited as income in the profit and loss account

by the assessee. Therefore, no addition of Rs.6,40,042/- was called for.

We find that the assessee has reversed the provision of Rs.9,78,102/-

which was claimed as deduction from the profit of the earlier year.

Therefore, the said provision was rightly treated as income of the

assessee which was wrongly allowed as deduction to the assessee in the

earlier year. Hence, the assessee cannot be allowed set off of this income

against the provision made for this year of Rs.6,40,042/-. Further, ld

A.R. in respect of Rs.6,40,042/- could not controvert the findings of both

lower authorities that the same was not allowable deduction u/s. 28 to 42

of the Act by bringing any positive material on record. Hence, we confirm

the order of the CIT(A) and dismiss the ground of appeal of the assessee.

the CIT(A) erred in not allowing claim of deduction for Rs.20,75,326/-.

of Rs.20,75,326/- as commission in the impugned year. The Assessing

Officer disallowed the commission of Rs.20,75,326/- as TDS was not

deducted from such payments by the assessee. The Assessing Officer

observed that TDS deducted was credited to the Central Government

account only on 20.8.2010. Therefore, the assessee was eligible for claim

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of deduction for the financial year 2010-2011 relevant to assessment year

2011-12. The Assessing Officer did not entertain the claim during the

assessment proceedings as the same was not claimed by the assessee in

his return of income.

on the ground that the assessee did not claim deduction in the original

return filed by it and neither claimed the same by filing revised return of

income.

for deduction during the course of assessment proceedings before the

Assessing Officer and, therefore, the Assessing Officer was not justified in

not accepting the same and allowing deduction for the same. Further, the

CIT(A) was also not justified in not allowing the claim of the assessee as

the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd

vs CIT, 284 ITR 323 (SC) was not applicable on appellate authorities.

Hence, he submitted that deduction should be allowed to the assessee.

on record, we find that the assessee had claimed deduction for

commission payment of Rs.20,75,326/- for the assessment year 2007-

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08, which was disallowed by him on the ground that the assessee has not

deducted TDS from the payment. The Assessing Officer observed that the

assessee had made payments of TDS to the Central Government on

20.8.2010 and, therefore, the assessee was eligible for deduction of

commission payment in financial year 2010-2011 relevant to assessment

year 2011-12. However, he disallowed the claim on the ground that the

assessee has not made claim for deduction in the return of income filed.

Hon’ble Supreme Court in the case of Goetze (India) Ltd (supra) and

submitted that this decision is not applicable on appellate authorities and,

therefore, any claim by the assessee during the appeal proceedings was

to be allowed deduction to the assessee. The CIT(A) did not accept the

explanation of the assessee and confirmed the order of the Assessing

Officer.

before us.

made claim for deduction on commission payment of Rs.20,75,326/- in

the return of income filed by him, it had made claim during the course of

assessment proceedings before the Assessing officer. On this background

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of the case, we are of the considered view that the CIT(A) was not

justified in not allowing the claim for deduction of the assessee as the

decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd

(supra) was not applicable to appellate authority. In this view of the

matter, we set aside the orders of lower authorities and remand back to

the Assessing Officer to consider the claim of the assessee for commission

payment of Rs.20,75,326/- and allow the same as per law after allowing

reasonable opportunity of the assessee.

Order pronounced in the open court on 10 /08/2017.

Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 10 /08/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : /Assessee : The Mayurbhanj Central Co-operative Bank Limited, At/pi: Baripada, Mayurbhanj 2. The Respondent. /Revenue: ACIT, Balasore Circle, Balasore 3. The CIT(A)- Cuttack 4. Pr.CIT- Cuttack 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack