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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI SATBEER SINGH GODARA & SHRI AMARJIT SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH : COCHIN BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA.Nos.251 & 252/Coch./2017 Assessment Years 2002-2003 & 2010-2011 M/s. State Bank of The ACIT, Circle-1(1), Travancore, Head Office (Tax Aayakar Bhavan, Kowdiar Cell), 2nd Floor, Poojappura, vs. PO, TRIVANDRUM TRIVANDRUM – 695 012. PIN – 695 003. PAN AAGCS9120G. KERALA. KERALA. (Appellant) (Respondent) For Assessee : Sri Ninad Patade, CA For Revenue : Sri Dr. S. Pandian, CIT-DR Date of Hearing : 20.08.2024 Date of Pronouncement : 25.09.2024 ORDER PER BENCH :
These assessee’s twin appeals, arise against the as many orders of the learned CIT(A), Trivandrum, in appeal ITA.No.44/TVM/CIT(A),TVM/2012-13 and ITA.No.135/TVM/ CIT(A),TVM/2015-16 both dated 24.03.2017 for the assessment years 2002-2003 and 2010-2011, in proceedings u/sec.143(3) and sec.143(3) r.w.s.263 of the Income Tax Act, 1961 (in short "the Act"), assessment year-wise, respectively.
2 ITA.Nos. 251 & 252/Coch./2017 Heard both the parties. Case files perused.
The assessee pleads the following substantive grounds in the instant appeal :
“The Ld. CIT(A) erred in confirming the disallowance of deduction u/s 36(1) (viia), due to AO's erroneous observation that no provision for doubtful debts were made in books, whereas on facts a sum of Rs.145.86 Crores was actually made towards provision for bad and doubtful debts for the relevant year. Hence no disallowance is called for.
Your appellant craves leave to add, to amend, and/or vary the grounds of appeal before or at the time of hearing.”
3. Learned DR has chosen to support the assessment findings dated 15.12.2013 that the assessee had never made any provision for bad and doubtful debts so as to be eligible for sec.36(1)(viia) deduction amounting to Rs.35,68,76,559/-. His case therefore, is that the lower authorities have rightly disallowed the assessee’s impugned deduction claim.
3 ITA.Nos. 251 & 252/Coch./2017 4. Learned counsel on the other hand, has filed a copy of the assessee’s statement(s) dated 16.02.2012 filed before the learned CIT in sec.263 proceedings reading as under :
4 ITA.Nos. 251 & 252/Coch./2017
5 ITA.Nos. 251 & 252/Coch./2017 4.1. Learned counsel therefore, submits that once the foregoing details already formed part of the case records, the assessee could not be blamed for not having submitted the relevant facts of it’s impugned provision as per Revenue’s arguments. Be that as it may, we are of the considered view in this factual backdrop that the assessee had already placed on record it’s corresponding details of the impugned provision for the purpose of claiming sec.36(1)(viia) deduction and therefore,
6 ITA.Nos. 251 & 252/Coch./2017 larger interest of justice would be met in case the learned Assessing Officer once again re-decides the issue afresh preferably within three effective opportunities of hearing, subject to the rider that it shall be the taxpayer’s onus and responsibility only to file and prove all the relevant facts in consequential proceedings. Ordered accordingly.
This assessee’s former appeal ITA.No.251/Coch./2017 is allowed for statistical purposes in above terms.
Next comes the assessee’s latter appeal ITA.No.252/ Coch./2017 for assessment year 2010-11 wherein it has raised the following substantive grounds :
“1. Disallowance under section 36(1)(viii):
1.1. The CIT (A) erred in confirming the order of AO abating eligible deduction u/s 36(1)(viii) ignoring the method of accounting for eligible business consistently followed by appellant. 1.2. The CIT(A) failed to appreciate that whereas the method adopted by appellant involved allocating only those expenses which is referable to income from specified
7 ITA.Nos. 251 & 252/Coch./2017 business the method adopted by AO allocating all expenses regardless they are referable to eligible business or not is artificial, arbitrary and unreasonable.
Disallowance of provision made for sick leave: The CIT(A) erred in confirming the disallowance of provision made for sick leave by invoking the provisions of section 43B whereas said provision for sick leave computed on actuarial valuation is not covered by above section and hence no disallowance is warranted.
Your appellant craves leave to add to amend and or vary the grounds of appeal before or at the time of hearing.”
7. We now advert to sec.36(1)(viia) deduction disallowance /addition amounting to Rs.10,90,20,000/- made in the course of assessment herein dated 16.12.2015 as upheld in the CIT(A)'s detailed discussion as under :
“2.3. I considered both the views expressed. As per section 36(1)(vili) of the Act, what is to be considered is the profit derived from the eligible business computed under the head
8 ITA.Nos. 251 & 252/Coch./2017 profit and loss of business. It is not in dispute that the appellant is entitled for deduction u/s 36(1)(viii). The only dispute is how the amount to which the appellant is entitled for deduction is to be worked out. The appellant claimed a deduction of Rs.30 cr and worked out the same after considering the total expenses incurred as a percentage of interest earned and allocated expenses on the same basis to the income earned from eligible advances to arrive at the profit derived from the eligible business. Whereas the Assessing Officer worked out the eligible deduction just by determining the profit from eligible business on the basis of the percentage of returned income to gross income. The Assessing Officer considered Rs.595,26,76,073/- as gross total income and worked out the percentage of total income to gross income at 12.74% and then after considering the income from eligible business amounting to Rs.749,50,00,000/- worked out the proportionate income at Rs.95,49,00,000/-. It is from this proportionate income, worked out the eligible deduction of Rs.19,09,80,000/- representing 12.74% of the profit derived from eligible business. As the eligible deduction is to be worked out in the 9 ITA.Nos. 251 & 252/Coch./2017 manner laid down in section 30 to 43A of the Act, the computation should necessarily be based on the assessed income, but not based on operating profit as claimed by the appellant. As mentioned earlier, what is to be considered is income/profit derived from the eligible business which the Assessing Officer has considered promptly and worked out the right amount of deduction at Rs.19,09,80,000/-. In the absence of further details filed by the appellant for the amount of Rs.30 cr they worked out, I agree with the Assessing Officer that the appellant is entitled for deduction u/s 36(1)(viii) only for an amount of Rs.19,09,80,000/- and accordingly, the addition made on account of excess claim made amounting to Rs.10,90,20,000/- is hereby confirmed. Appeal on this ground therefore stands dismissed.”
7.1. It is in this factual backdrop that the clinching question which arises herein for our apt adjudication is a fundamental one only as to whether it is the assessee’s “amount not exceeding 20% of the produce derived from eligible business” only or the corresponding gross total income, which needs to be considered for the purpose of computing the deduction
10 ITA.Nos. 251 & 252/Coch./2017 u/sec.36(1)(vii) of the Act. We are of the considered view that the learned CIT(A) himself has settled the instant afresh that the Assessing Officer went by the assessee’s gross total income. Faced with this situation, learned counsel has filed before us, the assessee’s computation wherein it had taken into consideration only the profits derived from eligible business than gross total income. We see prima facie merit in assessee’s case going by the preceding clinching statutory provision itself wherein there is no scope for including the gross total income going by the principles of stricter interpretation as per Commissioner of Customs (Imports) Mumbai vs. Dilip Kumar And & Co. & Ors. [2018] 9 SCC 1 (SC) (FB). We thus accept the assessee’s arguments in principle and leave it open for the learned Assessing Officer to finalise his consequential computation strictly as stipulated u/sec.36(1)(vii) of the Act as per law, preferably within three effective opportunities of hearing, subject to the rider that it shall be the taxpayer’s onus and responsibility only to file and prove all the relevant facts in consequential proceedings. This ground of the assessee is allowed for statistical purposes. Ordered accordingly.
11 ITA.Nos. 251 & 252/Coch./2017 8. Next comes the assessee’s latter substantive ground raising the issue of disallowance of sick leave provision.
Learned counsel quotes case law Exide Industries 292 ITR 470 that hon’ble Calcutta High Court has quashed the relevant statutory provision itself i.e., 43B(f) and therefore, both the learned lower authorities’ action making the impugned disallowance is not sustainable.
Learned DR on the other hand submits that hon’ble apex court’s decision in Union of India vs. Excide Industries Ltd., [2020] 425 ITR 1 (SC) has reversed the foregoing judicial precedent.
That being the case, we reject the assessee’s instant second substantive ground. Ordered accordingly.
This assessee’s latter appeal ITA.No.252/Coch./2017 is partly allowed for statistical purposes in above terms.
To sum-up, this assessee’s former appeal ITA.No.251/ Coch./2017 is allowed for statistical purposes and latter appeal ITA.No.252/Coch./2017 is partly allowed for statistical purposes
12 ITA.Nos. 251 & 252/Coch./2017 in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 25.09.2024.
Sd/- Sd/- [AMARJIT SINGH] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin, Dated 25th September, 2024 VBP/- Copy to 1. The appellant 2. The respondent 3. The CIT(A) concerned. 4. The CIT concerned 5. The D.R. ITAT, Cochin Bench, Cochin. 6. Guard File. //By Order// //True copy//
Sr. Private Secretary, ITAT, Cochin Bench, Cochin