SHIR DHOKESHWAR GRAMIN BIGARSHETI SAHAKARI PATSANSTHA MARYADIT,AHMEDNAGAR vs. PRINCIPAL COMMISSIONER OF INCOME TAX, PUNE-1, PUNE

This is recalled matter. Vide order dated 12.06.2024 in M.A. No.258/PUN/2023 for the assessment year 2018-19 filed against the order of the Tribunal in dated 24.03.2023 (appeal filed by the assessee) was recalled for limited purpose to adjudicate the ground no.2 in respect of NPA provision of Rs.42,51,668/- debited in the Profit & Loss Account.

LD counsel appearing for the assessee submitted before us that LD PCIT also directed to revise the assessment order on the basis of NPA provision of Rs.42,51,668/-, which was debited in the P&L Account, but in the original assessment order the AO failed to disallow the above provision as the same was not allowable as per section 28 to 43B of the IT Act, hence LD PCIT directed to disallow this NPA provision. LD counsel further submitted that the direction of LD PCIT to disallow the NPA provision will not increase the taxable income of the assessee. It was submitted that CBDT has issued Circular No.37/2016 dated 02-11-2016, wherein it was directed to allow chapter VIA deduction to the resultant income increased due to additions/ disallowances made by the Assessing Officer during course of assessment proceedings. It was therefore submitted that the taxable income of the assessee will not increase even if the NPA provision of Rs.42,51,668/- is disallowed & added back to the income of the assessee, because the resultant business income will VIA deduction u/s 80P(2)(a)(i) of the IT Act. It was therefore requested before the bench to set-aside the order passed by LD PCIT u/s 263 of the IT Act.

LD DR fairly accepted that the circular above referred is there & is applicable to the instant case.

We have heard LD Counsels from both the sides & perused the material available on record. We find force in the arguments of the LD counsel that in the light of Circular No.37/2016 dated 02-11-2016, the assessee is entitled to claim chapter VIA deduction u/s 80P(2)(a)(i) of the IT Act on the addition of Rs.42,51,668/- which is going to increase its business income, which is deductible u/s 80P(2)(a)(i) of the IT Act. Therefore, we are of the considered opinion that the direction issued by LD PCIT in the order passed u/s 263 of the IT Act will only result in an academic exercise & hence the order cannot be said to be prejudicial to the interest of revenue. We therefore set-aside the order passed by LD PCIT u/s 263 of the IT Act directing to revise the assessment order. Thus, the ground no.2 raised in the appeal is also allowed.