DCIT, CIRCLE, SANGRUR vs. M/S THE SANGRUR CENTRAL CO-OPERATIVE BANK LTD., SANGRUR

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ITA 439/CHANDI/2018Status: DisposedITAT Chandigarh06 August 2018AY 2014-154 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the expenditure on vehicles for senior officers was not allowable as it was not incurred wholly and exclusively for business purposes. The CIT(A)'s disallowance was sustained.

What were the facts?

The assessee bank incurred expenditure on vehicles for senior officers deputed for banking purposes. The Assessing Officer disallowed this expenditure, and the CIT(A) upheld the disallowance, citing it as not being wholly and exclusively for business purposes and potentially falling under a gratuitous act of convenience for officers.

What were the issues?

Whether expenditure incurred on vehicles for senior officers deputed for banking purposes is an allowable business expenditure under Section 37 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH

Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR

For Appellant: Shri. Ashok Goyal
For Respondent: Shri. N.D. Gupta
Hearing: 17/07/2018Pronounced: 06/08/2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’B’, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.365/Chd/2018 Assessment Year: 2014-15

The Sangrur Central Co-operative Vs. The ACIT Bank Ltd. Circle Patiala Gate, Sangrur Sangrur

PAN No. AAAAT3920D

ITA No. 439/Chd/2018 Assessment Year: 2014-15

The DCIT, Vs. The Sangrur Central Co-operative Circle Bank Ltd. Sangrur Patiala Gate, Sangrur

(Appellant) (Respondent)

Assessee By : Shri. Ashok Goyal Revenue By : Shri. N.D. Gupta

Date of hearing : 17/07/2018 Date of Pronouncement :06/08/2018

ORDER PER BENCH:

The present Appeal has been filed by the Assessee and Cross Appeal filed

by the Revenue against the order of the Ld. CIT(A), Patiala dt. 05/01/2018.

2.

Only one effective ground raised by the Assessee is as under:

1.

That Ld. CIT(A) ahs erred in confirming the addition of Rs. 5,15,552/- being expenditure incurred on vehicles for senior officer deputed for the bank for banking purpose when the same are for banking business. Hence relief be allowed.

Revenue has raised the following grounds of appeal:

1.

Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 34,14,000/- made by the AO on account of disallowance of expenditure claimed under the head provision for standard assets. The provisions made on account of bad debts on standard assets is not allowable expenditure according to Section 36(1)(viia) of the I.T. Act, 1961.

2.

The A.O. has rightly made the addition of Rs. 34,14,000/- on account of provision made under the head standard assets. 3. It is prayed that the order of Ld. CIT(A) be set-aside and that of the AO be restored.

3.

Firstly we shall deal with the appeal of the Assessee.

4.

The Ld. CIT(A) confirmed the disallowance of expenditure of Rs. 5,15,552/-

made by the Assessing Officer under the provisions of section 37 as the

expenditure was not incurred for wholly and exclusively for business purposes,

the expenses being incurred for the use of vehicles by the Senior Officials

deputed by the bank.

5.

Ld. CIT(A) held that “Though it may be seen as having been expended

"wholly and exclusively" for the purposes of the business of the appellant Bank,

the said expenses do get hit by the Explanation-1, which explanation was

inserted with retrospective effect from 1962 to prohibit claim of amounts spent

on bribery, extortion by local goons etc. for the smooth functioning of the

business. Though the expenditure claimed by the appellant bank may not fall in

the category of expressly prohibited purpose, it still lies in the realm of gratuitous

act of conveniencing the Officers of the Cooperative Department, which may

not exactly be as per the Conduct Rules with which the said officers are bound

to conduct their functioning. Considered in this context, the impugned expenses

are not allowable within the meaning of section 37 of the Act. The disallowance

made by the Assessing Officer with regard to the aforesaid expenditure is, thus,

sustained.”

6.

Before us, the Ld. AR argued that the similar disallowance made by the

Assessing Officer for the assessment year 2011-12 have been deleted by the Ld.

CIT(A) in the assessee’s own case for the A.Y. 2011-12. Further it was argued that

the similar addition was deleted by the coordinate Bench of ITAT in the case of

Ludhiana Central Co-operative Bank Ltd. in ITA No. 526/CHD/2013 and also by

ITAT Amritsar Bench in the case of Punjab Gramin Bank Ltd., Jalandhar. Further

the details of the expenditure, the letter of the Registrar of the Co-operative

societies approving the Rules for maintenance and use of vehicles of Central

Cooperative Banks addressed to all the banks have been submitted. The log

book regarding the mileage of the vehicles, the details of the Auditors / CEO’s /

ARC’s who were all employees of the State and also the purpose of utilization of

the vehicles have been submitted.

7.

Ld. DR relied on the order of the Ld. CIT(A).

8.

We have heard both the parties and perused the records. We find that

the vehicles have been used wholly and exclusively for the purpose of the

operations / activities of the bank. And keeping in view the order of the Ld.

CIT(A) in the assessee’s own case for the earlier years and the decisions of the

Co-ordinate Benches of ITAT mentioned supra, we hereby delete the

disallowance made on account of vehicle expenses.

9.

Now coming to the appeal of the Revenue we find that the Ld. CIT(A) has

deleted the addition made on account of disallowance of expenditure claimed

under the provisions for standard assets. The disallowance made by the

Assessing Officer and deleted by the Ld. CIT(A) was of Rs. 34,14,000/-.

10.

According to the Circular No. 03/2018 dated 11/07/2018, the CBDT in

supersession of earlier instructions has directed that department’s appeals

before ITAT shall not be filed in cases where the tax effect does not exceed the

monetary limit of Rs. 20 lacs. The tax will not include any interest thereon. It is

further clarified that if in the case of an assessee, disputed issues arise in more

than one assessment year, appeal can be filed in respect of such assessment

year or years in which the tax effect in respect of disputed issues exceeds the

monetary limit so specified.

11.

Admittedly, in the departmental appeal, the tax effect is less than Rs. 20

lacs, therefore, departmental appeal is not maintainable. The Ld. DR could not

bring to our notice any exceptions mentioned in the said Circular.

Hence, keeping in view the Circular mentioned above the appeal of the

Department is dismissed as non maintainable.

12.

As a result appeal of the Assessee is allowed and that of the Revenue is

dismissed.

Order pronounced in the open Court.

Sd/- Sd/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 06/08/2018 AG Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR

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