THE VALLABH VIDYANAGAR COMM. CO.OP. BANK LTD.,ANAND vs. THE ACIT, ANAND CIRCLE, ANAND

ITA 2777/AHD/2014Status: DisposedITAT Ahmedabad16 October 2017AY 2011-124 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the 'Sahay Expenses' were incurred to promote the bank's business and attract new members, thus qualifying as business expenditure. Therefore, the disallowance was set aside.

What were the facts?

The assessee, a cooperative bank, paid Rs. 6,15,000 as 'Sahay Expenses' to family members of deceased members. The Assessing Officer disallowed this expense, stating it was not for banking activities. The CIT(A) upheld this disallowance.

What were the issues?

Whether 'Sahay Expenses' paid to family members of deceased members are deductible as business expenditure. Whether such expenses were incurred wholly and exclusively for the purpose of business.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD

For Respondent: Shri Mudit Nagpal, Sr.DR

आदेश / O R D E R

PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax(Appeals)-IV, Baroda [CIT(A) in short] dated 28/07/2014 in the matter of assessment order passed under s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as

ITA No.2777/Ahd/2014 The Vallabh Vidyanagar Comm.Co-op.Bank Ltd. vs. ACIT Asst.Year – 2011-12 - 2 - "the Act") dated 29/11/2013 relevant to Assessment Year (AY) 2011- 12.

The grounds of appeal raised by the assessee read as under:-

The learned CIT(A)-IV, Baroda erred in law and / or on facts in confirming the disallowance of Sahay Expenses of Rs.6,15,000/- paid to the family members of deceased members of the Bank. 1.1 The learned CIT(A)-IV, Baroda, ought to have deleted the addition of Sahay Expenses of Rs.6,15,000/- on the grounds of Commercial Expediency. 1.2.The learned CIT(A)-IV, Baroda, erred in law and / or on facts in confirming the addition of Sahay Expenses of Rs.6,15,000/- though the same was incurred wholly and exclusively for the purpose of business of the appellant bank. 2. The learned CIT(A)-IV, Baroda, erred in law and / or on facts in confirming the action of AO to treat the Architect Fees of Rs.12,990/- as Capital Expenses instead of Revenue Expenses.

Ground No.1 concerns disallowance of ‘Sahay Expenses’ of Rs.6,15,000/- paid to family of deceased members of the Bank. The Assessing Officer (AO) disallowed the aforesaid expenses and claimed by the assessee on the ground that such expenses have not been incurred for its banking activities. The expenses incurred are not wholly and exclusively for its business purposes. The CIT(A) also confirmed the action of the AO in first appeal.

ITA No.2777/Ahd/2014 The Vallabh Vidyanagar Comm.Co-op.Bank Ltd. vs. ACIT Asst.Year – 2011-12 - 3 - 4. The Ld.AR for the assessee before us contended that the payment is made to the deceased member of the Bank as per the standard policy of the bank. The main business of the bank is to collect the funds and to give advances against the funds to its members exclusively. Therefore, the members of the bank are its customers. Hence, to attract the public to become members, the bank declared policy of ‘Sahay’ to the deceased members. As per the submissions made before the AO, the bank registered 336 income customers during the year by highlighting the policy. The expenditure incurred has helped boosting its banking business. The Ld.AR submitted that on similar facts situation, the Coordinate Bench of the Tribunal in Kalupur Commerical Co-op.Bank Ltd. vs. ACIT in ITA No.2614/Ahd/2011 for AY 2008-09 order dated 17/08/2016 has adjudicated the issue in favour of assessee and allowed the aforesaid payment as business expenditure.

The Ld.DR did not controvert the aforesaid narrative of the assessee.

In the light of the aforesaid submission, we find merit in the argument of the assessee. The expenditure incurred appears to have promoted the business of the company and thus is in the nature of business expenditure. Therefore, ground No.1 of assessee’s appeal requires to be allowed.

ITA No.2777/Ahd/2014 The Vallabh Vidyanagar Comm.Co-op.Bank Ltd. vs. ACIT Asst.Year – 2011-12 - 4 -

Ground No.2 raised by the assessee is dismissed as not pressed.

In the result, appeal of the assessee is allowed. This Order pronounced in Open Court on 16 / 10 /2017

Sd/- Sd/- (महावीर �साद) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 16/ 10 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-IV, Baroda �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 10.10.17 (dictation-pad 5- pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …10.10.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….16.10.17 7. Date on which the file goes to the Bench Clerk…………………16.10.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………

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