2016 (10) TMI 1050 - AT - Income Tax

Disallowance of claim of deduction under section 36(1)(viia) - CIT-A deleted the addition - Held that - So far as the provision in respect of CRB Capital Market the assessee himself has added it back, alongwith the provision for other bad debts, in the computation of income. What has been claimed is deduction is as per the formulae set out in section 36(1)(viia) which provides for deduction of 10% of rural advances and 7.5% of gross total income, which works out to ₹ 86, 71,687 and ₹ 14,37,073 respectively, and thus aggregate to ₹ 1,01,08,760. As regards the Assessing Officer s observations to the effect that since no provision is created for the bad debts, and that, for this reason, the same cannot be allowed as deduction, we find this aspect of the matter is now covered by the decision in the case of Power Finance Corporation Limited Vs JCIT 2006 (8) TMI 332 - ITAT DELHI inasmuch as undisputedly the assessee has created a provision of ₹ 1,42,36,140 to the debit of reserve fund against the investment in CRB Capital Market, and the mere fact that it is termed as transfer to reserve does not alter substance of the provision because admittedly it is an above the line transfer and not below the line appropriation. In view of these discussions, as also bearing in mind entirety of the case, we uphold the relief granted by the CIT(A) and decline to interfere in the matter. - Decided against revenue Disallowance of provision on account of Government Securities - Held that - this issue is covered, in favour of the assessee, by decision of a coordinate bench, in assessee s own case for the immediately preceding assessment year. In this view of the matter, even as learned Departmental Representative, relied upon the stand taken in the order of the Assessing Officer, which has anyway been rejected by the coordinate bench in immediately preceding assessment year, we see no reasons to interfere in the relief granted by the CIT(A)in allowing the claim - Decided against revenue

Summary

Issues:
1. Correctness of order dated 8th November 2012 for assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10.
2. Deletion of addition made on account of disallowance of claim of deduction under section 36(1)(viia) of the Income Tax Act, 1961.
3. Deletion of addition made on account of disallowance of provision on account of Government Securities.

Analysis:

Issue 1: Correctness of Assessment Order
The Assessing Officer challenged the correctness of the assessment order dated 8th November 2012 for the assessment year 2009-10. The primary grievance raised was regarding the deletion of an addition made on account of disallowance of a deduction under section 36(1)(viia) of the Income Tax Act, 1961. The appellant, a cooperative bank, had claimed a deduction of a certain amount which the Assessing Officer found to be incorrect. The dispute revolved around the creation of a provision for bad debts and its impact on the claimed deduction. The CIT(A) had deleted the disallowance, leading to the appeal before the tribunal.

Issue 2: Disallowance of Deduction under Section 36(1)(viia)
The Assessing Officer disallowed a deduction claimed by the appellant under section 36(1)(viia) of the Income Tax Act, 1961. This disallowance was based on the Assessing Officer's interpretation of the provisions related to the creation of provisions for bad debts. The tribunal, after considering the arguments and legal position, upheld the relief granted by the CIT(A) and declined to interfere in the matter. The tribunal relied on a previous decision by a coordinate bench to support its conclusion that the provision created by the appellant was valid for claiming the deduction.

Issue 3: Disallowance of Provision on Government Securities
The second ground of appeal raised by the Assessing Officer pertained to the deletion of an addition made on account of disallowance of a provision related to Government Securities. The tribunal noted that this issue was already decided in favor of the appellant by a coordinate bench in the immediately preceding assessment year. Despite the Departmental Representative's reliance on the Assessing Officer's order, the tribunal found no reason to interfere with the relief granted by the CIT(A) based on the precedent set in the previous assessment year.

In conclusion, the tribunal dismissed both grounds of appeal raised by the Assessing Officer and allowed the appeal in favor of the appellant. The judgment highlighted the importance of proper interpretation of legal provisions and the relevance of past decisions in determining the outcome of tax disputes.