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2016 (9) TMI 1465 - AT - Income TaxProvision for staff gratuity - Held that - This amount is debited to profit & loss account but the same is accumulated under the head reserve for gratuity fund which shows that the actual payment was not made by the assessee. CIT(A) by following the case of District Cooperative Central Bank Eluru after considering the details filed by the assessee he gave a categorical finding that payment made by the assessee towards unproved gratuity fund is not an allowable expenditure. As the assessee has submitted before us that even provision is made for the staff gratuity it is an allowable expenditure. There is no merit in the argument for the assessee for the reason that simply making a provision will not leads to allowable expenditure unless payment is made. Thus this ground of appeal raised by the assessee is dismissed. Provision for standard assets - Held that - A.O. disallowed by observing that the nature of contingent liability do not constitute an expenditure. Assessee carried matter in appeal before the CIT(A). CIT(A) confirmed the order of the A.O. by observing that the assessee is provided only provision for standard assets but it is not the case of the assessee that any of these assets have become bad or non-recoverable. It is also not the case that any of these loans/assets are written off and the provision claimed by the assessee is not allowable deduction as per the of the Income Tax Act 1961. Before us the assessee has submitted that the claim of the assessee has to be allowed. We find no merit in the argument of the Ld. Counsel for the assessee for the simple reason that the assessee has made a provision for standard assets not on the non-performing assets. It is a mere provision. We find no reason to interfere with the order passed by the Ld. CIT(A). This ground of appeal raised by the assessee is dismissed. Loss on account of Bobbili branch merger - Held that - The same cannot be allowed in the hands of the assessee s case. CIT(A) correctly by considering the provisions of the Act disallowed the claim made by the assessee. So far as RBI guidelines with regard to the amortization of losses is concerned in view of the specific provision provided by section 72AB of the Act in our opinion RBI guidelines cannot prevail over the Income Tax Act. As observed that business losses and unabsorbed depreciation of amalgamating co-operative bank i.e. Bobbili Co-operative bank can be set off against the income of successor co-operative bank i.e. amalgamated co-operative bank (assessee) if the amalgamation is within the meaning of section 72AB. In the present case the amalgamating company i.e. Bobbili Co-operative bank not filed return of income as required u/s 72AB of the Act. Therefore the claim of the assessee cannot be allowed. We find that the Ld. CIT(A) has correctly decided the issue and disallowed the claim of the assessee. In this case the assessee has not paid any amount to amalgamating company. The assessee has only taken losses of amalgamating company i.e. Bobbili Co-operative bank. Therefore the assessee has not acquired any goodwill. CIT(A) by considering the entire facts of the case has passed a detailed order by considering the provisions of law. In so far as case laws relied upon by the Ld. Counsel for the assessee particularly in the case of Cosmos Co-operative Bank Limited (2014 (1) TMI 1696 - ITAT PUNE) is entirely different facts and circumstances therefore we find no application to the facts of the present case. In so far as other case laws relied for the assessee also decided in a different facts and circumstances and therefore we find no application to the facts of the present case. We find no reason to interfere with the order passed by the CIT(A). This ground of appeal raised by the assessee is dismissed. Amortization of premium on Government securities - Held that - It is only a provision i.e. contingent liability was made which may become payable at future date therefore the provisions are not allowable u/s 36 & 37 of the Act the same is disallowed. On appeal the Ld. CIT(A) confirmed the order of the A.O. On appeal the assessee has submitted that this is an ascertained liability under the provision and the amount is already paid. We find this needs verification therefore we set aside the order passed by the CIT(A) and remit the matter back to the A.O. Provision for staff gratuity - Held that - A.O. has observed that the assessee has claimed Rs. 60 lakhs as a provision for staff gratuity debited the same in the profit & loss account. The A.O. has asked the assessee to furnish the details. The A.O. after considering the details submitted by the assessee he has observed that as per the information available on record it is not clear whether the assessee is contributing to the recognised gratuity fund or not accordingly the claim of the assessee of Rs. 60 lakhs was disallowed. On appeal the CIT(A) by following the assessee s own case for 2008-09 the order of the A.O. is confirmed and directed the A.O. to allow the deduction of the actual amount of gratuity paid during the year. TDS u/s 194A - Disallowance u/s 40(a)(ia) - TDS on the interest payment exceeding Rs. 10, 000/- in view of the specific provision contained in section 194A(3)(i)(b) - Held that - When the assessee filed a rectification petition u/s 154 of the Act dated 4.12.2013 CIT(A) has corrected the order by considering the assessment year 2007-08 and relief was granted. Therefore we find that this ground of appeal raised by the assessee has no merit and the same is dismissed.
Issues Involved:
1. Disallowance of provision for staff gratuity. 2. Disallowance of provision for standard assets. 3. Disallowance of amortization of loss on account of merger. 4. Disallowance of amortization of premium on Government securities. 5. Interest payment by the society to its members on the share capital. 6. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961. Detailed Analysis: 1. Disallowance of Provision for Staff Gratuity: The assessee claimed Rs. 20,00,000/- as a provision for staff gratuity, which was debited to the profit & loss account but not actually paid. The Assessing Officer (A.O.) disallowed the claim, and the CIT(A) confirmed this, stating that mere provision without actual payment does not constitute allowable expenditure. The Tribunal upheld this disallowance, agreeing that the provision without payment is not an allowable expenditure. 2. Disallowance of Provision for Standard Assets: The assessee claimed Rs. 30,87,213/- as a provision for standard assets, shown under "provision on performing assets" in the balance sheet. The A.O. disallowed this, considering it a contingent liability, not an actual expenditure. The CIT(A) upheld the disallowance, noting that the provision was for standard assets, not non-performing ones. The Tribunal confirmed this, agreeing that the provision does not constitute an allowable deduction. 3. Disallowance of Amortization of Loss on Account of Merger: The assessee claimed Rs. 1,56,70,500/- as amortization of loss due to the merger of Bobbili Cooperative Urban Bank. The A.O. disallowed this, stating it was not in accordance with Sections 72AB or 44DB of the Act. The CIT(A) upheld this, noting that Bobbili Bank had not filed a return of income, making its losses ineligible for carry forward under Section 72. The Tribunal agreed, stating that RBI guidelines cannot override the Income Tax Act and that the loss cannot be allowed as the amalgamating bank did not comply with Section 72AB requirements. 4. Disallowance of Amortization of Premium on Government Securities: The A.O. disallowed the amortization of premium on Government securities, considering it a contingent liability. The CIT(A) upheld this. However, the Tribunal remitted the matter back to the A.O. for verification, allowing the appeal for statistical purposes. 5. Interest Payment by the Society to its Members on the Share Capital: The A.O. disallowed Rs. 1,57,53,620/- paid as interest on share capital, treating it as appropriation of profits, not an expenditure. The CIT(A) directed the A.O. to delete the addition, following the Tribunal's decision in the assessee’s own case for A.Y. 2007-08. The Tribunal upheld this, adhering to the doctrine of precedent. 6. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961: The A.O. disallowed Rs. 5,64,79,087/- under Section 40(a)(ia) for non-deduction of TDS on interest payments. The CIT(A) initially confirmed this but later rectified the order, granting relief based on earlier years' decisions. The Tribunal upheld the CIT(A)'s rectification, noting the CBDT Circular No.9/2002 clarifies that cooperative banks are not required to deduct TDS on interest paid to members. Conclusion: The appeals filed by the assessee were partly allowed for statistical purposes, and the cross objections were dismissed. The appeals filed by the revenue were dismissed. The Tribunal's decisions were pronounced on 30th September 2016.
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