2020 (2) TMI 1558 - AT - Income Tax

Deduction on provision for bad and doubtful debts u/s 36(1)(viia) - claim of deduction being 10% of Incremental Advances of rural branches and 7.5% of income was claimed for provision for doubtful debt - only reason for which the claim of the assessee is disallowed is because assessee has not made any provision in the books of accounts - HELD THAT - CIT (Appeals) has failed to consider the fact that in the revised profit and loss account such claim was already made. Therefore, it is required to be considered by the lower authorities that when assessee has submitted the revised annual accounts which are duly approved by the AGM whether the assessee has satisfied the requirement of the provisions of Section 36(1)(viia) - As apparent from the record that annual accounts were revised on 26.02.2016, whereas the order was passed under Section 143(3) of the Act on 17.03.2016. Therefore, such accounts naturally could not have been before the Assessing Officer. CIT (Appeals) also did not consider the fact that whether such a revision of accounts is valid or not. In view of this we set aside the whole issue as per ground No. 1 of the appeal back to the file of the Assessing Officer to examine whether the assessee has made the provision correctly or not. TDS u/s 194A - Addition on interest paid on FDRs - assessee argued non examining Form No. 15G and 15H - assessee submitted that no tax is required to be deducted on fixed deposits made by agriculturists - HELD THAT - As apparent from the orders that assessee did file Form No. 15G and 15H before the Assessing Officer though the same might not have been filed before the learned Commissioner of Income Tax, Muzaffar Nagar or might have been filed late - assessee has also stated that most of the fixed depositors are agriculturists and are having income below the taxable limit. Merely because the assessee did not file the requisite form before the learned CIT, Muzaffar Nagar, in time, it cannot be said that assessee has failed to deduct tax at source on such interest payment - without examining those Form No. 15G and 15H the Assessing Officer also could not have held that the assessee should have deducted tax at source on interest paid to such persons who have furnished Form No. 15H and 15G to the assessee. Without examining the facts, no disallowance can be made in the hands of the assessee. Furthermore the learned CIT (Appeals) also did not carry out such an exercise - we set asdide this ground of appeal that to the file of the Assessing Officer with a direction to the assessee to submit such Form No. 15H and 15G and prove before the Assessing Officer that no tax was required to be deducted on such sum. Ground allowed for statistical purposes.

Summary

Issues:
1. Disallowance under Section 36(1)(viia) of the Income Tax Act.
2. Disallowance of interest paid on fixed deposit receipts under Section 40(a)(ia) of the Act.
3. Request for adjournment during the hearing.
4. Consideration of Form No. 15G and 15H for tax deduction on interest payments.

Issue 1: Disallowance under Section 36(1)(viia) of the Income Tax Act:
The appellant, a cooperative society deriving income from banking, filed an appeal against the disallowance of deductions under Section 36(1)(viia) of the Act. The Assessing Officer disallowed the claimed deductions as the provision for bad and doubtful debts was not reflected in the annual accounts. The appellant argued that the deduction was allowable under Rule 6ABA of the Income Tax Rules, citing Circular No. 258 dated 14.07.1979. The ITAT observed that the revised profit and loss account submitted by the appellant post-AGM approval contained the claimed provision. The ITAT directed the issue back to the Assessing Officer to verify the correctness of the provision made by the appellant, emphasizing the validity of the revised accounts.

Issue 2: Disallowance of interest paid on fixed deposit receipts under Section 40(a)(ia) of the Act:
The Assessing Officer disallowed interest paid on fixed deposits due to non-deduction of tax at source, amounting to &8377; 56,64,630. The appellant contended that no tax deduction was required on deposits by agriculturists and submitted Form No. 15H and 15G to the Assessing Officer. The ITAT found that the forms were submitted to the Assessing Officer but not to the Commissioner of Income Tax, Muzaffar Nagar. The ITAT directed the issue back to the Assessing Officer for the appellant to prove the non-requirement of tax deduction on the interest payments, emphasizing the importance of examining the submitted forms before making any disallowance.

Issue 3: Request for adjournment during the hearing:
The appellant sought an adjournment during the hearing, which was denied by the ITAT due to repeated adjournment requests in the past, highlighting the lack of merit in the request.

Issue 4: Consideration of Form No. 15G and 15H for tax deduction on interest payments:
The ITAT emphasized the importance of submitting Form No. 15G and 15H to prove the non-requirement of tax deduction on interest payments to depositors with income below the taxable limit. The ITAT directed the appellant to provide the forms and relevant details to the Assessing Officer for re-examination, stressing the need for a thorough assessment before disallowing any claims.

In conclusion, the ITAT allowed the appeal of the appellant for statistical purposes, directing the Assessing Officer to re-examine the issues related to the disallowances under Section 36(1)(viia) and Section 40(a)(ia) of the Income Tax Act, along with the submission of Form No. 15G and 15H for tax deduction verification.