2018 (12) TMI 114 - AT - Income Tax

Write off of debts under the Debt Waiver Scheme - claim of exemption of the same income in the earlier year or made double claim in the earlier years with regard to bad debts or NPAH - eld that - The assessee should not claim double deduction under the waiver scheme as well as the exemption of the income or bad debt for the same amount in the earlier years. Therefore, this issue needs detailed verification at the end of the AO, hence, we remit the matter back to the file of the AO to allow additional relief of 25% OTS after verifying whether the assessee has claimed the exemption of the same income in the earlier year or made double claim in the earlier years with regard to bad debts or NPA and decide the issue afresh on merits. The AO should give reasonable opportunity to the assessee before deciding the issue and the assessee is directed to furnish the details. Accordingly, the appeal of the revenue on this ground is remitted back to the file of the AO for fresh consideration and this ground is allowed for statistical purpose. Waiver of penal interest and other interests as expenditure u/s 31(1)as per schemes announced by the APCOB and KBCCB - Held that - The claim of the assessee was in all cases the waiver of interest on over due and sticky loans and the assessee submitted that such interest was never claimed as expenditure in the earlier years. Though there was change in the nomenclature the waiver and written off was interest and stated to be admitted as income in the earlier years. The assessee submitted that there was no double claim made by the assessee. The department did not bring any evidence to show that the assessee has made double claims of the deduction. Since facts of the case are identical to the assessee s own case in appeal of this tribunal respectfully following the view taken by the coordinate bench of this tribunal we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue on this grounds for the A.Ys 2011-12 to 2014-15.

Summary

Issues Involved:
1. Write-off of debts under the Debt Waiver Scheme for the amount of ?1,49,74,780/- for A.Y. 2011-12.
2. Waiver of penal interest and other interests amounting to ?2,39,84,671/- as expenditure u/s 31(1) of the Income Tax Act for A.Ys. 2011-12 to 2014-15.

Detailed Analysis:

1. Write-off of Debts under the Debt Waiver Scheme (A.Y. 2011-12):

The Assessing Officer (AO) disallowed the deduction of ?1,49,74,780/- claimed by the assessee under the Agriculture Debt Waiver and Debt Relief Scheme (ADWDRS) of 2008. The AO observed that the scheme did not cover penal interest, other charges, and interest exceeding the principal. The AO noted that the loss or expenditure on account of debt waiver should be carried to the General Reserves below the line as per RBI guidelines, and not charged to the Profit & Loss account. The AO added back the amount to the income, stating that the assessee had enough provisions for bad and doubtful debts and that the expenditure mainly related to the period when the income was exempt under section 80P of the Act.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, holding that the expenditure was allowable as it was actual and written off in the books. The CIT(A) relied on the decision of the ITAT, Hyderabad in the case of Nizamabad District Co-operative Central Bank Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the loss was permanent and should be allowed as a business loss under section 37(1) of the Act. However, the Tribunal remitted the matter back to the AO to verify whether the assessee had claimed double deductions in the earlier years.

2. Waiver of Penal Interest and Other Interests (A.Ys. 2011-12 to 2014-15):

The AO disallowed the expenditure claimed by the assessee for the waiver of penal interest and other interests under schemes announced by APCOB and KDCCB. The AO observed that the assessee did not follow RBI guidelines to take such losses to the General Reserves below the line and had enough provisions for bad debts and reserves to cover these waivers. The AO added back the amounts to the income for the respective assessment years.

The CIT(A) deleted the addition, following his own order of the earlier years and the decision of the ITAT in the case of Nizamabad District Cooperative Central Bank Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the waivers were actual and written off in the books, and the expenditure was allowable. The Tribunal noted that the department did not provide evidence of double claims by the assessee. The Tribunal dismissed the revenue's appeals for A.Ys. 2011-12 to 2014-15.

Cross Objections:

The assessee filed cross objections for A.Ys. 2011-12 to 2014-15, but they were dismissed as they were filed beyond the due date and the reason provided for the delay was not considered sufficient.

Conclusion:

The Tribunal partly allowed the revenue's appeal for A.Y. 2011-12 for statistical purposes and dismissed the appeals for A.Ys. 2012-13 to 2014-15. The cross objections of the assessee were dismissed.