2019 (7) TMI 1320 - AT - Income Tax

Disallowance for provision made for Non-Performing Assets (NPA) - CIT(A) denied deduction u/s 36(1)(viia) being the population of Midnapore Town being much higher than 10, 000 and not a Rural Branch - assessee submitted additional evidence stating that population mentioned by CIT(A) is factually incorrect - admission of additional evidence - HELD THAT - Documentary evidence as additional evidence before the Tribunal along with an application seeking admission thereof on the ground that the same obtained by the assessee after passing of the impugned order of the ld. CIT(Appeals) is relevant to decide the issue involved in Grounds No. 1 to 3 of the assessee s appeal. He has also submitted that this issue may be sent back to the AO for deciding the same afresh after verifying the additional evidence filed by the assessee. Keeping in view the relevance of the additional evidence filed by the assessee the same is admitted by us. D.R. has also not raised any objection for the admission of the additional evidence as well as for sending the matter back to the AO for verification of the additional evidence. We accordingly set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh after verifying the additional evidence filed by the assessee. Grounds are accordingly treated as allowed for statistical purposes. Disallowance of provision made for leave encashment - HELD THAT - As the issue involved in the present case as well as the material facts relevant thereto are similar to the case of the SRB Associates LLP 2017 (9) TMI 1833 - ITAT KOLKATA we respectfully follow the order of this Tribunal passed in the said case and restore the matter to the file of the AO for fresh adjudication as per the direction as given in the case of M/s. SRBC Associates LLP. Addition of provision made for difference in General Ledger (GL) and Detailed Ledger (DL) - HELD THAT - Provision made by the assessee on account of difference between General Ledger and Detailed Ledger as per the guidelines of the RBI is such that the same cannot be said to be a provision made for any obligation or liability. As rightly held by the authorities below there is no provision in the Income Tax Act under which the said provision can be allowed as deduction. No infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of provision made by the assessee for the difference in its General Ledger and Detailed Ledger and upholding the same we dismiss Ground No. 5 of the assessee s appeal. Addition of interest accrued on investment - already offered for taxation on receipt basis which was accepted by department - HELD THAT - We direct the AO to verify the claim of the assessee of having offered the amount in question to tax in A.Y. 2014-15 on receipt basis. If it is found on such verification that the said amount is already assessed to tax in A.Y. 2014-15 and the matter has reached its finality the AO shall delete the addition of the same amount made in the year under consideration. - Ground is accordingly treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of provision for Non-Performing Assets (NPA).
2. Disallowance of provision for leave encashment.
3. Addition on account of provision for difference in General Ledger (GL) and Detailed Ledger (DL).
4. Addition of interest accrued on investment.

Issue-wise Detailed Analysis:

1. Disallowance of Provision for Non-Performing Assets (NPA):
The assessee, a bank, filed its return of income for A.Y. 2010-11 declaring a total income of ?18,53,335/-. The Assessing Officer (AO) disallowed a provision of ?10,00,000/- made for NPAs, considering it a contingent or unascertained liability not allowable under the Income Tax Act, 1961. The CIT(A) upheld the disallowance, stating that the population of Midnapore Town exceeded 10,000, thus the branch did not qualify as a rural branch for deduction under section 36(1)(viia). The assessee provided additional evidence, including population certificates, which were admitted by the Tribunal. The matter was remanded to the AO for fresh adjudication after verifying the additional evidence. Similar directions were issued for A.Ys. 2012-13 and 2013-14, treating the appeals as allowed for statistical purposes.

2. Disallowance of Provision for Leave Encashment:
The AO disallowed the provision for leave encashment based on the stay granted by the Supreme Court on the Kolkata High Court's decision in the case of Exide Industries Ltd. The CIT(A) confirmed the disallowance. The Tribunal, following its earlier decision in the case of SRB & Associates LLP, restored the matter to the AO for fresh adjudication in accordance with the Supreme Court's decision in the Exide Industries Ltd. case. This ground was treated as allowed for statistical purposes.

3. Addition on Account of Provision for Difference in General Ledger (GL) and Detailed Ledger (DL):
The AO disallowed a provision of ?4,00,000/- made for discrepancies between the GL and DL, citing no provision in the Income Tax Act for such allowance. The CIT(A) upheld the disallowance, noting that the discrepancy had not been reconciled since the computerization in 2004. The Tribunal found no infirmity in the CIT(A)'s order and dismissed this ground for A.Ys. 2010-11 and 2013-14.

4. Addition of Interest Accrued on Investment:
For A.Y. 2013-14, the AO added ?16,58,820/- on account of interest accrued on investments in WBSCB, Punjab National Bank, and Allahabad Bank. The assessee claimed this income was offered to tax in A.Y. 2014-15 on a receipt basis, which the Department accepted. The Tribunal remanded the matter to the AO to verify the assessee's claim. If verified, the AO was directed to delete the addition for A.Y. 2013-14, treating this ground as allowed for statistical purposes.

Conclusion:
The appeals for A.Ys. 2010-11 and 2013-14 were partly allowed for statistical purposes, while the appeal for A.Y. 2012-13 was allowed for statistical purposes. The Tribunal directed fresh adjudication on the provision for NPAs and leave encashment, and verification of the interest accrued on investments. The disallowance for the provision for GL and DL discrepancies was upheld.