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2022 (5) TMI 856 - AT - Income TaxDisallowance claimed u/s 36(1)(viia) - provision for non-performing asset - amount under four heads are not provision for bad and doubtful debts for reserve the amount provided as per Gujarat Co-Operative Society, Act, is not the provision, rather it is a reserve created only if the society makes profit and provision for standard assets, the Assessing Officer held that standard assets cannot be treated to have provided against bad and doubtful debts under the standard assets a performing assets - HELD THAT - We find that Chennai Tribunal in Tamilnadu State Apex Cooperative Bank Vs ACIT 2014 (1) TMI 1737 - ITAT CHENNAI while considering the provision for non-performing asset under section 36(1)(viia) held that where the assessee-bank had claimed deduction for 'Provision for Non- Performing Assets' under section 36(1)(viia), in view of fact that taxonomy of provision had been done by assessee to keep it in line with RBI and NABARD guidelines, but in pith and substance provision had been created for 'Bad and Doubtful Debts', deduction was claimed in accordance with section 36(1)(viia) and assessee was entitled to benefit of same. Tribunal in DCIT Vs IGN Vysya Bank 2014 (9) TMI 44 - ITAT BANGALORE also held that in order to allow assessee's claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for bad and doubtful debts is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section. In Nanded District Central Co-operative bank Vs DCIT 2014 (10) TMI 613 - ITAT PUNE also held that deduction under section 36(1)(viia) is to be restricted to the actual amount of provision for bad and doubtful debts made in the books of account. Ahmedabad Tribunal in DCIT Vs Sarvodaya Shakari Bank Ltd 2014 (5) TMI 1182 - ITAT AHMEDABAD also held that that the provisions for bad and doubtful debts should be allowed u/s. 36(1)(viia), to the extent of provision made and available in the books of account, whether made in the current previous year. Thus, in view of the aforesaid factual discussion, we affirm the order of Ld. CIT(A) by adding our aforesaid observation. - Decided against revenue. Disallowances of centenary celebration expenses, gift distribution and interest relief to society expenses - AO Disallowed the various claims under appeal by taking view that no details and bills/vouchers were not furnished by assessee despite claiming that they are ready to produce such bills/vouchers - CIT(A) deleted the expenses by considering the fact that assessee claimed all evidences were produced before Assessing Officer for verification - HELD THAT - All the expenses were incurred to celebrate the centenary year. The expense incurred on account of relief fund to celebrate centenary year and are clearly for the purpose of business. There is no personal purpose in making of such expenses, gift items for distributed for valued customers, staff members, and token of appreciation of contribution in helping to boost the business of assessee-bank. Thus all the expenses were incurred wholly and exclusively for the purpose of assessee-bank. Before us Ld. AR for the assessee relied on various case law some of them relate to expense incurred by co-operative societies. We find that in CIT Vs Mehsana Dist. Co-Op. Milk Producers Union Ltd. 1993 (6) TMI 24 - GUJARAT HIGH COURT Hon ble Gujarat High Court has allowed the expense incurred on silver jubilee celebration as business expenditure and was treated the expense incurred wholly and exclusively for the purpose of business Further in Karjan Cooperative 1992 (1) TMI 39 - GUJARAT HIGH COURT allowed the expenditure incurred by assessee- society on giving presents to members on the occasion of its silver jubilee celebration and held that it was incurred wholly and exclusively for the purpose of business. - Decided against revenue.
Issues Involved:
1. Deletion of disallowance of Rs. 3,66,25,000/- claimed under Section 36(1)(viia) of the Income Tax Act. 2. Deletion of disallowance of Rs. 46,77,004/- for Centenary Celebration Fund. 3. Deletion of disallowance of Rs. 7,72,099/- for Gift Distribution Fund. 4. Deletion of disallowance of Rs. 8,83,239/- for Society Relief Fund. Detailed Analysis: 1. Deletion of Disallowance under Section 36(1)(viia): The Revenue contested the deletion of Rs. 3,66,25,000/- disallowed by the Assessing Officer (AO) under Section 36(1)(viia) of the Income Tax Act. The AO had disallowed the provisions for bad and doubtful debts under various heads, arguing that they did not qualify as provisions for bad and doubtful debts. The AO's contention was that these amounts were reserves created from profits and not provisions for bad debts. The CIT(A) allowed the deduction, noting that the assessee fulfilled the conditions under Section 36(1)(viia), which permits deductions up to 7.5% of total income and 10% of aggregate average advances made by rural branches. The Tribunal upheld the CIT(A)’s decision, noting that the assessee had consistently been allowed similar deductions in previous years and that the provisions were made in compliance with statutory requirements and RBI guidelines. 2. Deletion of Disallowance for Centenary Celebration Fund: The AO disallowed Rs. 46,77,004/- claimed for Centenary Celebration Fund due to the assessee's failure to produce supporting bills/vouchers. The CIT(A) overturned this disallowance, accepting the assessee’s submission that the expenses were incurred wholly and exclusively for business purposes, supported by resolutions, office notes, and invoices. The Tribunal upheld the CIT(A)’s decision, noting that the expenses were for a significant business event, presided over by the Governor of Gujarat, and were thus allowable under Section 37(1) of the Act. 3. Deletion of Disallowance for Gift Distribution Fund: The AO disallowed Rs. 7,72,099/- for Gift Distribution Fund on similar grounds of lack of evidence. The CIT(A) accepted the assessee's detailed submissions and supporting documents, which demonstrated that the expenses were incurred as part of the centenary celebrations and were business-related. The Tribunal agreed with the CIT(A), noting that the expenses were for gifts to valued customers and contributors, which were reasonable and customary in business practice. 4. Deletion of Disallowance for Society Relief Fund: The AO disallowed Rs. 8,83,239/- for Society Relief Fund, citing insufficient evidence. The CIT(A) found that the expenses were properly documented and incurred for legitimate business purposes, such as providing relief to members and supporting community activities. The Tribunal upheld the CIT(A)’s decision, emphasizing that such expenses are common for cooperative banks and are allowable under Section 37(1). Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)’s order that allowed the assessee’s claims under Section 36(1)(viia) and for various expenses related to centenary celebrations, gift distribution, and society relief. The Tribunal’s decision was based on the consistent application of statutory provisions and previous allowances of similar claims, as well as the adequacy of documentation provided by the assessee.
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