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TMI Blog2012 (8) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... zed auditor. As per provision contained in sec.36(1)(vii) read with Rule-6ABA, the provisions for bad and doubtful debt are allowable to the extent mentioned in this section. Before the AO, the assessee has not furnished the working. Same was furnished before the ld. CIT(A). We therefore, set aside the order of ld. CIT(A) and direct him to verify the working submitted before the ld. CIT(A) and allow the deduction u/s.36(1)(viia) in respect of provisions for bad and doubtful debts whether from the current year profit or from the earlier year’s profit after verifying the calculation and allow the same. Disallowed the overdue interest reserve - Held that:- It is pertinent to note that AO has not considered the fact that overdue interest amounting to ₹ 1,15,00,000/- which is credited into profit and loss account was debited as per RBI guidelines and there is no ultimate credit in P/L. A/c. in this respect. Thus, there is no income accrued and no addition on this account can be made. Distribution of gift by assessee-Co-operative Society to its member at AGM is allowable as business expenditure - ITA No.07/Rjt/2012, ITA No.481/Rjt/2011 - - - Dated:- 1-8-2012 - Shri T. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Act can be allowed only to the extent of provision made in the books of account. In this case, the assessee claimed deduction u/s.36(1)(viia) in the revised return at ₹ 26,00,52,236/- despite the fact that the provision of only ₹ 2,31,67,667/- has been made in the books of account. A.O. accordingly asked the assessee to explain the discrepancies and explain as to why the excess deduction claimed in the revised return be not disallowed. 4. Before the AO, vide letter dated 01-12-2009, the assessee made the following submission:- 1) At the very outset, your honor may kindly note that the assessee is a primary co-operative agriculture bank as so defined in explanation (b) to sub section (4) of section 80P. This is also clearly provided for in the bye laws of assessee as its main object is to advance agriculture loans. A copy of the bye laws is attached herewith for your honors ready reference. 2) To that extent, the assessee begs to submit that its entire income is exempt under section 80P(2) of the Act. The assessee begs to submit that this claim was not pressed in the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad and doubtful debts made during the year is we humbly submit incorrect. Your honours kind attention is invited to the opening phrase in sub section (viia) of section 36 is in respect of any provision for bad doubtful debts made by . The said phrase does not refer to the provision for bad and doubtful debts made only during the course of the year under consideration. 6) The assessee therefore begs to submit that the qualifying amount falling within the ambit of section 36(1)(viia) is ₹ 10,47,86,415/-. 7) A complete statement of the working of the advance made to the rural branch is attached herewith for your honor s ready reference. 8) The assessee, therefore, humbly submits that ab initio, its income is exempt under section 80P(2) of the Act since it is primarily an agriculture ban as so stated above. Alternatively, the assessee s claim in accordance with the provisions of section 37(1)(viia) may be adopted at ₹ 10,47,86,415/- and the loss may be permitted to be carried forward accordingly . 5. After considering the aforesaid submission, with regard to deduction claimed u/s.80P(2), the AO observed that this deduction cannot be claimed without filing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court judgment in the case of Keshavlal Vithaldas Vs. CIT (105 ITR 601). 8. For the aforesaid reason, in the assessment order, AO allowed the deduction u/s.36(1)(viia) of the Act at ₹ 26,00,52,236/- as claimed in the revised return. A.O. further noted that assessee vide letter dated 01-12-2009 submitted that working of deduction u/s. 36(1)(viia) given in the return of income was wrong. As per revised working furnished by the AO, 7.5% of the profit is ₹ 9,55,415/- and not ₹ 17,00,000/- ad debited in the profit loss account (and claimed in original return). On these basis, as per assessee s own working, AO allowed the deduction u/s. 36(1)(viia) at ₹ 2,24,23,082/- as under:- ₹ 9,55,415/- Being the amount of 7.5% of the total income as per the working filed by the assessee. Rs.2,14,67,667/- Being 10% of the average advances made by the rural branches, restricted to the provision made in the profit and loss account as discussed above.; Rs.2,24,23,082/- Total deduction allowed u/s. 36(1)(viia) of the Act. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the books of account as like in section 36(1)(vii). It is evident that both the clauses, i.e. section 36(1)(vii) and 36(1)(viia), are separate and they are distinct and independent. It is open for an assessee to claim benefit of the provisions of the Apex court in CIT v. Indian Engg. Commercial Corpn. (P) Ltd. [1993] 201 ITR 7231 and CCE v. Indo Petro Chemicals [1997] 11 SCC 318. It is also a known principle in tax law that if the assessee s income falls under two exempting sections, he is entitled to rely on both sections unless they are expressly or by necessary implication made mutually exclusive and he may claim exemption under either of them even if he does not fulfill the conditions of other. During the course of the assessment proceedings, the appellant also submitted that the claim u/s.36(1)(viia) made by the appellant was an erroneous one made through oversight and inadvertence. The appellant submitted a fresh working of claim u/s.36(1)(viia) of ₹ 10,47,86,415. The learned AO has however restricted the said claim of ₹ 2,24,23,082. Details of 10% of Average monthly outstanding (Agriculture advance) of brances containing population below 10000 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account of the bank on the last day of the previous years;] [Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect ass if for the words five percent , the words ten percent had been substituted. [Provided also that a scheduled bank or a non-scheduled ban or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government; Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head Profits and gains of business or profession .] [Explanation For the purpose of this sub-clause, relevant assessment years means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005:] It is found that appellant had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me it becomes new/additional evidences. The admissibility of additional/new evidences are covered by as discussed in preceding paras. Accordingly the action of the Assessing Officer is confirmed and ground no.1 of appeal stands dismissed. 10. With regard to ground No.2, the ld. CIT(A) observed that deduction u/s.80P(2) was rightly disallowed as on merit such claim cannot be entertained without filing a revised return as held by Hon ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT 204 CTR 182. Aggrieved with the order of ld. CIT(A), the assessee is in appeal before this Tribunal on the following grounds:- 1. That the learned CIT(A) Jamnagar, has grievously erred by contending that the claim of bad debts provision u/s.36(1)(viia) of ₹ 10,47,86,415/-, made by the assessee is excessive and restricting the same to ₹ 2,24,23,082/-. They denying on the basis that evidence not submitted before Assessing Officer so the same has not been considered at appellate stage. 2. That the Learned CIT(A) Jamnagar, has grievously erred in denying the benefit of the provisions of Section 80 P to the appellant. 11. At the time of hearing before us, on behalf of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d doubtful that is made which squarely satisfy the requirement of sec.36(1)(viia) of the I.T. Act, 1961. As against this, Shri Ankur Garg D.R. appeared on behalf revenue, relying on the judgment of Hon ble Supreme Court in the case of Southern Technology Ltd. vs. JCIT reported in 320 ITR 577 (SC) pointed out that in this judgment, the Hon ble Supreme Court has discussed the concept of write off and provisions for write off bad debts. The relevant observation is contained in page-134 of the paper book which reads as under:- To understand the above dichotomy, one must understand how to write off . If an assessee debits an amount of doubtful debt to the profit and loss account and credit the asset account like sundry debtors account, it would constitute a write off of an actual debt. However, if an assessee debits provision for doubtful debt to the profit and loss account and makes a corresponding credit to the current liabilities and provisions on the liability side of the balance sheet, then it would constitute a provisions for doubtful debt. 14. The ld. D.R. pointed out that from the above observation of the Supreme Court, it is clear that creation of reserve requires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for the assessment year 2008-09. In this appeal, the various grounds are raised as under:- 18. The grounds raised in this appeal are as under:- 1. That the learned CIT(A) has grievously erred in denying the appellant the deduction u/s. 36(1)(viia) being 7.5% of the gross total income. 2. That the learned CIT(A) has grievously erred in denying the appellant the deduction u/s. 36(1)(viia) being 10% of the average advances made to the rural branches on the basis that evidence not submitted before Assessing officer so the same has not been considered at appellate stage. 3. That the learned CIT(A) has grievously erred in disallowing the claim for overdue interest of ₹ 1,15,00,000. 4. That the learned CIT(A) has grievously erred in disallowing the claim for gift expenditure amounting to ₹ 16,00,000. 19. With regard to ground No.1, counsel of the assessee pointed out that in the assessment year, the AO allowed the deduction u/s.36(1)(viia) being 7.5% of the gross total income whereas, it has been confirmed by ld. CIT(A). However, in the assessment order, the AO has not allowed the same. He accordingly submitted that 7.5% of the gross total income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and there is no ultimate credit in P/L. A/c. in this respect. Thus, there is no income accrued and no addition on this account can be made. This view is supported by the decision of ITAT Ahmedabad Bench in the case of Karnavati Co-op Bank Ltd.(supra). In this case, the Tribunal has followed the judgment of Hon ble Apex court rendered in the case of UCO Bank vs. CIT as reported in 237 ITR 889. We therefore, following the decision of ITAT Ahmedabad Bench in the case of Karnavati Co-op. Bank Ltd. (supra) delete the disallowance of ₹ 1,15,00,000/- made by AO. This ground of appeal is allowed. 24. The facts relating to controversy involved in ground No.4 are that in the assessment order, the AO has disallowed ₹ 16,00,000/- being gift given to the member of the assessee-Cooperative Society. On appeal before the ld. CIT(A), the assessee furnished the photocopy of the gift register and contended that these were given to the member and is allowable as business promotion expenditure. In the impugned order, the ld. CIT(A) confirmed the disallowance mainly on the ground that assessee has not furnished any evidence to indicate that after distribution of gift, the business of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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