9911796707
TMI Blog2018 (12) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... As - Held that:- The said issue is squarely covered by the decision in CIT Vs. Deogiri Nagari Sahakari Bank Ltd.[2015 (1) TMI 1218 - BOMBAY HIGH COURT]. In view of the issue being covered, we find no merit in the aforesaid addition and the same is deleted. The ground of appeal No.2 raised by assessee is thus, allowed. Addition on account of unclaimed dividend - Held that:- The said issue also stands covered by the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Deogiri Nagari Sahakari Bank Ltd. [2015 (1) TMI 1218 - BOMBAY HIGH COURT] wherein it was held that unclaimed dividend amounts to excess provision for dividend made by the assessee on an earlier occasion, which has been reversed by the assessee in the year under consideration and transferred to reserve account - also where the provision for dividend made earlier was not charged on profits but it was appropriation profits available post taxation, then there is no merit in the taxability of unclaimed dividend. - Decided in favour of assessee. - ITA No.167/PUN/2015, ITA Nos.465 to 467/PUN/2016, ITA No.1618/PUN/2016 And ITA No.762/PUN/2016 - - - Dated:- 30-11-2018 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 11,72,40,650/-. The case of assessee was selected for scrutiny. On verification of books of account, the Assessing Officer noted that the assessee has claimed deduction under section 36(1)(viia) of the Act at ₹ 95,66,809/-. The Assessing Officer noted that the assessee was not having any rural advances and hence, was not eligible to claim the aforesaid deduction under section 36(1)(viia) of the Act. In this regard, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. Vs. CIT (Civil Appellate Jurisdiction Civil Appeal No.1143 of 2011). The assessee was thus, show caused as to why deduction claimed should not be disallowed. In response thereto, the assessee explained that it had claimed the deduction under section 36(1)(viia) of the Act which was 7.5% of the total income. He further pointed out that proviso to section 36(1)(vii) of the Act lays down that where deduction under section 36(1)(viia) of the Act for provision for bad and doubtful debts has been claimed, the actual write off of bad debts would be allowable under section 36(1)(vii) of the Act only to the extent of amount of actual write off over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank to which clause (viia) applies. Indisputably, clause (viia)(a) applies only to rural advances. iii. The Hon'ble Supreme Court has already considered the argument put forward by the assessee in its submission that there are two part of section 36(1)(viia) and only later part of this section apply to rural advance and first apply to all banks. Considering the provisions of the Act, notifications and circulars issued by the Board, all legal aspects and differential view expressed by the different High Courts the Hon'ble Supreme Court has held that clause (viia)(a) applies only to rural advances. iv. The Court has held that clear legislative intent of section 36(1)(vii) 36(1)(viia) together with the circulars issued by the CBDT demonstrate that the deduction on account of provision for bad and doubtful debts u/s 36(1)(viia) is distinct and independent of s.36(1)(vii) relating to allowance of bad debts. The legislative intent was to encourage rural advances and the making of provisions for bad debts in relation to such rural branches hence the section 36(1)(viia) was enacted. v. Further the court discussed that as far as foreign banks are concerned, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 36(1)(viia) of the Act was available only in respect of rural advances of the bank. The relevant observations of the Apex Court are reproduced under para 4.3.1 at page 7 of appellate order. Thus, the plea of assessee was rejected. 8. The assessee is in appeal against the order of CIT(A). 9. The learned Authorized Representative for the assessee pointed out that the assessee was Co-operative bank, which admittedly, had no rural branches. She further pointed out that deduction claimed under section 80P of the Act which was initially available to the assessee, was withdrawn and hence, the income of assessee co-operative bank was taxable from assessment year 2007-08. She further referred to the amendment in this regard in assessment year 2007-08. The learned Authorized Representative for the assessee fairly admitted that for the first time the issue was decided against assessee in assessment year 2010-11. Again, referring to the provisions of section 36(1)(viia) of the Act, it was stressed that the said section had two limbs, wherein the deduction could be computed either on the basis of 7.5% of total income or 10% of aggregate average advances made by rural br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verage advances made by such branches and further deduction upto 5% of total income in respect of provision for bad and doubtful debts. He further placed reliance on the decision of Bangalore Bench of Tribunal in bunch of appeals with lead order in DCIT Vs. The Corporation Bank in ITA No.496/Bang/2010, relating to assessment year 2006-07, order dated 31.10.2014. He referred to para 13 of the decision of Tribunal, wherein the ratio laid down by the Hon'ble Supreme Court in Catholic Syrian Bank Ltd. Vs. CIT (supra) had been summed up. 12. On the next day of hearing, the learned Authorized Representative Shri Kishore Phadke stressed that the decision of Tribunal in assessee s own case is not good law as the decision of the Hon ble High Court of Kerala in The Kodungallur Town Co-Op. Bank Ltd. Vs. ACIT in ITA No.37 of 2013, judgment dated 03.04.2014 has not been considered and also not relied upon by the learned Counsels before Pune Bench of Tribunal. It was pointed out that the Tribunal had passed the order on 29.05.2015 without taking into consideration the dictate of the Hon ble High Court of Kerala on the issue, which is squarely applicable to the facts and issues raised in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chin), dated 18.07.2016, which had applied the ratio laid down by the Hon ble High Court and allowed the claim of assessee. He stressed that deduction was not limited to Co-operative Banks with rural branches. Shri Kishore Phadke, the learned Authorized Representative for the assessee also filed a chart of history of provisions of section 36(1)(viia) of the Act, which was amended over a period of time. 13. The learned Departmental Representative for the Revenue placed reliance on the order of Tribunal in assessee s own case for assessment year 2010-11 and orders of authorities below. 14. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against claim of deduction under section 36(1)(viia) of the Act. Under the said section, deduction is allowable on account of provision for bad and doubtful debts. In other words, deduction could be claimed in respect of bad and doubtful debts subject to the terms and conditions which are provided in the Act itself. Explanation to section 36 of the Act defines the terms used in sub-clause (a) of clause (vii), wherein it was defined as non-scheduled banks, rural branches, co-operative ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to 5% of total income. The Circular then concluded by saying that this will imply that all scheduled or non-scheduled banks having rural branches would be allowed the deduction upto 2 percent of the aggregate average advances made by such branches and a further deduction upto 5 percent of their total income in respect of provision for bad and doubtful debts. In other words, the Circular very clearly provided that two types of deductions have to be allowed to scheduled or non-scheduled banks i.e. in case they had rural branches, then deduction of 2% of aggregate average advances was to be allowed and in addition to that deduction upto 5% of their total income in respect of provision for bad and doubtful debts was to be allowed. The second part of deduction was also made available to foreign banks, which admittedly would never have rural branches in India. In such scenario, the intent of the Legislature was to provide deduction to the scheduled or non-scheduled banks; first on account of rural advances and second on account of total income other than the rural advances and two different types of deductions were provided. It may be clarified herein itself that the Circular which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded under sub clause (a) of clause (viia) of section 36(1). It is further clarified that only such cooperative bank other than a primary agriculture credit society, etc., is included in sub clause (a) of clause (viia). The provision is a beneficial one. No doubt, plain reading of main section 36(1) (viia)(a) and Explanation under said section present certain difficulties, but situation is not without possibilities. The object and intention of the legislature is to be understood by harmonious construction of the provisions. The policy was to include cooperative banks as well, as they could not take shelter under section 80P of the Income Tax Act any more. By restricting the scope of the provisions, the very purpose of inclusion of cooperative bank would be lost. Sub clause (a) consists of two types of deduction. One refers to deduction of an amount not exceeding 7.5% of the total income (computed before making any deduction under this clause and chapter VIA). Section one refers to deduction of an amount not exceeding10% of the aggregate average advances made by rule branches of such bank while computing in the prescribed manner. So far as benefit of 7.5% of the total income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the benefit provided under section 36(1)(viia) of the Act, then the provisions have to be understood taking into consideration the amendment made by the Legislature. The Hon ble High Court has clearly noted the fact that for availing the benefit of 7.5% of total income, there is no condition that it should be in respect of any rural branches. It has further observed that all types of banks described under sub-clause (a) of clause (viia) are entitled to seek deduction of an amount not exceeding 7.5% of total income and only condition is that there should be provision for bad and doubtful debts in the books of account. The second linked issue which was considered was whether co-operative bank in respect of having rural branches was entitled to have the benefit of second part of section 36(1)(viia)(a) of the Act. The Hon ble High Court clearly held that reading the definition of non-scheduled bank along with meaning of rural branch under Explanation to section 36(1) of the Act clearly indicate that co-operative bank also falls under the category of non-scheduled bank for the purpose of said section. It further goes on to hold that reading the entire section along with Explanation wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the banks. A reading of paragraph 27 of the judgment of the Hon ble Apex Court would show that while making the observation indisputably, clause (viia)(a) applies only to rural advances , the Hon ble Apex Court was examining the issue if there would be double deduction of actual bad debts written off under clause (vii) and deduction in respect of rural advances provided under the second part of clause (viia). The Hon ble Apex Court has not held that the first part of clause (viia) providing for deduction of 7.5% of the total income applies only to rural advances . (underline provided by us for emphasis) 20. Then, reference was made to the decision of jurisdictional High Court i.e. Hon ble High Court of Kerala in The Kodungallur Town Co-Op. Bank Ltd. Vs. ACIT (supra), judgment dated 03.04.2014 and it was held that invoking of jurisdiction by the Commissioner was held to be not justified, relying on the ratio laid down by the Apex Court in Catholic Syrian Bank Ltd., which is dated 17.02.2012. 21. The Bangalore Bench of Tribunal in DCIT Vs. ING Vysya Bank Ltd. (2014) 149 ITD 611 (Bangalore) vide its order dated 25.10.2013 had held vide para 32 that the object of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law declared by the Hon ble High Court though of another State, which was final law of the land. 25. The Pune Bench of Tribunal in ACIT Vs. Aurangabad Holiday Resorts (P) Ltd. (supra) has referred to the aforesaid ratio laid down by the jurisdictional High Court in the case of CIT Vs. Smt. Godavaridevi Saraf (supra) and held as under:- 11. Let us now take a look at the Hon'ble jurisdictional High Court's judgment in the case of Godavari Devi Saraf (supra). In this case, question before. Their Lordships was as follows: Whether, an the facts and circumstances of the case, and in view of decision in the case of A.M. Sali Maricar 90 ITR 116, the penalty imposed on the assessee under Section 140A(3) was legal? 12. The specific question before. Their Lordships was whether the Tribunal, while sitting in Bombay, was justified in following the Madras High Court decision holding the relevant section as unconstitutional Hon'ble High Court concluded as follows: It should not be overlooked that Income Tax Act is an all India statute, and if a Tribunal in Madras has to proceed on the footing that Section 140A(3) was non existent, the order of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal decided the issue in turn, relying on the ratio laid down by the Hon ble High Court of Gauhati in Smt. Bandana Gogoi Vs. CIT Anr. (2007) 289 ITR 28 (Gau) in the absence of any other decision of any High Court in other State. In view of the above said position of law, we are departing from the view taken by Pune Bench of Tribunal in assessee s own case relating to assessment year 2010-11, wherein the order is dated 29.05.2015 but decision of the Hon ble High Court of Kerala on the issue is dated 03.04.2014 was neither relied upon nor brought to the knowledge of Tribunal and the issue was decided against assessee. The issue raised in the present appeal stands fully covered by the decision of the Hon ble High Court of Kerala (supra) though not the jurisdictional High Court, but the only decision available on the said issue squarely binds the Tribunal and hence, applying the said ratio, we hold that the assessee is entitled to the claim of deduction under section 36(1)(viia) of the Act to the extent of 7.5% of total income. The assessee co-operative bank do not have any rural branches, hence is not entitled to the second part claim of 10% of advances made by rural branc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Hon ble Bombay High Court and parity of reasoning as in the order of Tribunal in assessee s own case for assessment year 2009-10, the said issue is also to be decided in favour of assessee, hence addition of ₹ 45,000/- is deleted. The ground of appeal No.3 raised by assessee is thus, allowed. 32. Now, coming to ground of appeal No.4, wherein the issue is against addition on account of unclaimed dividend. The said issue also stands covered by the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Deogiri Nagari Sahakari Bank Ltd. (supra), wherein it was held that unclaimed dividend amounts to excess provision for dividend made by the assessee on an earlier occasion, which has been reversed by the assessee in the year under consideration and transferred to reserve account. The Hon ble Bombay High Court further held that where the provision for dividend made earlier was not charged on profits but it was appropriation profits available post taxation, then there is no merit in the taxability of unclaimed dividend. Following the same parity of reasoning, we hold that the issue in the present appeal is squarely covered by the ratio laid down by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
