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TMI Blog2019 (12) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in confirming the action of the assessing officer in disallowing the claim of loss of Rs. 1,56,71,108/- being irrecoverable amount of deposits placed by the appellantbank with Madhavpura Mercantile Co-operative Bank Ltd. 3. The learned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in holding that the explanation offered by the appellant for having claimed the amount of Rs. 1,56,71,108/- as business loss in A.Y. 2012-13 does not hold water. 4. The learned Commissioner of Income-tax (Appeals) - 7, Ahmedabad erred in confirming the action of assessing officer in not allowing to carry forward and set off of loss of Rs. 2,31,857/- for A.Y. 2005-06 and Rs. 16,71,665/- for A.Y. 2006-07 by failing to appreciate the distinction between an exemption and a deduction provision. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. 2. The 1st interconnected issue raised by the assessee in ground numbers 1 to 3 is that the learned CIT (A) erred in confirming the order of the AO by not accepting the revised return of income and disallowing the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Fund i.e MMCB Investment Depreciation Fund 31.03.2011 Investment Depreciation reserve fund 11,71,000/- 51,00,000/- 51,00,000/- Bad and doubtful debt fund 39,29,000/- Thereafter the assessee has further credited the above funds with the following sources up to 31.03.2012:- Madhav-pura Mercantile Co-operative Bank Investment Depreciation Fund up to 31.03.2012 Date of deposit in the above fund Source of above fund Amount of funds transferred from the funds as per para 2 Total fund transferred to this fund Closing balance in this Fund i.e MMCB Investment Depreciation Fund 11.10.2011 Bad and doubtful debt fund 40,00,000/- 91,00,000/- 91,00,000/- up to date 05.12.2011 Bad and doubtful debt fund 45,00,000/- 1,36,00,000/- 1,5671108/- up to date From profit and loss a/c 20,71,108/- 1,56,71,108/- The AO on the basis of the above found that the provision for the loss on account of the FDR's in MMCBL has already been sourced from the investment depreciation reserve fund/Bad and doubtful debt fund/profit and loss account. Accordingly he was of the view that further deduction in the return of income on account of impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the same can be revised under section 139(4) of the Act. 4.1 The assessee on merit submitted that the FDR's in MMCBL was made in its normal course of business. The interest income from such FDR's in the past was offered to tax. The fixed deposits made with the MMCBL were representing the stock in trade for the assessee. As such the amount of interest income of the FDR's made with MMCBL is akin to the loan and advances given to the customers. Therefore the same is eligible for deduction. 4.2 The assessee also submitted that it has not claimed any deduction by way of provision for bad and doubtful debts at the rate of 7.5% of the current year income as provided under section 36(1)(viia) of the Act in the past except for the assessment year 2008-09, 2010-11 and 2011-12 which is very nominal in comparison to the provision for bad and doubtful fund. 4.3 The assessee also claimed that such business loss on account of FDR's made with MMCBL claimed in the year under consideration was as per the direction of the RBI which is binding on it. 4.4 The amount of provisions such as investment depreciation reserve fund, bad and doubtful debt fund were not allowed as deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The investments in MMCB were made for the first time in 2000-01. As far back as 2004, the RBI had issued a circular on 21 July 2004 to the banks that had deposited money with the MM_CB to treat their deposits to the bank as non-performing assets and submit the particulars of their deposits to the Reserve Bank. The appellant has not given any details of the same or of any communication in respect of its deposits with MMCB, to the RBI. In fact, it has been stated that provision was made for MMCB only partially from 1.4.2011. Thus the explanation offered by the appellant for having claimed the amount of Rs. 1,56,71,108/- as business loss in AY 2012-13, does not hold water. 4.2.6 In view of the discussion above, I am of the view that even on merits, the appellant's claim of loss is not allowable, and the AO was justified in not allowing the same and in making the impugned addition of Rs. 90,96,990/-. Grounds of appeal Nos 1 and 3 are dismissed. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 5. The learned AR before us filed a paper book running from pages 1 to 66 and submitted that the return was filed within the time specified under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of subsection (1) of 139 of the Act shall be applied to the return filed under section 139(3) of the Act. Thus there remains no ambiguity that a return filed under section 139(3) of the Act is considered a return filed under section 139(1) of the Act and accordingly we hold that the same can be revised under section 139(5) of the Act. 7.3 Similarly, we also note that there is no specific denial under section 80 of the Act that the return filed under section 139(3) of the Act, which is considered the return filed under section 139(1) of the Act, cannot be revised under section 139(5) of the Act. The relevant provisions of section 80 of the Act read as under: "Submission of return for losses. 80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed 27 [in accordance with the provisions of sub-section (3) of section 139], shall be carried forward and set off under subsection (1) of section 72 or sub-section (2) of section 73 or sub-section (1) 28 [or sub-section (3)] of section 74 29 [or sub-section (3) of section 74A]." 7.4 In view of the above we conclude that once a return filed under section 139(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in section 139(3) makes it clear that all the provisions of this Act shall apply to such a return as if it were a return under section 139(1). In view of such a specific provision, there is no reason to exclude the applicability of section 139(5) to a return filed under section 139(3). In view of the above we hold that the assessee cannot be denied the benefit of the loss to be allowed carried forward under the provisions of subsection 139(3) read with section 80 of the Act in a situation where the loss was claimed in the revised return of income. On this technical count, the assessee succeeds. 8. Now coming to the 2nd question whether the assessee is eligible for deduction for the FDR's written off against the business income of the assessee, in this regard that the genuineness of the loss has not been doubted by the authorities below. Admittedly, the income by way of interest from such FDR's was offered to tax which was accepted by the Revenue. Thus, any loss on account of FDR's written off cannot be denied merely on the ground that the impugned interest income was offered under the head income from other sources. In this regard we find support and guidance from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to carry on the general business of banking and therefore, subject to the Co-operative Societies Act, it had to carry on its business in the manner that ordinary banks do." 8.2 We also note that the investment written off by the insurance company was allowed as deduction treating the same as business loss. In this regard we find support and guidance from the order of Delhi ITAT in the case of DCIT Vs. Oriental General Insurance Company Ltd. reported in 92 TTJ 300 wherein it was held as under: "In the instant case, the entries made in the assessee's books of account in that behalf were strictly in accordance with the guidelines issued by General Insurance Corporation. Those guidelines permitted the assessee to book a loss which had, for all practical purposes, been suffered on account of depreciation in value of investments beyond any reasonable hope of recovery. In such circumstances, the Guidelines permitted the insurance company to book the loss in the accounts rather than waiting for actual realization of loss on sale of investment. Thus, the amounts claimed by the assessee were to be understood as a loss on investments suffered by the assessee. Such 'loss' could neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court of India in the case of C1T vs. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC) has also observed that loss from a source which is not taxable cannot be carried forward. In view of the same, the action of the A.O is confirmed and ground of f appeal No.2 is dismissed. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. 12. The learned AR before us submitted that the impugned losses were brought forward from the earlier assessment years. 13. On the other hand, the learned DR vehemently supported the order of the authorities below. 14. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the loss can be carried forward with respect to the income in respect of which deduction under section 80P of the Act is available. Admittedly, the assessee was entitled for the deduction under section 80P of the Act with respect to its income up to the assessment year 2006-07 and the impugned losses as discussed above pertain the earlier years i.e. 2005-06 and 2006-07 which were allowed be carried forward in the assessments framed under section 143(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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