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TMI Blog2023 (7) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer in making addition of Rs. 51,67,000/- by disallowance of golden jubilee incentive expenses. 4. The Commissioner of Income-tax (Appeals), Jamnagar erred in confirming the action of assessing office in making disallowance upto Rs. 1,99,749/- u/s 14A of the Act. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal." Ground number 1: disallowance of Rs. 40 lakhs on provision for standard assets 3. The issue for consideration with respect to this ground of appeal is that during the course of assessment, the AO disallowed the sum of Rs. 40 lakhs on the ground that it pertains to provision for standard assets and not for bad and doubtful debts and since deduction under section 36(1)(viia) of the Act can be allowed only in respect of provisions which are made for bad and doubtful debts, same is liable to be disallowed. The AO held that since the assessee has not credited the said amount to bad debt account but has credited the same to provision against standard assets, deduction is not allowable to the assessee under section 36(1)(viia) of the Act by relying on the decision of Ahmedabad Tribunal in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Before proceeding further we would like to reproduce the provision of section 36(1)(viia) of the Act as under :- "Other deductions. M/s Jila Sahakari Kendriya Bank Khargone ITA No.455/Ind/2018 Assessment year 2014-15 Page 5 of 18 36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 xxxx xxxx xxxx (viia) in respect of any provision for bad and doubtful debts made by - (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a cooperative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank, an amount not exceeding 99[seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : Provided that a scheduled bank or a non-scheduled bank referred to in this subclause shall, at its option, be allowed in any of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision for bad and doubtful debts, it only claimed Rs. 2 lacs. We, therefore, in the facts and circumstances of the case, are of the opinion that in the instant appeal the contingency provision for standard assets is basically in the nature of bad and doubtful debts only and the assessee has rightly claimed the expenditure u/s 36(1)(viia) of the Act. We, therefore, allow the sole ground raised by the assessee." 10. Thus, the impugned issue is settled in favour of assessee by various decisions of ITAT Benches including the co-ordinate bench of ITAT, Indore. Respectfully following the same, we too hold that the provision made by assessee qua standard assets is allowable u/s 36(1)(viia) and therefore the Ld. CIT(A) has rightly deleted the disallowance made by AO. 6. The ITAT in the case of Nagaur Urban Co-operative Bank Ltd. Vs. ACIT, ITA No. 240/Jodh/2013 also held that the "provision for standard assets" was held to be a provision for bad debts allowable u/s 36(1)(viia). 7. The Amritsar ITAT in the case of Nawanshahr Central Cooperative Bank Ltd, ITA No. 61/Asr/2017 made the following observations, while deciding this issue in favour of the assessee: From the above provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the assessee as a bank is permitted by its regulator, being the Registrar of Cooperatives in Gujarat State to give gifts to members up to certain amount. Further, the expenditures was incurred on such items such as cookware, clothes and footwear which were purchased and gifted to members. The counsel for the assessee submitted that every year the bank makes a provision at year end and it follows mercantile system of counting and hence, it becomes an allowable expenditure for this year itself. The counsel for the assessee further submitted that in immediately preceding assessment year 2011-12, similar disallowances made by the AO has been allowed by the Ld. CIT(Appeals). A copy of order passed by Ld. CIT(Appeals) for assessment year 2011-12 has been submitted for our records. Further, the counsel for the assessee placed reliance on the decision of Rajkot Tribunal in the case of Amreli Sahakari Bank Ltd. in ITA No. 482/Rjt/2012 in which it was held that expenditure incurred on welfare activities for its members is for the prosperity of the cooperative Bank and hence allowable under section 37 of the Act. In response, the Ld. DR placed reliance on the observations made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at statement of account is not supported by any records and evidences. Accordingly, in the interest of justice, the matter is being set aside to the file of Ld. CIT(Appeals) to check the veracity/genuineness of expenses incurred for diamond jubilee expenses amounting to Rs. 51.6 lakhs to its members and the assessee may also give supporting evidence in support of genuineness of the claim, with proof of actual payment having been made. 18. In the result, ground number 3 of the assessee's appeal is allowed for statistical purposes. Ground number 4: disallowance under section 14A of the Act 19. The brief facts in relation to this ground of appeal are that the AO held that the assessee had earned a dividend income of Rs. 1,99,749/- and accordingly, worked out the disallowance under section 14A read with Rule 8D amounting to Rs. 2,67,436/-. 20. The Ld. CIT(Appeals) restricted the said disallowance to Rs. 1,99,749/- to exempt dividend income earned. 21. Before us, the counsel for the assessee submitted that it's tax free funds were to the tune of Rs. 33.38 crores as compared to the average investment of Rs. 80.19 lakhs. Accordingly, in view of the decision rendered by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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