9911796707
TMI Blog2024 (9) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. Additional ground raised by the assessee - entitlement of the assessee u/s 36(1)(vii) of the Act to claim deduction on account of the bad debts actually written off in their books of account - Having admitted the additional ground raised by the assessee, which is relating to entitlement of the assessee u/s 36(1)(vii) of the Act to claim deduction on account of the bad debts actually written off in their books of account, since this issue has been raised before us for the first time and has not been considered by the lower authorities, therefore we deem it appropriate to remand back the matter to the file of the Ld. AO with the direction to examine afresh the issue in accordance with law after affording opportunity to the assessee. The assessee is also directed to prove that they have complied all the requirement of the law for claiming the deduction on account of the bad debts actually written off in their books of account. Addition towards profit on sale of investment - assessee had wrongly credited to the profit and loss account on account of profit on sale of investment and during the assessment proceedings the assessee filed the revised computation of income by deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to value the same at lower of cost or market rate as per the accepted accounting principle. This issue of the assessee is allowed for statistical purposes. - SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER Assessee : Shri M.V.Anil Kumar, Advocate Revenue : Ms. K. Haritha, CIT-DR ORDER PER BENCH: These appeals for A.Ys. 2008-09 to 2014-15 and stay applications for A.Ys. 2008-09, 2010-11, 2011-12, 2012-13 2014-15, filed by The Andhra Pradesh State Co-operative Bank Limited ( the assessee ) are arising out of the orders of first appellate authority ( Ld. CIT(A) ) passed by separate orders on different dates. As the facts of the case in all these appeals/S.As. are similar, for the purpose of convenience, all these appeal/S.As. are heard and are being disposed off together. 2. First, we take up the appeal of the assessee in ITA No. 241/HYD/2018 for A.Y. 2009-10. The grounds of appeal raised by the assessee read as under: 1. Your Appellant submits that the Assessing Officer as well as the Commissioner of Income Tax (Appeals)-1 erred in not giving effect to the Hon'ble ITAT directions in ITA No. 1481/h/2013 88/H/2014 dated 9-10-2014. 2. Your Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these and such other grounds that may urged at the time of hearing, your appellant prays that the relief claimed may be allowed. 3. The assessee also raised the following additional ground before us: 1. Your Appellant submits that the provisions of section 36(1)(vii) are applicable to the facts of the case, as debts have been written off in the books of account. 2. Your Appellant submits that share of APCOB in the debts irrecoverable by PACS, followed by DCCBS, are debts written off and eligible for deduction under section 36(1)(vii) in absence of any provision under section 36(1) (viia) r.w.s 36(2)(v) of the Income Tax Act, 1961. 3. Your Appellant submits that provision of section 36(1)(vii) and 36(1)(viia) operate independently subject to the condition that any debts written off in books will be first setoff against any provision under section 36(1)(viia) made and allowed by the Assessing Officer in the earlier assessment years, otherwise the entire amount written off ought to be allowed as deduction under section 36(1)(vii) of the Act. 4. Ld. AR submitted that additional ground so filed are admissible in view of judgment rendered by the Hon ble Supreme Court in the case of Natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts with regard to this ground are that, the Ld. AO made disallowance of Rs.173,15,46,253/- on account of debts written off by the assessee as per his observation under para No.2 of his consequential order dated 31/03/2016, which is reproduced as under : 2. WRITE OFF OF AMOUNTS UNDER (ADWDRS} AMOUNT RS. 173,15,46,253/- On this issue it was directed that the Assessing Officer shall satisfy himself about the fulfillment of the condition stipulated in Section 36(2) (v) by the assessee keeping in view that Section 36(1)(viia) is applicable in the case of the assessee only with effect from 01.04.2007 for deduction on account of Bad Debts under while considering the claim of the assessee ADWRDS. During the course of assessment proceedings, the assesses Authorised Representative submitted as under: We (APCOB) have charged the amount of Rs. 173,15,46,253/- to their Profit and Loss account and credited the accounts of respective DCCB's. These amounts represent amounts advanced to DCCB's during normal course of business of banking and accrued interest. It is the practice of APCOB to recognize interest on advances on accrual basis and credit to the revenue account every year. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of 7.5% of the gross total income only. APCOB, despite the fact that the provision for 2007-08 was in dispute had reduced this amount as well the provision for 2008-09 from the amounts written off and claimed the balance only under section 36(1)(vii), which has to be allowed as per the directions of the CIT(A), APCOB had no rural branches and therefore need not make any provisions on rural advances as per section 36(1)(viia) and to this extent the provision of the said section are not applicable to the facts of this case. We submit that we have satisfied all the conditions related to allowance of bad debts under section 36(1)(vii) r.w.s. 36(2) of the Income Tax Act. We therefore request that entire claim for bad debts written off of Rs.173,15,46,253/- be allowed U/s. 36(1)(vii) r.w.s. 36(2)(v) of the Income Tax Act . The above argument of the assessee is not acceptable. As per the directions of the ITAT, the Assessing Officer has to satisfy himself about the fulfillment of the conditions stipulated in Section 36(1)(viia) and Section 36(2)(v). On the own admission of the assessee, APCOB has never made any provision under the said Section in the books of accounts till date. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is claimed as deduction under Sub- clause (vii). The assessee has not created any provision under Sub-clause -(viia). In view of violation of the above provisions as discussed above the assessee is not entitled to claim deduction under Sub-clause (vii) without fulfilling the conditions stipulated under Sub-clause (viia) of clause (1) of Sec.36 and also Sec.36(2)(v). From the above it is clear that the assessee was not able to satisfy that the conditions stipulated-under Sub-clause (viia) of clause (1) of Sec.36 and also Sec.36(2) (v), as directed by the Tribunal. Therefore, no deduction can be allowed with reference to the amounts written off under ADWDRS Scheme. 6.1 Feeling aggrieved by the order passed by Ld. AO, the assessee filed appeal before the Ld. CIT(A), who dismissed the claim of the assessee as per his observation under para No.9 of his order, which is reproduced as under: 9. The submissions of the appellant have been carefully considered. The issue before me, is whether Rs.1,73,15,46,253/- written off under the Scheme of ADWDRS should be allowed u/s.36(2)(v) r.w.s.36(1)(viia). It is no doubt that under ADWDRS, the appellant's loans to marginal farmers were writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.6,65,66,52,938/- (3 instalments mentioned above) reimbursement on this account from Government of India through NABARD under ADWDRS. Hence it is to be taken that out of the total of Rs.1,73,15,46,253/- share of loss, this amount of instalment during the year has been received. During this year, the appellant has not offered this amount as income. It is pertinent to note that the Agricultural Debt Waiver and Debt Relief Scheme 2008 came into a picture when the Government envisaged to write off the loans to the farmers. The relief was supposed to given to the farmers who have taken loans from the banks to the accounts and most of the case, these loans have become bad and termed as Non Productive Assets (NPA). As per the Banks Accounting System, write off of NPAs are a regular exercise, however, write off are without foregoing the right to recovery. Further write off generally carried out against accumulated provisions made for such loans which go bad. recovered, the provisions made for those, flow back into profit loss account of the Bank. The Government reimbursements are actually a sort of collection of recoveries. Hence, whatever received by the Bank under Agricultural Debt Wai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that debt, in fact has become irrecoverable. In the present case, the write-off is under scheme of Agricultural Debt Waiver and Debt Relief Scheme, 2008. And not because of actual. This issue has no relevance to the present case. In view of the above, since the assessee failed to fulfil the conditions required u/s 36(2)(v), to allow the deduction u/s 36(1)(viia), nor has given the complete picture of the reimbursement of these NPAS. I direct the Assessing Officer to verify the receipts from Government of India under the Scheme of Agricultural Debt Waiver and Debt Relief Scheme 2008 for the AY 2009-10 and AY 2010-11. In case, these amounts have been received and not offered to tax as Income, then the Assessing Officer may include the amounts as Income, if any as per Law. I uphold the addition and the stand taken by the Assessing Officer. 6.2 Feeling aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld.AR submitted that the assessee had not claimed any deduction on account of provision for bad and doubtful debt u/s 36(1)(viia) of the Act. Instead the assessee had write off the debt of Rs.173,15,46,253/- in its books of account and claimed the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 36(2) of the Act. Allowing of deduction of bad debts is controlled by the provisions of Section 36(2). The argument advanced on behalf of the Revenue is that it would amount to allowing a double deduction if the provisions of Sections 36(1)(vii) and 36(1)(viia) are permitted to operate independently. There is no doubt that a statute is normally not construed to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. As far as the question of double benefit is concerned, the Legislature in its wisdom introduced Section 36(2)(v) by the Finance Act, 1985 with effect from 01.04.1985. Section 36(2)(v) concerns itself as a check for claim of any double deduction and has to be read in conjunction with Section 36(1)(viia) of the Act. It requires the assessee to debit the amount of such debt or part thereof in the previous year to the provision made for that purpose. 18 . 19 20 . 21 . 22 . 23 . 24 25. The language of Section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It applies to all banks, commercial or rural, scheduled or unscheduled. It gives a benefit to the assessee to claim a deduction on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of reimbursement received from government under ADWDRS had already been reduced before writing off the debt of Rs.173,15,46,253/- in its books of account and claiming the deduction u/s 36(1)(vii) of the Act. Hence he prayed that the actual amount of debt written off by the assessee after reducing the amount received from government under ADWDRS should be allowed as deduction u/s 36(1)(vii) of the Act. 6.4 Per contra, the Ld. DR placed heavy reliance on the order of authorities below and requested to uphold the order of the revenue authorities. The Ld. DR opposed to the allowability of the additional ground raised by the assessee regarding applicability of section 36(1)(vii) to their case. 6.5 We have heard the rival contentions and gone through the records in the light of submissions made by the either side. For the purpose of better understanding of the case it is necessary to go through the relevant section i.e.36(1)(vii), 36(1)(viia) and 36(2)(v), which are to the following effect : Other deductions. 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 (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purposes 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;] (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);] [(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) :] [ Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;] (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply [(i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part there of is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;] (ii) if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the 42[Assessing] Officer had not allowed it to be deducted on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the single issue, new ground cannot be agitated in the remand proceedings before the tribunal. 6.8 We have heard the rival contention of the parties and perused the material available on record. Admittedly as per the CBDT Circular No. 14 (XL-35) dated 11/04/1955, it is a duty of the Ld. AO to apprise the rights of the assessee . Further more the coordinate Bench of ITAT in the case of M/S. Omega Biotech Ltd., Ghaziabad vs Ito, ITA No.2570/Del./2015 dated 12/04/2019, had held that the assessee is entitled to take the legal ground even in the second round of litigation . Respectfully relying upon the judgement of the coordinate Bench of ITAT in the case of M/S. Omega Biotech Ltd., Ghaziabad vs Ito (Supra), the additional ground raised by the assessee is admitted. Having admitted the additional ground raised by the assessee, which is relating to entitlement of the assessee u/s 36(1)(vii) of the Act to claim deduction on account of the bad debts actually written off in their books of account, since this issue has been raised before us for the first time and has not been considered by the lower authorities, therefore we deem it appropriate to remand back the matter to the file of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d while completing the Set-aside assessment. In view of the above the claim of the assessee is rejected . 7.1 Feeling aggrieved by the order passed by Ld. AO, the assessee filed appeal before the Ld. CIT(A), who dismissed the claim of the assessee as per his observation under para no. 10 of his order, which is reproduced as under: 10. Ground No.7: Addition of Rs.5,11,09,716/- towards Profit on sale of investments 10.1 The assessee has claimed that they had debited Rs.5,11,09,716/- in the profit and loss account towards Profit on sale of investments. assessee submitted that while passing original assessment order, the Assessing Officer has not considered the re- revised computation of income in which the profit on sale of investments of Rs.5,11,09,716/- was excluded. The assessee has claimed that they had excluded Profit on sale of investments of Rs.5,11,09,716/- from the taxable income since the same does not part of the taxable income. The appellant raised this issue firstly before the CIT(A), Hyderabad. The appellant submitted that it relates to the calculation mistake made by the Assessing Officer in including investment depreciation reserve and capital receipt on sale of invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant have been carefully considered. The Assessing Officer has categorically said in the Consequential order dated 31.03.2016 that this issue was brought before to the Assessing Officer through a letter dated 07.12.2011 and revised 'computation of total Income' was filed. While passing the consequential order dated 18.10.2013, the Assessing Officer stated that the assessee could not produce any evidence regarding the issue i.e., how Rs.5,11,09,716/- was arrived at. In absence of any supporting evidences, the claim of the appellant that there is a mistake in saying that there was nil income by sale of investments. During the consequential order dated 31.03.2016, the Assessing Officer said that the Tribunal has not given any direction, hence the claim of the appellant was rejected. In the appeal No. ITA: No.1481/Hyd/2013 ITA No.88/Hyd/2014 dated 09.10.2014, this issue is In Ground No.8 raised by the appellant and the Tribunal give directions as follows: Accordingly, the issue involved in ground no.8 of the assessee's appeal is restored to the file of the Assessing Officer for deciding the same afresh, as per the same directions as given by the Tribunal in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,18,382/- as depreciation of the investments. Appellant has not given notes on accounts while submitting the annual reports. As per the guidelines, the appellant is directed by. NABARD by letter dated 27.06.2008, to submit the disclosure as per the following format: Particulars Outstanding during the year (Rs. In Crores) As on March, 31 Securities sold under reports Minimum Maximum Daily Average Securities purchased under reverse repo Appellant did not submit any such disclosure in the above format, as per the information submitted. Hence before me, no further information regarding the sale has been given. Even if, the contention of the appellant s accepted that no profits has been there, this has not been brought out as per the NABARD guidelines dated 27.06.2008. Hence, for this Financial ear the mistake happened in the annual accounts in which this has been pointed out by the NABARD's letter dated 27.06.2008. In this background, the contention of the appellant cannot be accepted. -Ground Dismissed 7.2 Feeling aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld.AR submitted that the assessee had wrongly credited to the profit and loss account Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18,382/- on account of depreciation on investment. However the Ld. AO completed the assessment by disallowing the said claim of the assessee for Rs.7,05,18,382/- on account of depreciation claimed on investment as per his observation under para no.3 of his consequential order dated 31/03/2016, which is reproduced as under : 3. DISALLOWANCE OF INVESTMENT DEPRECIATION OF RS. 7,05,18,382/- AND PROFIT ON SALE OF INVESTMENTS OF Rs. 5,11,09,716/-. On this issue it was stated that a similar issue was restored by the Tribunal to the file of the Assessing Officer in assessee's own case for the A.Y. 2008-09 for the deciding the same afresh. Accordingly the Tribunal directed the Assessing Officer to decide the same afresh as per the same directions as given by the Tribunal in assessee's own case for the A.Y. 2008-09. As seen from the order of the Tribunal the observations of the Tribunal on this issue are as under: In our opinion, the above additional evidence go to the root of the matter in deciding the issue whether the investment made by the assessee form part of SLR and/or whether the investment is current investment or long term investment. Being so, it is appropriate to remit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f required by the prudential norms can make a provision for diminished value as part of appropriation but it cannot equate the investment in bonds to the stock in trade for claiming the diminished value as expenditure. In view of the above the claim of depreciation was disallowed. On the above order for the A.Y. 2008-09 the assessee preferred appeal before the CIT(A) and the same is pending. In view of the above mentioned facts and also pending finalization of the appeal by the CIT(A), the deduction claimed for the A.Y. 2009-10 amounting to Rs. 7,05,18,382/- is not treated as allowable . 8.1 Feeling aggrieved by the order passed by Ld. AO, the assessee filed appeal before the Ld. CIT(A) who dismissed the claim of the assessee as per his observation under para No. 11 of his order, which is reproduced as under: 11. Ground No.8: Disallowance of Rs.7,05,18,382/- Investment Depreciation Reserve 11.1 The assessee has claimed that they had debited Rs.7,05,18,382/- in the profit and loss account towards Investments Depreciation Reserve Fund. The assessee submitted that while passing original assessment order, the Assessing Officer has not consider the re-revised computation of income in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the A.Y. 2008-09 completed on 30.03.2015, wherein it was held that the assessee's claim of notional decrease in the value of investment cannot be accepted as expenditure incurred by the assessee. - The assessee has been disclosing the investment under current category following the prudential norms prescribed by the NABARD. However, the guidelines for prudential norms cannot be overriding the Income Tax Act as envisaged in the Apex Courts judgment in the case of Southern Technologies Ltd. Vs. JCIT(320 ITR 577). - The assessee, if required by the prudential norms can make a provision for diminished value as part of appropriation but it cannot equate the investment in bonds to the stock in trade for claiming the diminished value as expenditure. - The claim of depreciation was disallowed by the Assessing Officer for the AY 2008-09. In view of the above, the Assessing officer disallowed the deduction claimed for the AY 2009-10 amounting to Rs.7,05,18,382/-. 11.3 Before me, the appellant submitted that the investments is in non-SLR securities were valued on market to market basis as per guidelines of NABARD, and if the market value of the securities was below the book value, depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Govt. Securities 961,95,49,039 957,19,66,000 986,92,24,060 ii) Other Trustee Securities 23,00,00,000 23,00,00,000 24,94,53,250 iii) Other Institutions (Debentures) 0 0 0 iv) Total 984,95,49,039 980,19,66,000 10,11,86,77,310 NON-SLR iNVESTMENTS Sl. No. Issuer Amount Extent of Privat placement Extent of below Investment grade securities already invested Extent of unrated securities already invested Extent of unlisted securities 1 PSU 218,60,60,000 218,60,60,000 - - 22,90,60,000 2 FI (Shares) 3,3347,914 1,88,58,926 - 1,88,58,926 1,88,58,926 3 Total 221,94,07,914 220,49,18,926 - 1,88,58,926 24,79,18,926 4 Provision held towards depreciation 37,11,75,325 - - - - 5 Net 184,82,32,589 - -- - - Appellant has submitted that referred investments are Non-SLR Investments, hence they are to be given depreciation. The RBI issued a circular Master Circular on Investments by Primary (Urban) Co-operative Banks-2015/30UBD. BPD(PCB). MC.No.12/16.20.000/2014-15, wherein the banking institutions have to classify Investments for SLR and Non-SLR Investments. The entire investment portfolio of the banks (including SLR securities and non-SLR securities) should be classified under three categories viz., &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,90,000 2,18,60,60,000 1,95,10,20,704 23,84,75,500 Total 11,99,89,16,000 12,06,89,56,953 12,08,85,56,040 37,11,75,325 PROVISION REQUIRED FOR THE F.Y. 2008-09 (AS ON 31.03.2009) 37,11,75,325 PROVISION ALREADY AVAILABLE IN THE RESERVE UPTO 30.03.2009 37,11,75,325 PROVISION MADE BY DEBITING P L AS ON 31.03.2009 7,05,38,382 TOTAL PROVISION VAILABLE IN THE RESERVE AS ON 31.03.2009 37,11,75,325 To conclude the contention of the appellant is not accepted because of the following reasons: a) The appellant has not differentiated investments of SLR investments into the three categories. It is not known whether the above mentioned investments (Non- SLR investments) are HTM or AFS. b) Secondly, the working of the depreciation has not been given before me. It is pertinent to note that the working was asked by the Assessing Officer before passing the consequential orders also. Even during that time, the appellant did not submit the details. c) The Non-SLR investments are not statutory requirement as per banking rules. The bank can make investments beyond the SLR requirements. However, referred issue is for Non-SLR investments. As the appellant has treated these investments as Stock-in-trade, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act and in the prescribed tables of depreciation (schedules of the IT rules), the investments in securities by the assesse are not covered. 8.4 We have heard the rival contentions and gone through the record in the light of submissions made by the either side. As submitted by the Ld. AR the investment on which depreciation has been claimed by the assessee, have been treated as current assets by the assessee. However under the provisions of the Act, depreciation is allowed only on fixed assets and no depreciation is allowed on current assets. Hence we are of the concerned opinion that no depreciation will be allowable to the assessee on the investment treated as current assets. We here by make it clear that, neither we have decided the nature of the investment, whether it is current or otherwise, nor it was an issue before us to decide the nature of the investments. We have only decided on the issue whether the assessee is eligible to claim depreciation on the investments, which the assessee has shown as current assets. Accordingly, on this count, this issue of the assessee is dismissed . 8.5 However it is also the contention of the assessee that the investment are in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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