Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Shree Sharada Sahakari Bank Ltd. Versus The Income Tax Officer, Ward 6 (2) , Pune.

2015 (6) TMI 34 - ITAT PUNE

Disallowance u/s 36[1](viii] - no reserve was created - appellant submits that the appellant may be permitted now to create such reserve - Held that:- The case of the assessee that admittedly it had not created any reserve in its books of account before claiming the said deduction under section 36(1)(viii) of the Act on the surmise that no such reserve is to be created in view of wording of the section finds no merit in the said plea of the assessee in view of the similar wordings in section 36( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eserve in its books of account now - Held that:- In view of the clear wording of the section that where it is provided that the special reserve is to be created and maintained by the special entity from its profit derived from the eligible business, then such non-creation of special reserve by the assessee cannot be made good by creating any reserve on a later date. The books of account of the assessee are admittedly audited and in the absence of any reserve being created in such audited books o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eate additional reserve. In the facts of the present case, there was no reserve created by the assessee and in the absence of same, we find no merit in the alternate plea raised by the assessee and the same is dismissed.- Decided against assesse. - ITA No.234/PN/2013 - Dated:- 29-4-2015 - MS SUSHMA CHOWLA AND SHRI R.K. PANDA, JJ. For The Appellant : Shri Sunil Ganoo For The Respondent : Shri B.D. Singh ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee is against the order of CIT(A)- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

In the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that for claiming the deduction u/s 36[1] [viii] of the IT Act 1961, the amount of reserve ought to be debited to the Profit and Loss Account and mere claim in the Computation of Income by way of maintaining separate reserve is not a statutory compliance. The aforesaid finding / conclusion drawn by the learned CIT(A) being patently illegal, bad in law and devoid of merits the same may please be vacated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ry at the time of hearing of the appeal. 3. The issue raised in the present appeal is in relation to the claim of deduction under section 36(1)(viii) of the Act. 4. Briefly, the facts of the case are that the assessee is a Co-operative Bank registered under the Maharashtra Co-operative Societies Act, 1960 and carries on the business of banking under the license granted by the Reserve Bank of India. The assessee for the year under consideration had furnished its return of income declaring total i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

77; 33,077/- has been claimed for TDS paid during the A.Y. 2009-10 pertaining to expenses disallowed in A.Y. 2008-09 due to non-payment of TDS in A.Y. 2008-09. 5. The case of the assessee was selected for scrutiny. The Assessing Officer show-caused the assessee to provide proof as to whether the amount was transferred during the year to special reserve account created for the purpose of section 36(1)(viii) of the Act. In response, the assessee stated that the said deduction of ₹ 11,51,111/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reserve now. The Assessing Officer noted that the assessee had not created any reserve during the financial year 2009-10 and through a revised return it had requested for an opportunity to create such reserve now. In the absence of any reserve being created during the previous year the assessee claimed a deduction under section 36(1)(viii) of the Act at ₹ 11,51,111/-, which was disallowed by the Assessing Officer. 6. The CIT(A) observed that from the reading of the provisions, it was clear .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eserve in its books of account was held to be not eligible for deduction under section 36(1)(viii) of the Act by the CIT(A). The other contention of the assessee that it should be allowed an opportunity to create the requisite reserve during the assessment proceedings was also rejected by the CIT(A), since the assessee had failed to create any reserve in its books of account before claiming the deduction under section 36(1)(viii) of the Act. Reliance was placed on the judgement of the Hon ble Pu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Act. The CIT(A) further held that the ratio laid down by the Hon ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Industrial Development Corporation, (2010) 323 ITR 495 (P&H) rendered on the issue was not applicable to the facts of the present case. The assessee is in appeal against the order of the CIT(A). 7. The Ld. Authorized Representative for the assessee pointed out that no reserve was created while claiming the deduction under section 36(1)(viii) of the A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee that after making claim of deduction in the computation of income filed alongwith the revised return, the assessee had made a prayer before the authorities below that it be allowed an opportunity to make reserves and pass entries. The contention of the Ld. Authorized Representative for the assessee was that all these being beneficial provision then the provision ought to be interpreted liberally. Further, the Ld. Authorized Representative pointed out that similar issue arose before the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with special reference to para 5 to 5.1 of the impugned order. 9. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to allowability of deduction under section 36(1)(viii) of the Act. The assessee was a Co-operative Bank engaged in the business of banking. In the original return of income filed for the year under consideration, the assessee had not claimed any deduction under section 36(1)(viii) of the Act. However, in the revised r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dition precedent for claiming deduction under this section. An alternate plea was raised before the lower authorities that without prejudice to the above, assessee bank be allowed an opportunity to create such reserve now. 10. Section 36(1)(viii) of the Act provides as under :- 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 - (i) …………….. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es of the specified entity, no allowance under this clause shall be made in respect of such excess. 11. For computing the income under the head business income certain deductions are allowed from such business income and one such deduction is laid down in section 36(1)(viii) of the Act. The said section provides a deduction not exceeding 20% of the profits derived from eligible business computed under the head Profits and gains of business or profession , in respect of any special reserve create .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

such reserve account. In other words, it is specified that entries are to be made in the books of account by way of a creation of a special reserve in order to claim the deduction under section 36(1)(viii) of the Act which, in turn, would not exceed 20% of the profits derived from the eligible business. Further, certain restrictions are provided in the proviso to the said sub-section which is not relevant for deciding the issue before us. 12. In the facts of the present case, admittedly assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction 36(1)(viii) of the Act. Our attention was drawn to the wording of section 34(3a) of the Act wherein it is provided that the deduction under section 33 of the Act shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the Profit & Loss Account and also created to be a reserve account to be utilized by the assessee during the period of eight years next. 13. On the other hand, the case of the Department is that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provisions in the books of account equal to the amount of deduction sought to be claimed under section 36(1)(viia) of the Act, the assessee was not entitled to the entire claim of deduction but only deduction to the extent of ₹ 50,00,000/- being the amount of provision actually made in the books of account was allowed in the hands of the assessee. The relevant findings of the Tribunal are as under :- 9. We have carefully considered the rival submissions. We have also anxiously perused the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ety or a primary co-operative agricultural and rural development bank], an amount [not exceeding 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 : 10. A bare perusal of aforesaid section clearly brings out that the deduction specified therein is in respect of any provision f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

elies the interpretation sought to be canvassed by the assessee. In the case before the Hon ble High Court, assessee-bank had originally filed its return of income for assessment year 1985-86 claiming deduction under Section 36(1)(viia) of the Act at ₹ 1,90,36,000/-. After filing of the return the provisions of Section 36(1)(viia) of the Act were amended by Finance Act, 1985 whereby deduction was enhanced to 10% of the profit or 2% of the aggregate average advances made by rural branches o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 1,90,36,000/- only. The assessee argued that the Provision of ₹ 1,90,36,000/- was made in the Balance-Sheet finalized on 14.02.1985 which was as per the unamended provisions of Section 36(1)(viia) of the Act and that in view of the amendment of Section 36(1)(viia) of the Act permitting higher claim of deduction, the assessee could not have possibly made the higher Provision in the Balance-Sheet finalized on a prior date, but it made up the shortfall by making an adequate Provisi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

& Haryana High Court. The Hon ble High Court referred to the provisions of Section 36(1)(viia) of the Act and observed that …..the deduction allowable under the above provisions is in respect of the provision made and further went on to hold that …..making of a provision for bad and doubtful debts equal to the amount mentioned in this section is must for claiming such deduction. In view of the aforesaid judgement of the Hon ble Punjab & Haryana High Court, in our view, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ndia] or a non-scheduled bank, an amount not exceeding ten per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) or an amount not exceeding two per cent of the aggregate average advances made by the rural branches of such bank, computed in the prescribed manner, whichever is higher. 6. A bare perusal of the above shows that the deduction allowable under the above provisions is in respect of the provision made. Therefore, making of a provision for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provision for bad and doubtful debts account made under that clause. 7. This also clearly shows that making of provision equal to the amount claimed as deduction in the account books is necessary for claiming deduction under s. 36(1)(viia) of the Act. The Tribunal has distinguished various authorities relied upon by the assessee wherein deductions had been allowed under various provisions which also required creation of reserve after the assessee had created such reserve in the account books bef .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

subsequent year. 9. We are, therefore, satisfied that the Tribunal was right in holding that since the assessee had made a provision of ₹ 1,19,36,000 for bad and doubtful debts, its claim for deduction under s. 36(1)(viia) of the Act had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this Court. 11. In view of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sion actually made in the books of account. 12. The learned counsel for the assessee has cited certain decision in support of his proposition that the claim of deduction under Section 36(1)(viia) of the Act is not linked to making of a Provision in the account books. At the outset, we may observe that the decisions relied upon by the assessee are of various Benches of the Tribunal and not of any High Court. Therefore, the judgement of the Hon ble High Court in the case of State Bank of Patiala ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deciding the issue of allowability of claim of deduction under section 36(1)(viii) of the Act held that where the assessee had claimed said deduction and created a reserve on the basis of book profit, but where the assessee was entitled to a higher deduction under section 36(1)(viii) of the Act for which the reserve already created was not sufficient, an opportunity was offered to the assessee to create further reserve. 15. The case of the assessee before us is that admittedly it had not create .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Tribunal in the case of Shri Mahalaxmi Co-op. Bank Ltd. vs. ITO (supra). In the absence of any reserve being created the assessee is not entitled to the said claim of deduction under section 36(1)(viii) of the Act. The second aspect of the issue is the plea of the assessee that it should be allowed an opportunity to create the said reserve in its books of account now. From the plain reading of the wordings of the section, it is clear that reserve is to be created from the profits of the relevant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version