TMI Blog2012 (5) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000. The said license was suspended by the RBI vide its order dated 29-09-2001, going on to cancel the same u/s. 22(4) of the B.R. Act on 16-01-2002. These primary facts are admitted and not disputed. Accordingly, the assessee s claim for depreciation u/s. 32(1) of the Act for ₹ 17,63,138/- was restricted by half in view of the proviso to section 32(1) of the Act; its assets having been put to use for the purpose of business for a period of less than 180 days during the relevant previous year, and disallowance for ₹ 8,81,569/- effected in its respect. The same stood confirmed in appeal by the ld. CIT(A) for the same reasons. 3. Before us, it was contended by the ld. AR, the assessee s counsel, that the proviso to section 32(1) is not applicable, being so only for the year of acquisition of the relevant assets. Further, the ld. AR would submit that the assets continued to be used throughout the year. What had been stopped by the RBI by suspending its license was only fresh banking business, so that the assessee continued to service its old deposits as well as collect interest on old advances, putting its assets to use. Why, the Revenue had taxed the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance. In fact, the assessee s claim before the first appellate authority, i.e., that though its operations were suspended, yet its assets were kept in a state of readiness for being used, so that there was a passive user even after 28/9/2001, entitling it to depreciation for the entire year, is though a tacit admission to the contrary. Further, the assessee s argument is sans any material, or prayer for admission of additional evidence. Also, the issue is not as straight forward as appears to be, and may involve the application of Explanation to sec. 37(1) of the Act. Under the circumstances, we hold that the assessee s claim to the extent it relates to assets acquired during the current year would be subject to the second proviso to sec. 32(1), the details of which assets and their user would be furnished by the assessee, where not already available with the Revenue. We decide accordingly. 5. The second ground relates to the non-allowance of the assessee's claim qua the provision for bad and doubtful debts made u/s. 36(1)(viia) of the Act; the assessee being not a banking company as at the end of the relevant previous year, i.e., 31-03-2002. In this regard, the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to a banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice (vide s. 36A(2)). In the instant case, the said notification u/s. 36A was only on 21-09-2002, so that the assessee-company was a banking company, i.e., for all intents and purposes, up to that date. It is only the provisions of sections 11, 12(1), 17, 18, 24 and 25, which would not apply to it on the cancellation of its license u/s. 22 of the Act. An Index of the Banking Regulation Act, 1949, placed on record, was adverted to by the ld. AR; the title of the various sections, indicating the content and nature of the relevant provisions, being as under:- s.11 Requirement as to maintain paid-up capital and reserves s. 12 Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of shareholders s.17 Reserve Fund s.18 Cash reserve s. 24 Maintenance of a percentage of assets s. 25 Assets in India s. 29 Accounts and balance sheet s. 30 Audit s. 31 Submissions of returns s. 32 Copies of balance sheets and accounts to be sent to registrar s. 33 Display of audited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firstly observe that the assessee's claim u/s. 36(1)(viia) of the Act is applicable, among others, to a non-scheduled bank, as the assessee. Secondly, as the assessee based its case before the authorities below on the restoration of its license by the appellate authority, it may therefore appear to have completely changed its stand before us, it is in fact not so. This is as the assessee s case remains essentially the same, i.e., of it being a banking company for the relevant year or, at least for the major part thereof, while the Revenue s case is that the matter being legal, either the assessee is a banking company as at the relevant year-end or not, with it being not disputed that the banking licence stood cancelled well before the end of the relevant year. 7.2 Clearly, therefore, there is no dispute that the assessee s claim falls under u/s. 36(1)(viia) only, and the issue centres around the assessee s exigibility there-under. Continuing further, the proviso to the provision at the option of the assessee - would be applicable to the assessee, in terms of which deduction by way of provision in respect of assets classified as doubtful or loss assets in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case failed to examine and determine the relevant facts, i.e., whether the impugned claim does indeed qualify u/s. 36(1)(viia); it proceeding only on the basis that the said provision is inapplicable in view of the assessee, being not a banking company as at the relevant year-end. There being thus no adjudication on merits, under the circumstances, we only consider it fit and proper, and in the interest of justice, that the matter with regard to the claim for ₹ 48.49 lacs is restored back to the file of the AO for fresh adjudication by issuing clear findings of fact, and after allowing the assessee a reasonable opportunity to present its case in the matter. As regards the assessee's claim for the balance ₹ 12.30 lacs, the same is admittedly in respect of sub-standard assets, which are, as we understand, a category of assets different from either loss or doubtful assets as per the guidelines by the RBI, so that the assessee s claim is again prima facie not admissible, or maintainable only to the extent the sub-standard assets in its portfolio includes loss or doubtful assets as per the RBI norms, the onus to establish which is on the assessee. To th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view the assessee's claim would be maintainable. The assessee s case clearly falls u/s. 36A(1)(b) of the BR Act. Accordingly, the provision of sections 29, 30 and 31, relating to the preparation of accounts (for the year) and the balance-sheet (as at the yearend); their audit; and submission of returns based thereon, would continue to apply to the assessee till the notification u/s. 36A(2). The assessee-company is thus obliged to classify its assets according to the RBI norms, as any other non-scheduled bank, i.e., irrespective of the fact that its banking license stood cancelled by the RBI prior to 31-03-2002. We are aware that the assessee has not raised any such claim before the authorities below, so that there is no finding by them in the matter. So, however, the same is only a legal claim, going to the root of the matter. Merely because it was not able to canvass the legal basis of its claim before the authorities below, would in our view not preclude the assessee from doing so before a higher appellate authority. There is no finding, however, with regard to the date of the notification u/s. 36A(2) of the B.R. Act in the orders of the authorities below, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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