TMI Blog2016 (3) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly direct the Assessing Officer to allow the claim of the assessee for deduction under section 36(1)(viii) after verifying the quantum thereof in accordance with law. - Decided in favour of assessee Restricting the claim of the assessee for deduction under section 36(1)(viia) of the Act for provision for bad and doubtful debts - Held that:- It is observed that a similar issue has been decided in favour of the revenue and against the assessee in the case of State Bank of Patiala-vs.- CIT [2004 (5) TMI 12 - PUNJAB AND HARYANA High Court ] wherein it was held that the deduction allowable under section 36(1)(viia) is in respect of the provision made and, therefore, making of provision equal to the amount claimed as deduction in the account books is necessary for claiming deduction under section 36(1)(vii). Since there is no other decision of any High Court taking a different view on this issue has been brought to our notice, we respectfully follow the decision of the Hon’ble Punjab & Haryana High Court and uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of deduction under section 36(1)(viia). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of Profit & Loss Account - Held that:- Assessing Officer as well as the ld. CIT(Appeals) have proceeded on the presumption that these amounts might have been debited by the assessee to the Profit & Loss Account in the earlier years. He has urged that an opportunity may, therefore, be given to the assessee to establish that the said amounts had not been claimed by it as deduction in any of the earlier years and the provisions of section 41(1) thus are not applicable. Although the ld. D.R. has strongly opposed to this request of the ld. counsel for the assessee, we consider it fair and reasonable and in the interest of justice to accede to the said request. Accordingly, the impugned order of the ld. CIT(Appeals) on this issue is set aside and the matter is restored to the file of the Assessing Officer for the limited purpose of giving the assessee an opportunity to establish its case that no deduction on account of the amounts in question was claimed by it while computing the total income of any of the earlier years - I.T.A. Nos. 2175/KOL/ 2009, I.T.A. Nos. 2176/KOL/ 2009 & I.T.A. Nos. 2070/KOL/ 2009 - - - Dated:- 16-3-2016 - SHRI P.M. JAGTAP, ACCOUNTANT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of both the sides on this issue and also perused the relevant material available on record. As rightly submitted by the ld. counsel for the assessee relying on the several decisions of the Tribunal, the similar disallowance made under section 14A has been restricted by the Tribunal to 1% of the exempt income by treating the same to be fair and reasonable. In the present case, the disallowance offered by the assessee under section 14A is more than 1% of the exempt income and this being the undisputed position, we hold that the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A over and above the disallowance offered by the assessee at more than 1% of the exempt income is not sustainable. The same is, therefore, deleted and Grounds No. 1 2 of the assessee s appeal for A.Y. 2005-06 are allowed. 5. The issue involved in Grounds No. 3 4 of the assessee s appeal for A.Y. 2005-06 relates to the disallowance of ₹ 11,63,09,158/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of deduction claimed by the assessee under section 36(1)(viii) of the Act. 6. The deduction claimed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than a primary agricultural credit society or a primary co-operative agricultural and rural development bank). The amendment also provides definitions of the expressions banking company , co-operative bank , primary agricultural credit society . 10. Further the restructuring done to define the financial corporation is only clarificatory as we can see from the notes on clauses which read as follows: The proposed amendment further seeks to define certain terms including specified entities and 'eligible business' for the purposes of deduction . 11. Since the definition is only clarificatory in nature, it can be presumed that the entity such as the assessee were covered in the definition from the inception of the section. 12. Even otherwise the assessee is a Govt. company since the Central Govt. holds more than 51% of the share capital of the bank and as defined in Sec. 617 of the Companies Act the assessee is a Govt. company. Hence the deduction u/s. 36(1)(viii) has to be allowed to the assessee as it is engaged in the business of providing long term finance for industrial, agriculture and infrastructure development in India and is a Govt. c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en decided by the Hon ble Punjab Haryana High Court in favour of the revenue and against the assessee in the case of State Bank of Patiala-vs.- CIT reported in 272 ITR 54, wherein it was held that the deduction allowable under section 36(1)(viia) is in respect of the provision made and, therefore, making of provision equal to the amount claimed as deduction in the account books is necessary for claiming deduction under section 36(1)(vii). Since there is no other decision of any High Court taking a different view on this issue has been brought to our notice, we respectfully follow the decision of the Hon ble Punjab Haryana High Court and uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of deduction under section 36(1)(viia). Ground No. 5 is accordingly dismissed. 11. Grounds No. 6 to 10 of the assessee s appeal for A.Y. 2005-06 and additional grounds no. 1 2 raised by the assessee and admitted by us involve the issues relating to the various additions made by the Assessing Officer and confirmed by the ld. CIT(Appeals) while computing the book profit under section 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Association was in progress during the year under consideration and as per advice of Indian Banks Association, an understanding was reached with the Workmen Union and Officers Associations on wage revision. It was submitted that even though the final agreement was not executed during the year under consideration, provision of ₹ 138.83 crores was made in the accounts based estimate of such liability made by the Management and duly verified by the statutory auditors. These submissions made by the assessee in support of its claim for deduction on account of provision for salary arrears were not found acceptable by the Assessing Officer. According to him, since the expenditure on account of salary arrears was not quantified, the provision made for the same was in the nature of unascertained liability and the assessee was not entitled to claim deduction for the same. Accordingly, he disallowed the deduction claimed by the assessee on account of provision for salary arrears. 15. The disallowance made by the Assessing Officer on account of its claim for deduction towards provision for salary arrears was challenged by the assessee in the appeal filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme court, the ITAT, Nagpur bench in the case of Western Coalfields limited v ACIT, 2009-TIOL-589-ITAT-NAGPUR has allowed deduction in respect of provision for incremental wages made on estimated basis on account of pending National Coal Wage agreement -IV for A.Y. 2002-2003. In my opinion provision for wage arrears made by the bank in the financial year 2004-2005 satisfies all the conditions prescribed in AS 29. Hence the A.O is directed to allow the provision for wage arrears and this ground of appeal is allowed . 16. The ld. D.R. submitted that there was no basis given by the assesese on which the amount of salary arrears payable to the staff and Officers could reasonably be quantified and in the absence of the same as well as any specific event that occurred during the year under consideration showing that the liability on account of salary arrears had crystallized, the provision made by the assesese for salary arrears represented unascertained liability which was not allowable as deduction, as rightly held by the Assessing Officer. He contended that the ld. CIT(Appeals), however, overlooked these relevant aspects highlighted by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered is whether it was possible to ascertain or quantify the same with reasonable certainty in the year under consideration. In this regard, it is observed that the negotiations between Indian Banks Association and Employees Union had already taken place and the final understanding was almost reached during the year under consideration, which is evident from the fact that the final agreement for revision was entered into in the month of May, 2005 itself, i.e. immediately after the end of the year under consideration. The fact that the revision was finally settled with 13.25% in May, 2005 also goes to show that the provision made by the assessee for such revision at 13% in the year under consideration was a liability, which could be ascertained with reasonable certainty. 19. In support of the Revenue s case on this issue, the ld. D.R. has relied on the decision of the Hyderabad Bench of this Tribunal in the case of Andhra Pradesh Gramin Vikas Bank. It is, however, observed that the same is distinguishable on facts, inasmuch as, the liability on account of salary arrears in the said case had arisen as a result of proceedings held on 24.07.2010, i.e. mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for salary arrears while computing the book profit under section 115JB has become infructuous as a result of our decision rendered while disposing of the appeal of the assessee holding that the provisions of section 115JB are not applicable in the case of the assessee-Bank. Ground No. 3 of the Revenue s appeal is accordingly dismissed. 22. The issue involved in Ground No. 4 of the Revenue s appeal for A.Y. 2005-06 relates to the deletion by the ld. CIT(Appeals) of the addition of Rs.75,00,00,000/- made by the Assessing Officer by way of disallowance of assessee s claim for bad debts written off under section 36(1)(vii) of the Act. 23. In the Profit Loss Account, a sum of ₹ 75,00,00,000/- was debited by the assessee on account of bad debts written off relating to Non-Rural Branches and the same was claimed as deduction under section 36(1)(vii). In this regard, the Assessing Officer noted that the opening balance in the provision for bad and doubtful debts made by the assessee under section 36(1)(viia) was to the extent of ₹ 584.04 crores. Since the amount of bad debts written off by the assessee and claimed as deduction under section 36( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not pressed. 26. In Ground No. 3, the assessee has disputed the addition of ₹ 45.09 crores made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the amount transferred from Contingency Account - General to the credit of Profit Loss Account. 27. During the year under consideration, the assessee-Bank had transferred old outstanding balances aggregating to ₹ 104.63 crores from Contingency Account - General to the credit of the Profit Loss Account under the head other income as per the decision taken by its Board of Directors. On verification of the same, it was found by the Assessing Officer that the amounts transferred by the assessee from flabby accounts (i.e. bills payable, Debit Note payable, etc.) to the extent of ₹ 43.12 croes and from sundry creditors to the extent of ₹ 1.97 crores were in the nature of cessation of liability as covered by the provisions of section 41(1) of the Act. He, accordingly, invoked the said provision and made addition of ₹ 45.09 crores to the total income of the assessee. On appeal, the ld. CIT(Appeals) confirmed the said addition made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(Appeals) have proceeded on the presumption that these amounts might have been debited by the assessee to the Profit Loss Account in the earlier years. He has urged that an opportunity may, therefore, be given to the assessee to establish that the said amounts had not been claimed by it as deduction in any of the earlier years and the provisions of section 41(1) thus are not applicable. Although the ld. D.R. has strongly opposed to this request of the ld. counsel for the assessee, we consider it fair and reasonable and in the interest of justice to accede to the said request. Accordingly, the impugned order of the ld. CIT(Appeals) on this issue is set aside and the matter is restored to the file of the Assessing Officer for the limited purpose of giving the assessee an opportunity to establish its case that no deduction on account of the amounts in question was claimed by it while computing the total income of any of the earlier years. Ground No. 3 of the assessee s appeal for A.Y. 2006-07 is accordingly treated as allowed for statistical purposes. 29. As regards Ground No. 4 of the assessee s appeal for A.Y. 2006-07, it is observed that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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