TMI Blog2019 (12) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... f losses of fraud committed at main branch, Hoshiarpur and on account of contra entry of interest not decided by the CIT(Appeal) - HELD THAT:- We find that while disallowing the total amount of ₹ 6,00,75,946/-. The AO has also included the amount of ₹ 2.17 crores being provisions made against main branch office of fraud and ₹ 2.58 crores being interest paid to main branch Hoshiarpur without confronting the assessee on this issue. Therefore, we are of the considered opinion that this issue is set aside to the file of the AO for examination and reconsideration of the same after affording a reasonable opportunity of being heard to the assessee. In view of this ground of appeal is set aside to the file of the AO in entirety for reconsideration of the disallowances made. Disallowance of fuel and hire charges debited to the P L account - HELD THAT:- In the instant case, we find neither of these two conditions being satisfied; the former being in fact incidental in-as-much as a voluntary expenditure, shown to be for the purpose of the assessee s business, would qualify for deduction. In our considered view, therefore, the impugned expenditure does not meet the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceed under law to exact the same. It does not in any manner lead to the inference of any income having accrued to the assessee as a result. Rather, the said tax, where paid, would stand to be debited to its operating statement (P L A/c) for the year. We decide accordingly. 7. Vide the second ground, the Revenue contests the deletion of the disallowance of the provision on standard assets, made by the assessee-bank at the rate of 0.25%, on the ground it being only a contingent liability. The assessee alludes to the RBI/NABARD guidelines, which are to be mandatorily followed. The same, in view of the AO, would not convert the provision as toward an existing liability, only in which case would the provision be deductible u/s. 37(1), quoting from the Board Instruction No. 17/2008 dated 26.11.2008, qualifying that a provision in respect of uncertain or contingent liability, which had not accrued, would not qualify for deduction. In appeal, the assessee found favour with the ld. CIT(A) on the basis that the provision, though against standard assets, is yet a provision for bad and doubtful debts and, therefore, governed by section 36(1) (viia), which admits deduction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Per contra the Ld counsel for the assessee submitted that this issue is covered by para 14 and 15 at page 16 to21 by the order ITAT in assessee s own case in ITA No. 47/Asr/2011 and ITA No. 93/Asr/2011 dated 16.07.2018. 10. We have heard the rival submissions and find that the issue is covered against the Revenue by the order of ITAT vide para 14 to 15 vide order of ITAT dated 16.07.2018 (supra) which are reproduced as under: 14. Ground 4 is in respect of claim of ₹ 1.43 lacs (refer para 13 above). The same was denied on the basis that the said provision could not be regarded as a provision for bad and doubtful debts. The assessee s claim is that the interest, booked as income for fy. 2006-07 (AY 2007-08), being not realized even during fy. 2007-08 (AY 2008-09), was reversed. That is, constitutes reversal of interest, so that it would not, as stated by the ld. CIT(A), stand to be debited to the provision account. 15. We have heard the parties, and perused the material on record. The assessee bank, following accrual system of accounting, had booked income for AY 2007-08 even as the interest wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de with reference to either component. In our considered view, firstly, the crystallization of the amount of provision u/s. 36(1)(viia), in-so-far as it is based on assessed income, shall have to await the finalization of and, thus, could only be after giving the effect to the assessee s other claims (or counter claims), i.e., in appeal proceedings. On merits, the assessee has aggregated the provision into its two constituents, opening and maintaining separate (provision) accounts for each of them, as is incumbent upon it. This is as though each of the two limbs is, in effect, a provision for bad and doubtful debts, the deduction for the same is to be made with reference to the upper limit for each of the two limbs, defined separately as, not exceeding i.e., the specified percentage of total income in one case, and of the aggregate rural branch advances for the other. Each of the two components would therefore have to be reckoned separately, and no disallowance could be made where each of the two components does not exceed the limits specified there-for. It does not mean that the provision already made in accounts is to be disturbed to accommodate other provision, i.e., adjust th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckoned with reference to the advances (by rural branches of the bank, speaking in the context of section 36(1)(viia)) as on 31.03.2008. The said provision may include that made during the earlier years, i.e., where not reversed, which thus would have to be taken into account while computing the upper limit specified qua rural advances u/s. 36(1)(viia). And in which case, therefore, the provision based on income (for each year u/s. 36(1)(viia) would have to be made, accounted for and reckoned (for the breach of the limit specified in its respect) separately. The argument aforesaid appealing at first blush, does not hold. At this stage, we may refer to the Revenue s Ground No. 2 (for AY 2008-09, in ITA No. 399/Asr/2011). The AO regarding the entire provision of ₹ 852 lacs by the assessee as against standard loans, effected an addition for the same, i.e., ₹ 852 lacs. The ld. CIT(A), while confirming disallowance of ₹ 2 lacs (agitated by the assessee per its appeal), regarding the balance ₹ 850 lacs as in excess by ₹ 1.69 lacs, allowed thus, in effect, a relief of ₹ 848.31 lacs, which the Revenue contests per its Ground 2. Even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not decided by the CIT(Appeal). The Ld. counsel submitted that the CIT(Appeal) has allowed partly appeal in respect of disallowance of ₹ 6,0075,946/- for provision made against standard loans of ₹ 25 lacs and advances of rural branches at ₹ 1 crore by following the decision of his predecessor and CIT(Appeal) for AY 2008-09. However, the CIT(Appeal) did not adjudicate the ground relating to provision against fraud of ₹ 2.17 crores and interest paid to head office of ₹ 2.58 crores u/s 36(1)(viia) on the ground that no separate grounds are taken for the same in appeal nor the issue of disallowances arise from the assessment order also, hence the addition of ₹ 4,75,75,946/- being disallowance not covered u/s 36(1)(viia) was not decided. The Ld. counsel draw our attention to para 4 of the assessment order wherein by adopting the figures of ₹ 6,00,75,946/- as provision against standard loans dealt with the assessee s reply dated 10.10.2011, furnishing head-wise break up of the said amount of ₹ 6,00,75,946/- only qua the two amounts of ₹ 25 lacs being provision against standard loans and Rs. one crore being provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being heard to the assessee. In view of this ground of appeal is set aside to the file of the AO in entirety for reconsideration of the disallowances made at ₹ 6,00,75,946/- accordingly. 15. Ground no. 6 relates to confirming the addition of ₹ 8,39,825/- made by the AO being disallowance of fuel and hire charges debited to the P L account. 16. At the outset, the Ld. counsel for the assessee submitted that this issue is covered against him by the decision of tribunal in assessee s own case vide para 4 and 5 page 8 to11 of ITAT order dated 16.07.2018. The Ld. CIT-DR has also agreed for the same. 17. We have heard the rival submissions and perused the material available on record. We find that the ITAT in ITA No. 47, 93/Asr/2011 dated 16.07.2018 has given his finding on the above issue as per para 4 and 5 at page 8 to 11 which is reproduced as under: 4. The next issue, per Gd. 3, is in respect of disallowance of fuel and hire charges u/s. 37(1) of the Act. The assessee-bank was during assessment proceedings asked to explain the business purpose of the said expenditure, suffered and claimed at ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the preservation of the business or for the protection of the assets and property thereof from expropriation coercive process or assertion of hostile title; it may comprehend many other acts incidental to the carrying on of a business. In short, the words connote commercial expediency , considered from a businessman point of view and, therefore, would not include the condition of being incurred necessarily . In the present case, however, we are unable to find any commercial expediency. The assessee s only explanation, as we see it, and even as put forth by the ld. counsels before us, is that the Registrar of Societies being a regulatory body, the assessee could not refuse to accede to its prescriptions for all the cooperative banks meeting the maintenance cost of the vehicles being used by its officers. On being ask by the Bench as to how could it be said that the assessee could not refuse in the absence of any legal or contractual obligation, no satisfactory answer was forthcoming. In fact, the Registrar of Cooperative Societies (ROCS) is a registering authority, and not a regulatory authority. It is the NABARD (or RBI) under whose superintendence, direction and control, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/Asr/2014 (AY 2011-12) by the Revenue 19. Ground no. 1 and 2 relates to deleting the addition of ₹ 35,67,180/- made on account of dividend tax. 20. We have heard the rival submissions and find that the issue is covered against the Revenue by the decision of tribunal for AY 2007-08 in ITA No. 93/Asr/2011 AY 2007-08 vide para 6 of the ITAT order. We further find that this issue is decided against the Revenue by us in appeal for AY 2009-10 as discussed in earlier part of this order in ITA No. 120/Asr/2013, therefore, our findings his given therein would apply for this ground also for this year accordingly following the same. This ground of appeal of the Revenue is accordingly dismissed. 21. Ground no. 3 to 4 relates to deleting the addition of ₹ 2,25,00,000/- which was made by the AO rejecting the claim of the assessee on account of provision for bad and doubtful debt. 22. Briefly stated fact are that the AO made an addition of ₹ 2.25 croes by disallowing provision for bad and doubtful debt against advances made by rural branch on the plea of contingent liability. The AO carried out the matter befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Here it may also be relevant to state that section 36(1)(viia) is applicable to cooperative banks (other than those excluded) w.e.f. 01.04.2007, i.e., AY 2007-08 onwards. The assessee has not been shown to us as falling within the excluded categories, which we note to be the same as those saved u/s. 80P(4). As such, clearly either of the two sections, i.e., 36(1)(viia) or section 80P, shall apply to the assessee, who cannot take an ambivalent stand with regard to its status. The parameters of a primary agricultural credit society or a primary cooperative agricultural and rural development bank, i.e., two specified excluded categories, are well settled. The AO shall accordingly examine the matter, and decide the same issuing definite findings of fact, of course, after hearing the assessee in the matter. In fact, as it appears, the assessee has not claimed deduction u/s. 80P, for otherwise this itself would have been the subject matter of dispute between the parties, with the AO clearly adverting to section 80P(4), excluding the assessee from the purview of section 80P. Why, in that case, i.e., of the assessee being considered as eligible for deduction u/s. 80P even for AY 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee, if that is so, therefore this issue is set aside to the file of the AO for verification, if the said amount has already been disallowed by the assessee in the return of income then no addition is required to be made. This ground is dispose off, therefore set aside to the file of the AO. 33. Ground no. 3 relates to sustaining the addition of ₹ 6,99,344/- made by the AO by way of disallowance of vehicle expenses. 34. At the outset, the Ld. counsel submitted that this issue is covered against the assessee by the order of the tribunal vide para 4 page 5 in ITA No. 93/Asr/2011 for AY 2007-08 dated 16.07.2018. 35. We have heard the rival submissions and find that this issue is decided again by the tribunal in para 4, 5 of order dated 16.07.2018. Further we have also followed the same while deciding the appeal of the assessee for AY 209-10 in ground no. 6 has discussed above in earlier part of this order. Therefore respectively our findings and findings of the tribunal in assessee s own case for AY 2007-08, this ground of appeal of the assessee is therefore dismissed. 36. In the result, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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