TMI Blog2021 (2) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to the pigmy deposit collectors as commission for making disallowance under section 40(a)(ia) of the Act for non-deduction of TDS under section 194H of the Act - We are therefore of the opinion that the disallowance deserves to be deleted. Denial of deduction u/s 36(1)(viia) - provision for NPA of 10% of the aggregate average advances made by the rural branches - CIT(A) while concluding on this issue, held that assessee is eligible only for deduction equal to an amount not exceeding 7 % of the total income computed before making any deduction under section 36 (1) (viia) of the Act, read with Rule 6 ABA of Income tax Rules - HELD THAT:- Section 36 of the Act deals with various deductions that could be allowed in computing income under section 28 of the Act. As per Section 36(1)(a)(viia), deduction could be claimed by banks referred to in clause (viia) in respect of bad and doubtful debts. It provides certain terms and conditions under which such deductions could be claimed by a particular bank. As benefit of 7.5% of the total income, there is no condition that it should be in respect of any rural branch. In the paper book computation 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 ..... es of the case. 5. The Commissioner (Appeals) failed to appreciate that the relationship between the pigmy collectors and the appellant co-operative bank is that of master-servant and not that of principal-agent as held by the Hon'ble Supreme Court in Indian Banks Association v. Workmen of Syndicate Bank Ors. in Civil Appeal No. 3355 of 1998 decided on 13.02.2001 reported in 2001(1) SCR 1011. 6. The Commissioner (Appeals) also failed to take note of and follow CBDT's letter dated 03.03.2008 in F,No.275/25/2007/ITB to the Indian Banks' Association which has clarified that payments to pigmy collectors are to be made under section 192 of the Act as salary. 7. The Commissioner (Appeals) erred in holding that the appellant cooperative bank is only eligible for deduction in respect of provision for NPA of seven and half percent of the total income in terms of section 36(i)(viia) of the Act on the facts and circumstances of the case. 8. The Commissioner (Appeals) erred in denying the deduction available under the second limb of clause (a) of section 36(1)(viia) of the Act to the extent of 10% of the aggregate average advances made by the rural branches of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit and loss account. The Ld.AO noticed that NPA provision made for the year under consideration was negative as the provision available in the balance sheet for financial year 2009- 10 was ₹ 35,71,21,496/-and for financial year 2010-11 was ₹ 26,45,67,095/-. The net provision for year was Rs.(- )8,98,57,395/-. The Ld.AO concluded that, there is no bad debts newly formed requiring further provision for NPA during the year and therefore the same was disallowed under section 36(1)(viia) of the Act. 5. Aggrieved by the order passed by Ld.AO, assessee preferred appeal before the Ld.CIT(A). 6. The Ld.CIT(A) while considering the issue of disallowance under section 40(a)(ia) of the Act for non-deduction of TDS on the pigmy deposit commission paid by assessee held as under: 6.1 The aforesaid submissions of the appellant were duly considered. During the course of the appellate proceedings, the authorized representative placed reliance on the decision of the Honourable Supreme Court of India rendered in the case of Indian Banks Association Vs. Workmen of Syndicate Bank and others vide case no. Appeal (Civil) 3355o11998, dt. 1310212001 wherein the Honoura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... par to a co-operative bank and where the manner prescribed governing the scheduled banks was very much available, the insistence of the assessing officer on corresponding amendment to the Rules was unwarranted, in the instant case, it is held that such an authority for rendering a creative interpretation of the law, which is always available to the Honourable Courts of law, are not at all available either to the assessing officer and the First Appellate Authority under the Income-tax Act, 1961. The assessing officer and the First Appellate Authority under the Income-tax Act, 1961 are only empowered to administer the law, as per the provisions of the statute. Therefore, after due consideration of the issue, it is held that the appellant is eligible only for a deduction equal to an amount not exceeding seven and one-half percent of the total income [computed before making any deduction under sub- clause (a) of clause (viia) of sub-section (1) of section 36 and Chapter VIA of the Income-tax Act, 1961, as per the extant provisions contained iii section 36(i)(viia) of the Act, read with Rule 6ABA of the Income-tax Rules, 1962. Accordingly, the Eighth, the Ninth and the Tenth Grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was liable to deduct TDS under section 194H and the Ld.CIT(A) was correct in upholding the disallowance in respect of the payments on which TDS was not deducted that exceeded ₹ 5000/-. 14. We have perused submissions advanced by both sides in light of records placed before us. 15. The CBDT circular relied by the Ld.AR has been clarified vide letter dated 12/12/2007 by CBDT treating the remuneration (commission) earned by the pigmy deposit collectors as salary and subject to TDS under section 192 of the Act. The same has been placed at page 78 of paper book No.2. Vide letter dated 03/03/2008 the position has been reiterated and confirmed by CBDT followed by 01/12/2011 and 14/12/2011. The subsequent clarifications by CBDT States applicability of provisions of section 192 of the Act on the remuneration earned by pigmy deposit collectors, and that, the same will be treated as salary. In the light of the Circulars and subsequent clarifications issued by CBDT, in our view the authorities below could not have treated the payment made by assessee to the pigmy deposit collectors as commission for making disallowance under section 40(a)(ia) of the Act for non-deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subclause (a) reads as under : A scheduled bank not being a bank approved by the Central Government for the purposes of clause (viiia) or a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society 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 VI-A) 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. Sub-clause (a) consists of two types of deductions: deduction of an amount not exceeding 7.5% of the total income (computed before making any deduction under this clause and Chapter VI-A); deduction of an amount not exceeding 10% of the aggregate average advances made by rural branches of such bank while computing in the prescribed manner. 22. So far as benefit of 7.5% of the total income, there is no condition that it should be in respect of any rural branch. In the paper book page 20, computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciated that the relationship between the pigmy collectors and the appellant cooperative bank is that of master-servant and not that of principal-agent as held by the Hon'ble Supreme Court in Indian Banks Association v. Workmen of Syndicate Bank Ors. in Civil Appeal No. 3355 of 1998 decided on 13.02.2001 reported in 2001(1) SCR 1011. 6. The Commissioner (Appeals) ought to have taken note of and followed CBDT's letter dated 03.03.2008 in F.No.275/25/2007/ITB to the Indian Banks' Association which has clarified that payments to pigmy collectors are to be made under section 192 of the Act as salary. 7. Without prejudice, the Commissioner (Appeals) ought to have appreciated that the appellant has made deductions of tax at source u/s 192 of the Act wherever applicable and it is not a case of non-deduction of tax at source, but at the most of short deduction of tax at source for which provisions of section 40(a)(ia) of the Act are not attracted on the facts and circumstances of the case 8. Without prejudice, the Commissioner (Appeals) ought to have appreciated that the assessing officer has made disallowance u/s 40(a)(ia) of the Act even in respect of amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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