TMI Blog2019 (4) TMI 2055X X X X Extracts X X X X X X X X Extracts X X X X ..... d claim of the assessee that as to whether the income of PTU was exempt under Sec. 10(23C)(iiiab) of the IT Act, or not. Needless to say, the assessee shall in the course of the set aside proceeding be afforded a reasonable opportunity of being heard and therein substantiate its aforesaid claim. Apart there from, in case if the verification made by the A.O reveals that the income of PTU was not exempt under Sec. 10(23C)(iiiab), but the latter had furnished its return of income under Sec. 139 and had taken into account the amount of interest income in such return of income and paid tax on the same, then as per the 2nd proviso of Sec. 40(a)(ia) read with the 1st proviso to Sec. 201(1) of the IT Act, the aforesaid amount would not be liable to be disallowed under Sec. 40(a)(ia) Addition on account of provision for leave encashment and interest accrued on previous investments - HELD THAT:- We are in agreement with the view taken by the CIT(A) that as the actual premium has been paid by the assessee, therefore, the said statutory provision which comes into play only where the actual premium has not been paid but a deduction has been claimed, would however not be applicable in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of contingent liability - HELD THAT:- We find that the issue as regards the allowability of deduction of provision for bad and doubtful debts made against standard assets had been decided by the Tribunal in the assesses own case for A.Y. 2008-09 [ 2016 (6) TMI 1443 - ITAT AMRITSAR] . We thus are of the considered view that as the provision for bad and doubtful debts against standard assets is covered in the main provisions of Sec. 36(1)(viia) of the IT Act, therefore, uphold the order of the CIT(A) who we find had rightly deleted the addition made by the A.O on the said count. The Grounds of Appeal No. 4 to 6 raised by the revenue are dismissed. - ITA No. 784/Asr./2017, ITA No. 731/Asr./2017 - - - Dated:- 5-4-2019 - SHRI N.K. SAINI, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER For the Appellant : Shri Ranjan Sehgal, A.R. For the Respondent : Smt. Parvinder Kaur, C.I.T, D.R ORDER PER RAVISH SOOD, JM The present cross appeals filed by the assessee and the revenue are directed against the order passed by the CIT (Appeals)-2, Jalandhar, dated 27.09.2017, which in turn arises from the assessment order passed by the A.O under Sec. 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 3,53,47,000/- made by the AO by disallowing the provision for bad and doubtful debit on standard assets. 5. That while allowing the relief of Rs. 3,53,47,000/- Ld. CIT(A) has not appreciated that the A.O has clearly held that out of provision of Rs. 8,85,32,000/- only Rs. 5,31,85,000/- were on account of bad and doubtful debts and the balance amount of Rs. 3,53,47,000/- was on account of Standard Assets and as per provisions of section 36(1)(viia) only provision for bad and doubtful debts was allowable as deduction. 6. That while allowing the relief of Rs. 3,53,47,000/-, Ld. CIT(A) has failed to appreciate that it was a contingent liability and was not allowable as business expenditure. The department has already filed appeal before the Hon ble High Court u/s 260A for the Asstt. Year 2011-12 and 2012-13 against the order of the ITAT on this issue. 7. It is prayed that the order of the Ld. Commissioner of Income Tax (Appeals) be set aside and that of the Assessing Officer be restored. 8. The appellant requests for leave to add or amend or alter the grounds of appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to deduct TDS under Sec. 194A on the interest payment of Rs. 2,45,58,987/- paid on the fixed deposits of PTU, therefore, the said amount was liable to be disallowed under Sec. 40(a)(ia) of the IT Act. On the basis of his aforesaid deliberations the A.O disallowed the interest expenditure of Rs. 2,45,58,987/- by invoking the provisions of Sec. 40(a)(ia) of the IT Act. Apart therefrom, it was observed by the A.O that the assessee had claimed an expenditure of Rs. 45,53,677/- on account of provision for leave encashment. It was noticed by the A.O that as per the past history of the case the assessee bank had been claiming the deduction on the basis of investments made for the aforesaid purpose with the LIC, Bajaj Allianz and PNB Metlife. Any payment for leave encashment in future was to be made out of the said respective funds. It was observed by the A.O that the department had not been allowing the deduction in respect of the said expenditure as the same was not supported by any provisions of the Income Tax Act, and the deduction if any was to be allowed only on the actual payments made to the employees. Further, it was observed by the A.O that the assessee bank was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been decided in the favour of the assessee by the ITAT, Amritsar in the assesses own case for A.Y. 200809, however, as the tax effect was less than the monetary limit prescribed for filing of the appeal before the Hon ble High Court of Punjab Haryana, therefore, no appeal was filed. It was further observed by the A.O that the revenue being aggrieved with the order of the CIT(A) in context of the issue under consideration in A.Y. 2012-13 and A.Y. 2013-14 had preferred appeals before the ITAT, Amritsar. On the basis of his aforesaid observations the A.O disallowed the provision amounting to Rs. 3,53,47,000/- against the standard assets and added the same to the total income of the assessee. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Insofar the disallowance under Sec. 40(a)(ia) of the interest expenditure of Rs. 2,45,58,987/- made by the A.O was concerned, it was observed by the CIT(A) that as the income tax act did not provide any exemption for non deduction of tax at source unless a certificate was issued by the A.O of the recipient assessee for non deduction of tax at source or for deduction of tax at source at a lower rate, therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provision for leave encashment and also the balance amount of addition of Rs. 1,53,65,565/- on account of interest accrued on Group Insurance Leave Encashment Policy. Adverting to the disallowance of Rs. 3,53,47,000/- made by the A.O on account of provision for bad and doubtful debts made against standard assets, it was observed by the CIT(A) that the said issue was decided in favour of the assessee by the Tribunal vide its order dated 22.06.2016 in the assesses own case for A.Y. 2008-09. In the backdrop of the aforesaid facts, it was observed by the CIT(A) that as there was no change in the facts of the case during the year under consideration, therefore, the addition of Rs. 3,53,47,000/- made by the A.O on account of provision for bad and doubtful debts on standard assets during the year under consideration was liable to be vacated. 5. That both assessee and the revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Ld. Authorized Representative (for short A.R ) for the assessee submitted that as PTU had submitted letters with the assessee bank therein claiming that its income was exempt under Sec. 10(23C)(iiiab) and thus TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87/- made by the A.O under Sec. 40(a)(ia) of the IT Act was concerned, it was submitted by the Ld. D.R as the assessee had neither deducted the tax at source under Sec. 194A on the interest paid to PTU on the fixed deposits held by the latter with the bank, nor obtained any certificate for non deduction of tax at source as envisaged in Sec. 197 of the IT Act, therefore, the lower authorities had rightly disallowed the said amount under Sec. 40(a)(ia) of the IT Act. Insofar the addition of Rs. 1,99,19,242/- made by the A.O on account of provision for leave encashment and on account of interest accrued on Group Insurance Leave Encashment Policy was concerned, the Ld. D.R relied on the order passed by the A.O. As regards the addition of Rs. 3,53,47,000/- made by the A.O towards provision for bad and doubtful debts on standard assets, the Ld. D.R took support of the order of the A.O and submitted that the CIT(A) had wrongly deleted the said addition. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Insofar the disallowance of the interest expenditure of Rs. 2,45,58,987/- paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t PTU had made a wrong declaration w.r.t. claim of exemption under Sec. 10(23C)(iiiab). Apart there from, the A.O in order to buttress his aforesaid observations had relied on the judgment of the Hon ble Supreme Court in the case of Visvesvaraya Technology University Vs. ACIT [Civil Appeal No. 4361-4366 of 2016 (arising out of SLP (C) No. 5354-5359 of 2014)]. We have deliberated at length on the issue under consideration and are of the considered view that no concrete finding on the basis of any irrefutable documentary evidence has been placed on record either by the assessee or by the revenue in support or contradiction of the claim of PTU that its income was exempt under Sec. 10(23C)(iiiab) of the IT Act. In case the income of the aforementioned university i.e. PTU is exempt under Sec. 10(23C)(iiiab), then in the backdrop of the CBDT Circular No. 4/2002; dated 16.07.2002 no obligation would be cast upon the assessee for deducting tax at source on the interest paid on the fixed deposits under consideration. We thus in terms of our aforesaid observations restore the matter to the file of the A.O, who is directed to conclusively verify the aforesaid claim of the assessee that as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of the business of an assessee. Apart there from, the A.O had made a further addition of Rs. 1,53,65,565/- on account of interest accrued on previous investments made under Group Leave Encashment Scheme Policy. 10. We have given a thoughtful consideration to the issue pertaining to the disallowance of the provisions for leave encashment and addition of the interest accrued on the previous investments made by the A.O, which thereafter had been vacated by the CIT(A). Insofar the provisions of Sec. 43B(f) of the IT Act are concerned, we are in agreement with the view taken by the CIT(A) that as the actual premium has been paid by the assessee, therefore, the said statutory provision which comes into play only where the actual premium has not been paid but a deduction has been claimed, would however not be applicable in the present case as the aforesaid premium has been paid by the assessee. Admittedly, the assessee had paid a premium of Rs. 45,53,677/- for taking the Group Insurance Leave Encashment Scheme Policy during the year. In our considered view, as observed by the Hon ble Supreme Court in the case of Bharat Earth Movers Vs. CIT (2000) 245 ITR 428 (SC), if a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- on account of provision for bad and doubtful debts made by the assessee against standard assets on the ground that the said provision was made against assets which were of good quality and was in the nature of contingent liability. It has been the claim of the assessee that the provision for bad and doubtful debts had been made in accordance with the instructions and circulars of the RBI on the said issue. We find that the issue as regards the allowability of deduction of provision for bad and doubtful debts made against standard assets had been decided by the Tribunal in the assesses own case for A.Y. 2008-09 i.e. Dy. CIT, Circle-IV, Jalandhar Vs. M/s Punjab Gramin Bank, Kapurthala in ITA No. 134(Asr)/2015; dated 22.06.2016, which thereafter had been followed in its cases for A.Y. 2011-12 and A.Y. 2012-13. The Tribunal while disposing off the appeal of the assessee for A.Y. 2008-09 had observed as under :- 8 We have heard the rival parties and have gone through the material on record. We find that the assessee had created a provision of Rs.50,00,000/- which included a sum of Rs.13,25,000/- as provisions for bad and doubtful debts and the balance amount of Rs.36,75,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head Profits and gains business or profession. From the above provisions it can be seen that deduction u/s 36(1)(viia) of the Act is allowed in respect of provisions for bad and doubtful debts This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section(1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of ave ..... X X X X Extracts X X X X X X X X Extracts X X X X
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