Rampur Zila Sahkari Bank Ltd.,, ... vs Department Of Income Tax

ACIT, Rampur Zila Sahkari Bank Ltd, Circle-1, Civil Lines, Moradabad Rampur AAALR0004R (Appellant) (Respondent)

Appellant by :Shri Vikram Sahay, Sr.D R Respondent by : None

Date of Hearing 24.03..2015 Date of pronouncement 30.04.2015 ORDER

PER A. T. VARKEY, JUDICIAL MEMBER

This appeal filed by the Revenue is directed against the order dated 08-03-2013, passed by the Ld. CIT(A), Bareilly pertaining to assessment year 2007-08.

2. The Revenue has raised the following grounds in its Appeal:-

"1. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs.15,40,562/- made by the AO on account provisions of expenses without appreciating the finding of the AO that these provisions relate to unascertained and unquantified liability which are not allowable as deduction in the year in which such expenses remained unascertained and unquantified.

2. In the facts and circumstances of the case, Ld. CIT(A) has erred in allowing relief of Rs. 21,58,958/- to the assessee without appreciating the fact that the employee's share of PF is allowable as deduction u/s 36(1 )(va) only if such share has been credited to employee's account in the Fund before the due date as per the rules of the Fund irrespective of the fact that it has been so credited before the due date for filing of return of income.

3. Ld. CIT(A) has also erred in not appreciating the fact that the AO has disallowed the employee's share which is governed by section 36( 1) (va) and not employer's share which is governed by sec. 43B and as per the provision of section 43B, employer's share can be allowed if ITA NO.3002/Del/2013

paid before due date for filing return of income. But this provision is not applicable to employee's share the allowability of which is governed by provisions of section 36(I)(va)."

3. The brief facts of the case are that the assessee is a Co-operative Bank registered under the U.P. Co-operative Societies Act, 1912 vide Registration No. 823 dated 13-01-1966. It has been licensed by the Reserve Bank of India to carry on the business of banking vide License No. ACD.UP.8-C dated 4-05- 1970 of the Banking Regulation Act, 1949. That for the year under question the assessee had filed the return u/ s 139(1) of the Income Tax Act, 1961 (herein after 'the Act') on 31-10-2007 declaring taxable income of Rs. 72,9,791/- as reflected from final Balance Sheet and Profit & Loss Account drawn on 31-03-2007. However, the assessment was completed by AO on 24.12.2009 u/s. 143(3) of the Act on total income of Rs. 2,16,96,848/- by making various additions.

4. Against the aforesaid order of the Assessing, officer, assessee appealed before the Ld. CIT(A), who vide his order dated 08.3.2013 has partly allowed the appeal of the assessee.

5. Now the Revenue is in appeal before us.

6. We have heard both the parties and perused the records. We find that the Ground no. 1 is relating to deletion of addition of Rs. 15,40,562/- made by the AO on account of various provisions of expenses. We find that the assessee before the ld CIT(A) has submitted that A.O. has unlawfully disallowed 15,40,562/- provisions made for various head of expenses on closing date of the accounting year and by invoking the barring provision of Sec. 37(1), of the Act. According to the assessee, the A.O. has made disallowances simply upon presumption and surmises. The AO was of the opinion that since the various expenses reflected are in round figure, they have not been incurred, so it is just an approximate figure for the year under consideration and therefore such provision approximated for expense clearly assumes the character of unascertained and unqualified liability during the year. The assessee however took the stand that it has explained each expense which relates to the year in question and the expenses in question 2 ITA NO.3002/Del/2013

has been incurred or ascertained during the relevant assessment year. Assessee submitted that amount as provisioned during the year has actually been paid in subsequent year before due date of filing of return. Therefore, according to the assessee it is an allowable deduction in terms of section 43B, of the Act. The Ld. CIT(A) in his finding has noted that the AO has made disallowance simply upon presumption and surmises. Therefore, he deleted the addition of Rs. 15,40,562/-. We take note of the submission of the ld AR, that the expenses incurred of this nature was allowed by the revenue authorities in the previous assessment years. In that case, we are of the considered opinion that AO shall examine the previous assessment orders of the assessee on this issue to ascertain as to how the assessee was claiming its expenditure of this nature and if it is found that the claim of the assessee this year is akin to that of the previous year then it should be allowed. Therefore, in the interest of justice, we are of the view that issue requires fresh adjudication at the level of the AO. Hence, we set aside the impugned order and remand back this issue to the file of the AO to verify the claim of the assessee in the manner as directed by us supra and decide afresh this issue the de nova after giving opportunity to the assessee. Accordingly, the Ground No. 1 is allowed for statistical purposes.

7. With regard ground no. 2 raised by the Revenue is concerned, we find that before the AO the assessee submitted that the assessee is in the business of banking and there has been a practice in banking sector that salary of the employees due for a month is paid in the last week of the same month. According to the assessee This is followed in almost all banks whether scheduled or not. The A.O. during assessment proceedings asked for details about the deposit of Employer's and Employees' contribution towards provident fund in their respective account. The assessee furnished a month wise detail before him vide its reply dated 07/12/2009. According to the ld AR, the A.O. has misunderstood the month wise detail furnished before him, and he has wrongly presumed that the salary for a particular month was paid in subsequent month, while according to the assessee, the fact of payment of salary in the same month was verifiable from the books of 3 ITA NO.3002/Del/2013

accounts and registers produced before him. According to the ld AR disallowances made on this account were simply based upon the presumptions and beyond the actual facts of the case. The Ld. CIT (A) has recorded a finding of fact that the assessee had filed its return of income for the year under appeal in Form ITS 2D "Saral" on 31.10.2007. The amounts of PF as mentioned in the assessment order at page no. 4 & 5, were paid beyond the due date in each month of the year, but paid before the due date of filing of return of income and accordingly the addition on this account was deleted by the Ld. CIT(A). For the sake of convenience, we are reproducing herewith the amounts of PF mentioned in the assessment order at page no. 4 & 5.

Month to which Employer Employee Due Date Date of salary due contribution share deposit March, 2006 1,71,391 1,72,711 15.4.06 26.4.2006 April, 2006 1,67,683 1,69,007 15.5.06 27.5.06 May, 2006 1,67,663 1,68,987 15.6.06 24.6.06 June, 2006 1,74,156 1,74,981 15.7.06 27.7.06 July, 2006 1,76,140 1,76,979 15.8.06 26.8.06 August, 2006 1,77,244 1,78,083 15.9.06 25.9.06 September,2006 84,302 1,85,156 15.10.06 28.10.06 October, 2006 1,88,558 1,89,434 15.11.06 27.11.06 November, 2006 89,684 1,90,560 15.12.06 29.12.06 December,2006 1,84,507 1,85,385 15.1.07 28.1.07 January, 2007 1,83,496 1,84,821 15.2.07 25.2.07 February, 2007 1,81,029 1,82,354 15.3.07 27.3.07 21,45,853 21,58,958

8. From a perusal of the above chart, we are of the same view as that of the ld CIT (A) that the assessee had filed its return of income for the year under appeal in Form ITS 2D "Saral"on 31.10.2007, and the P. Famounts were paid beyond the due date in each month of the year, but paid before the due date of filing of return of income, which is in accordance to law and therefore, in the background of the aforesaid discussions, we do not find any infirmity in the reasoned findings of the Ld. CIT(A) with respect of ground no. 2, hence, we uphold the same. In the result, the ground no. 2 raised by the Revenue is rejected.

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9. With regard ground no. 3, The Revenue is aggrieved by the deletion of disallowance of bad debts of Rs.25,70,719/- was made by the AO on the ground that this amount pertains to investment (being value of share of cooperative societies purchased long back from which no dividend is being received) and not advances and because there are not rural advances hence not covered u/s 36(1) (viia). We find the assessee's counsel before the ld CIT(A)has submitted that the A.O. disallowed the Provision for shares of Rs. 2,05,000/- made under Bad and Doubtful debts for two reasons (i) because it pertains to Investment and not advances (2) it is not a rural advance. The disallowance was made under section 36(1)(viia) of the Act. He further submitted that the A.O. has misread and misunderstood most of the submissions made by the assessee. He further submitted that the assessee in its written submission dated 07/12/2009 at Point no. 11 clearly mentioned that Rs 2,05,000/- was investment in shares of different societies the detail of which are given hereunder:

S.No. Name Date of Purchase Amount 1 The Cooperative Textile Mills, 27.04.1981 2000.00 Bulandshahar . 2 Uttar Pradesh Silram and Nirman 09.07.1984 2000.00 Sangh Ltd., Lucknow . 3 Uttar Pradesh Cooperative 24.10.1978 1000.00 Federation, Lucknow 4 Rudra Bilas Kisan Sehkari Chini 16.08.1976 100000.00 Mills Ltd., Bilaspur 5 Uttar Pradesh Sehkari Praklvarn 26.12.1991 100000.00 Evam Tilhan Vikas Sangh Ltd Lucknow Total Rs 205000.00

9.1 We find that the assessee further submitted before the AO that on

these investments no dividend has been received by the assessee from past many years. Also, the value of Investments has diminished at present and no amount is recoverable on such investments. Therefore, the same was bad and doubtful assets and a provision was made u/s. 36(1)(vii) which allows for a deduction of the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. Therefore, as per assessee's counsel the deduction of such provision was 5 ITA NO.3002/Del/2013

correctly claimed by the assessee u/s 36(l)(vii) and should be allowed. We find from the facts and circumstances that the assessee has written off the interest which according to it is irrecoverable and so treated as bad and doubtful retrieve, so it was written off by the assessee we do not find any infirmity in the impugned order and we uphold the same. So in the result, the ground no. 3 raised by the Revenue is rejected.

10. In the result, the Appeal filed by the Revenue is partly allowed for statistical purposes.

Order pronounced in the open court on 30.04.2015.

-Sd/- -Sd/- (R.S. SYAL) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated:30 /04/2014 A K Keot

Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi

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