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Applicability of provisions u/s section 36(1)(vii) of the Income Tax Act


Court :
ITAT Ahmedabad

Brief :
Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-10, Ahmedabad dated 19.3.2019 passed for Asstt.Year 2014- 15.

Citation :
ITA No.895/Ahd/2019


ITA No.895/Ahd/2019
Asstt.Year 2014-15

ACIT, Sabarkantha Cir.



The Himatnagar Nagrik Sahkari Bank Ltd.
Tower Road, Himatnagar
Dist: Sabarkantha 383 001.
PAN : AAAAH 0519 E


Revenue by : Shri S.S. Shukla, Sr.DR
Assessee by : Shri S.N. Divetia, AR

Date of Hearing : 11/08/2021

Date of Pronouncement: 24/08/2021


In the grounds of appeal of the Revenue, sole issue raised for our adjudication is that the ld.CIT(A) has erred in deleting disallowance of Rs.2,69,68,337/- by ignoring the fact that provisions of section 36(1)(vii) is applicable to the facts of the assessee’s case.

2. Brief facts of the case are that the assessee is a cooperative bank and engaged in banking activities. It has e-filed its return of income on 3.7.2014 declaring total loss of Rs.1,06,74,970/-. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) and 142(1) of the Income Tax Act, 1961. During the assessment proceedings, it was noticed by the AO that in the computation of income for the year under consideration, the assesseebank has deducted Rs.2,69,68,337/- on account of transfer from MMC Bank Investment Fund. According to the AO, since the deduction is not allowable under section 36(1)(vii) of the Act, the assessee was showcaused as to why this transfer from MMC Bank Investment Fund should not be disallowed and added to the total income of the assessee. It was explained by the assessee that the assessee-bank had parked surplus money with Madhupura Merc.Co-op. Bank.

3. Before us, the ld.DR supported the assessment order and submitted the deposits written off could not be allowed as bad debts under section 36(1)(vii) of the Act, because the transaction carried out by the assessee was an isolated, and in the nature of investment, and the same did not form part of regular course of business.

4. We have considered rival submissions and gone through the orders of the Revenue authorities. We have also perused the orders of the ITAT, Ahmedabad Benches and Mumbai Benches passed on similar issue. The issue before us is that whether the loss on account of FDR's maintained with MMCBL, which was under liquidation, and written off of the same is eligible for deduction under the head business and profession. It is pertinent to observe that the MMC Bank was sick bank and the amount of FDs deposited by the assessee-bank with MMC Bank has not received by the assesseebank. We also note that activities of the assessee-bank in parking surplus fund in the scheduled banks were in accordance with the guidelines of the RBI in this behalf.

5. On consideration of above decision of the Tribunal, we find that the issue raised in the instant case is also similar. The ld.DR has not pointed out any disparity of facts so as to take a different view in the present case. Therefore, following the decision of Co-ordinate Bench of ITAT, Ahmedabad Benches, we reject the ground of appeal of the Revenue and confirm the order of ld.CIT(A) on this issue.

6. In the result, appeal of the Revenue is dismissed.
Pronounced in the Court on 24th August, 2021 at Ahmedabad.

Please find attached the enclosed file for the full judgement


Poojitha Raam
on 28 August 2021
Published in Income Tax
Views : 14
Attached File : 1442821_4285_21.pdf
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