Ita/100002/2021 Of M/S Karnataka Vikas Grameena Bank v. Asst. Commissioner Of Income Tax

ROHANHADIMANITDigitally signed byROHAN HADIMANITDate: 2023.10.1316:54:26 +0530 NC: 2023:KHC-D:12343-DBITA No. 100002 of 2021 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 11 DAY OF OCTOBER, 2023 PRESENT THE HON'BLE MR JUSTICE S.R. KRISHNA KUMAR AND THE HON'BLE MR JUSTICE G BASAVARAJA -INCOME TAX APPEAL NO. 100002 OF 2021 () BETWEEN: M/S KARNATAKA VIKAS GRAMEENA BANK, REP. BY ITS GENERAL MANAGER, CHANDRASHEKAR D MORO, HEAD OFFICE, H.O. BUILDING, BELGAUM ROAD, DHARWAD-580008. …APPELLANT (BY SRI A SHANKAR, SR. COUNSEL FOR SRI SHASHANK S.HEGDE, ADVOCATE) AND: ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2-1, CENTRAL REVENUE BUILDING, HUBBALLI-580025. …RESPONDENT (BY SRI. Y.V.RAVIRAJ, ADVOCATE) THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE ASSESSEE IN THE COMMON ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘B’ BENCH IN ITA Nos.608/Bang/2020 FOR THE A.Y 2009-10 [APPEAL WITHDRAWN VIDE ORDER DT.12.11.2021] AND IN ITA Nos. 612/Bang/2020 FOR THE A-Y 2017-18 DATED 15.10.2020 VIDE ANNEXURE-A. THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, THE COURT DELIVERED THE FOLLOWING: JUDGMENT This appeal is directed against the impugned order dated 15.10.2020 passed in ITA.No.612/Bang/2020 in relation to the Assessment Year 2017-18. By the impugned order, the Income Tax Appellate Tribunal “B” Bench, Bangalore (hereinafter referred to as the ‘Tribunal’) had partly allowed the appeal preferred by the respondent-Revenue, while the cross objections preferred by the appellant herein were dismissed by the Tribunal. 2.The present appeal is admitted today to consider the following substantial questions of law: “(i) Whether the Tribunal was justified in law in not allowing the claim of the appellant in relation to the allowing the claim of the appellant in relation to the - 3 - deduction under Section 36(1)(viia) of the Income Tax Act and consequently passed a perverse order, on the facts and circumstances of the case? (ii) Whether the Tribunal was right in holding that the creation of a reserve in the books of account is a condition precedent for allowance of the claim under Section 36(1)(viia) of the Income Tax Act? creation of a reserve in the books of account is a condition precedent for allowance of the claim under Section 36(1)(viia) of the Income Tax Act? (iii) Whether the Tribunal was right in holding that the amount deductible under Section 36(1)(viia) of the Income Tax Act should be restricted to the extent of the amount of provision for bad and doubtful debts created in the books during the relevant previous year? amount deductible under Section 36(1)(viia) of the Income Tax Act should be restricted to the extent of the amount of provision for bad and doubtful debts created in the books during the relevant previous year? (iv) Whether the Tribunal erred in law in not appreciating the language of Section 36(1)(viia) of the Income Tax Act in contrast to the language of Section 36(1)(vii) of the Income Tax Act and consequently passed an erroneous order on the facts and circumstances of the case? appreciating the language of Section 36(1)(viia) of the Income Tax Act in contrast to the language of Section 36(1)(vii) of the Income Tax Act and consequently passed an erroneous order on the facts and circumstances of the case? (v) Whether the authorities below failed to appreciate that the appellant is a Co-operative Society being a Rural Regional Bank and consequently not hit by the prohibition under Section 80P(4) of the Act, on the facts and circumstances of the case? that the appellant is a Co-operative Society being a Rural Regional Bank and consequently not hit by the prohibition under Section 80P(4) of the Act, on the facts and circumstances of the case? - 4 - (v) Whether the authorities below failed to appreciate that the appellant is a Co-operative Society being a Rural Regional Bank and consequently not hit by the prohibition under Section 80P(4) of the Act, on the facts and circumstances of the case? that the appellant is a Co-operative Society being a Rural Regional Bank and consequently not hit by the prohibition under Section 80P(4) of the Act, on the facts and circumstances of the case? - 4 - (vi) Whether the authorities below were justified in assessing the appellant as an Association of Persons (AOP) when the appellant ought to have been assessed as a Co-operative Society and consequently the order passed in the wrong status is required to be set aside as bad in law, on the facts and circumstances of the case?”assessing the appellant as an Association of Persons (AOP) when the appellant ought to have been assessed as a Co-operative Society and consequently the order passed in the wrong status is required to be set aside as bad in law, on the facts and circumstances of the case?” 3. We have heard Sri A.Shankar, learned Senior Counsel for the appellant and Sri Y.V.Raviraj, learned counsel for the respondent and perused the material on record. 4.In addition to reiterating the various contentions urged in the appeal and referring to the material on record, the learned Senior Counsel for the appellant invited our attention to the substantial question of law Nos. (v) and (vi) as referred to supra in order to point out that it is the specific contention of the appellant-Bank that it was a Co-operative Society and Rural Regional Bank which was not hit by the prohibition under Section 83(4) of the Income Tax Act and consequently, the - 5 - respondent was not justified in denying the deduction in favour of the petitioner which was available to the appellant and the Tribunal has wrongly assessed the appellant as an association of persons. It is therefore submitted that the impugned order passed by the Tribunal allowing the appeal preferred by the respondent-Revenue deserves to be set aside. 5.Per contra, learned counsel for the respondent submits that the said contention was not urged before the Tribunal and as such, there is no merit in the appeal and the same is liable to be dismissed. 6.A perusal of the impugned order passed by the Tribunal will clearly indicate that the aforesaid substantial question of law Nos. (v) and (vi) have neither been addressed nor dealt with, much less considered or appreciated by the Tribunal while passing the impugned order. However, since the said issue gives rise to a pure question of law, without expressing any opinion on the merits/demerits of the rival contentions, we deem it just and proper to set aside the impugned order passed by the Tribunal and remit the matter back to the Tribunal for consideration of substantial question of law Nos. (v) and (vi) referred to supra and to proceed further in accordance with law. In the result, we proceed to the pass the following: ORDER (i)The appeal is hereby allowed. (ii)The impugned order dated 15.10.2020 passed in ITA.No.612/Bang/2020 in relation to the Assessment Year 2017-18 on the file of the Income Tax Appellate Tribunal “B” Bench, Bangalore is hereby set aside. passed in ITA.No.612/Bang/2020 in relation to the Assessment Year 2017-18 on the file of the Income Tax Appellate Tribunal “B” Bench, Bangalore is hereby set aside. (iii)Matter is remitted back to the Tribunal for consideration of the substantial question of law Nos. (v) and (vi) referred to supra in accordance with law. consideration of the substantial question of law Nos. (v) and (vi) referred to supra in accordance with law. - 7 - NC: 2023:KHC-D:12343-DBITA No. 100002 of 2021 Liberty is reserved in favour of the appellant to raise and urge the substantial question of law Nos. (v) and (vi) as referred to supra, if the need so arises at a later stage. Sd/- JUDGE Sd/- JUDGE RH List No.: 1 Sl No.: 46