Jan 3, 2010
Assessee cannot come forward and say that on account of change brought in by way of amendment with effect from 1-4-1989, under section 36(1)(vii) inquiry is not permissible.
CASE LAW DETAILS
Decided by: HIGH COURT OF ALLAHABAD, In The case of: CIT v. Kohli Brothers Color Lab (P) Ltd., Appeal No.: ITA NO. 02 OF 2007, Decided on: NOVEMBER 5, 2009
RELEVANT PARAGRAPH
The intention of legislature is clear that once in assessment year in question debt or part thereof has been written off, as irrecoverable qua the same deductions are to be accorded as per provision of section 36(1)(vii) of the Act, subject to the provisions of 36(2) of the Act. Prior to amendment in the aforementioned section w.e.f. 1.4.1989 the words ‘ any bad debt, or part thereof, which is established to have become, a bad debt in the previous year’ were used and after the amendment w.e.f. 1.4.1989, same has been substituted by “any bad debt or part thereof which is written off as irrecoverable in the account of assessee for the previous year”. Effect of said amendment is that now it is not necessary for the assessee to establish that debt had become bad in the previous year, before getting deductions, and mere writing 9 of as irrecoverable of debt or part thereof is substantial compliance of the same. The question is, is said entry of writing of bad debt or part thereof, made in books of accounts conclusive and Assessing Officer is precluded from making inquiries, before according/refusing deductions. Under the scheme as provided for under Income Tax Act, the entries which have been made, as to whether same are genuine entry and not imaginary and fanciful entry, qua the same Assessing Officer is fully empowered to make inquiry however, wisdom of the respondent-assessee cannot be in such matter questioned and no demonstrative or infallible proof of bad debt having become bad is required, and commercial expediency is to be seen from the point of view of assessee, depending on nature of transaction, capacity of debtor etc. but qua entry, semblance of genuineness has to be there and same should not be mere paper work. All the judgment, which have been cited at the Bar, genuineness of entries, have never been doubted therein, whereas in the case in hand, specific query has been made from respondent-assessee to furnish i.e. (a) Complete names and addresses of the persons (with reference to whom bad debts written off claimed, mentioning against each amount.(b) Copies of ledger account of these persons for the relevant assessment year and three preceding years. (c) Efforts made to realize these dues. Admitted position is that said queries have not at all been replied and requisite information has not at all been furnished, rather stand has been taken, that entry has been made , no proof is required. Under Section 143(2) of the Act, Assessing Officer is empowered to require the assessee to produce the evidence in support of the return, as such where respondent-assessee has claimed as bad debt or part thereof, written off as irrecoverable in the accounts of the assessee under the provision of section 36(1)(vii) of the Income Tax Act, 1961, then on the strength of the amendment made on 1.4.1989 it cannot be said, that an inquiry is not permissible under the provision of Income Tax Act to see and satisfy that there is some semblance of the genuineness in the entry, which had been made, same is not at all totally fake entry as respondent- assessee would be entitled for deduction only if its bad debt, or part thereof. Hon’ble Apex Court in the case of Travancore Tea Estates Co. Ltd. Vs. CIT (1999) 151 CTR (SC) 231; (1998) 233 ITR 203 (SC) has taken the view, that as to whether a debt has become bad or at what point of time it became bad, are pure question of fact. Though standard of proof of proving the same is bad debt, is not required to be adopted and is to be decided on the wisdom of the respondent10 assessee and not on the wisdom of Assessing Officer, but to show that entry which had been made as bad debt there has to be some material in support of the same, giving some semblance of genuineness and truthfulness to the same in the direction of forming opinion, that said debt was arising out of trading activity, there was relationship of debtor or creditor, same was irrecoverable. Merely because entries have been made, in respect of bad debt or part thereof, writing it off, claiming deduction, the said entries can always be examined by the Assessing Officer, before proceeding to award deductions, and not by merely blindly following the same, but stand of the assessee has to be tested from the point of view of assessee, and assessee cannot come forward and say that on account of change brought in by way of amendment w.e.f. 1.4.1989, under Section 36(1)(vii) inquiry is not permissible.
Thus in the present case, on the substantial question of law, posed, provision of Section 143 (2) of Income Act viz-aviz section 36(1)(vii) of the Income Tax Act, 1961 read with section 36(1) both would be harmonized to give purposeful meaning to both the statutory provisions, as one extends benefit to the respondent-assessee of deduction for their debt or part thereof becoming bad and other authorizes Assessing Officer to see that provision of Income Tax Act are not flouted by any means.
By bank finance 555
Monday, January 4, 2010
An Invisible Revolution in Rural India
Mahua Devi is a petite woman in her early twenties.
She cycles through 10 to 12 villages of the Koraput district in Orissa everyday.
"I help these women keep their accounts,"
she tells me as we walk towards a group
sitting in the shade under a tree.
Madhukar Shukla
When she says "these women" she is referring to one of India's millions of self-help groups, or SHGs. Each group has 15 to 20 women who pool their tiny savings of only 5 rupees to 10 rupees at a time. They use the money to give loans to members for income-generating investments like chickens, seeds or goats. The interest on the loans then adds to their savings pool.
Driving from the nearest city to the village, I don't see any bank branches. Even if there is a branch, it's unlikely it would be equipped to open even simple savings accounts for these women, given their meager savings, lack of assets and inability to read or write. For most of the village women the SHG is the only bank they have ever had.
Ms. Devi keeps the accounts for 20 groups, for which she gets a commission of 2% of the value of all the transactions. "On average, I earn about 5,000 rupees per month," she tells me.
That, I quickly calculate, works out to 250,000 rupees in cash transactions per month - an amazing economic engine, silently working in one of India's poorest regions.
Self help groups are a transformational phenomenon which has swept the Indian countryside over the last decade and a half. The groups are India's own social innovation. In a country where almost two-thirds of the population have no access to formal financial services, SHGs are a unique route to financial inclusion, increasing incomes and helping build productive assets among the poor.
Though similar groups were promoted by many non-government organizations in the 1980s the turning point of the SHG movement was a pilot project by the National Bank for Agricultural and Rural Development (NABARD) in the early 1990s.
Despite India's network of around 30,000 bank branches in rural areas, a majority of the poor still remained outside the fold of the formal banking system. NABARD studies showed this was because existing bank policies, systems and products were not aligned to meet the financial needs and constraints of the poor. What the poor can earn and save varies widely each day. Meanwhile their tiny savings – as little as 50 rupees per month - make providing banking services to them too expensive for banks.
“The self help groups have gone beyond financial inclusion and become a platform to provide a voice to a marginalized section of society.”
To bridge this gap, NABARD and a group of NGOs started a pilot project o 500 groups of women to be used a vehicle for financial intermediation through its SHG-Bank Linkage Program. Typically, these were informal groups of up to 20 women, who would meet regularly and pool their savings.
After saving for six months and proving the group had developed the required fiscal discipline through consistent savings, on-time loan payments and maintaining records the group becomes eligible to be "linked" to the local bank branch. The innovation here was that the group, rather than the individuals in it, could open an account with the bank and use that account to save and take loans.
The pilot was a remarkable success and within a year more than half of the first groups had become eligible for the bank-linkage. Even more impressive was the fact that 90% of the loan payments were on time and there were no defaults. The success of this pilot project sparked the SHG movement which has been an unparalleled, albeit under-reported, revolution in financial inclusion.
The number of bank-linked SHGs crossed 10,000 in five years. By 2004, there were more than one million groups with their own bank accounts. By the year ended this March, the number of groups had grown to about 4.7 million, touching 59 million rural families through their members. Meanwhile, the average loan size per group has increased from 1,137 rupees in 1992 to 74,000 rupees this year. That shows the women's rising capacity to manage, utilize and pay back loans.
So is everything fine with the SHG movement?
Not entirely.
According to one 2006 study (EDA Rural Systems and Andhra Pradesh Mahila Abhivruddhi Society's "Self Help Groups in India: A Study of the Light and Shades") the groups still suffer from many inadequacies. For instance, the study found that a large proportion of SHG members remained poor even after being in the groups for seven years. Another report (Access Development Services' "Microfinance in India: The State of the Sector Report 2009") underlined the popularity of SHGs has so far been a regional phenomenon tilted towards the southern and eastern states of India.
In spite of such inadequacies, however, self help groups have emerged as a critical vehicle for creating social equity and empowerment.
I once sat with women from three SHGs in the community hall of Madanpur in Haryana. The women had assembled for a workshop on "legal literacy" organized by a Delhi NGO. There was jubilation in the air and the village women were talking animatedly.
"We got the license of the local liquor shop stopped yesterday," one of the members told me with glee. "It was a drain on us because the men-folk would squander away their earnings, spoil their health, and often physically abuse us. This time we protested and kept the liquor license from being renewed."
The self help groups have gone beyond financial inclusion and become a platform to provide a voice to a marginalized section of society. Some SHGs have become forums for women to discuss everything from health and sanitation to legal rights and human trafficking. They are also being used to promote education and skill building. The groups are so respected now that they have been called upon to implement government and donor-driven programs such as the mid-day meal program for school children and HIV/AIDS awareness campaigns.
Between 2006 and 2008, more than 600,000 new self help groups were linked to banks. Assuming an average group size of around 13 or 14 members, that means more than 400 women are joining a SHG every hour!
Now if that's not a revolution, then what is?
By MADHUKAR SHUKLA
—Madhukar Shukla is a professor of organizational behavior and strategic
management at the XLRI School of Business & Human Resources in Jamshedpur.
4th Jan2010
LS approves merger of State Bank of Saurashtra with SBI
14 Dec 2009, 2017 hrs IST
NEW DELHI: The Lok Sabha on Monday post facto put its seal on merger of the State Bank of Saurashtra (SBS) with State Bank of India (SBI) amid opposition from Left parties
"The pay and allowances and service conditions of the employees of SBS will not be altered to their disadvantage," Minister of State for Finance Namo Narain Meena said as the House approved the two bills to given effect to the merger that took place last year.
The bills to repeal the State Bank of Saurashtra Act and amend the SBI (Subsidiary Banks) Act were passed by voice vote.
Meena also said no branches of SBS are being closed as a result of the merger. "There should be no apprehension on this count", he said.
The associate bank was merged with the SBI in October 2008 following resolutions passed by the boards of both the banks.
The amendments, though a legislative formality, was opposed by CPI-M and CPI which saw in the merger a larger design to privatise the state-owned banking sector.
"The bill has a hidden agenda to consolidate state-owned banks into a monolith...the purpose for which is privatisation of the bank," A Sampath (CPI-M) said, while opposing the bills.
Opposing the bills, Prabodh Panda (CPI) demanded that government should have a comprehensive debate on its "agenda" for merging associate banks with the SBI.
Thousands of bank employees, he added, would go on strike on December 16 to protest against such merger and consolidation in the banking sector.
Jagada Nanda Singh (RJD) regretted that government was pursing the banking policy only to protect and promote the interest of large borrowers.
Bhartruhari Mahtab (BJD) wanted to know whether there was a difference of opinion between the Finance Ministry and Reserve Bank over consolidation in the banking sector.
T K S Elangovan (DMK) said the merger would not be in the interest of either employees or shareholders or customers.
Sumitra Mahajan (BJP) said it was incorrect on the part of the government to merge associate banks with the SBI as the exercise would not benefit anyone.
The regional character of the associate banks, he said, should be maintained to further the goals of financial inclusion and promote banking in all parts of the country.
P C Chacko (Cong) said that mergers have become the order of the day and would help SBI to compete with international players.
The merger, he said, was accepted and approved by the boards of the two banks.
Shailendra Kumar (SP) said people have emotional attachment with the banks and the merger would end the regional character of the associate banks.
Source:Loksabha News
NEW DELHI: The Lok Sabha on Monday post facto put its seal on merger of the State Bank of Saurashtra (SBS) with State Bank of India (SBI) amid opposition from Left parties
"The pay and allowances and service conditions of the employees of SBS will not be altered to their disadvantage," Minister of State for Finance Namo Narain Meena said as the House approved the two bills to given effect to the merger that took place last year.
The bills to repeal the State Bank of Saurashtra Act and amend the SBI (Subsidiary Banks) Act were passed by voice vote.
Meena also said no branches of SBS are being closed as a result of the merger. "There should be no apprehension on this count", he said.
The associate bank was merged with the SBI in October 2008 following resolutions passed by the boards of both the banks.
The amendments, though a legislative formality, was opposed by CPI-M and CPI which saw in the merger a larger design to privatise the state-owned banking sector.
"The bill has a hidden agenda to consolidate state-owned banks into a monolith...the purpose for which is privatisation of the bank," A Sampath (CPI-M) said, while opposing the bills.
Opposing the bills, Prabodh Panda (CPI) demanded that government should have a comprehensive debate on its "agenda" for merging associate banks with the SBI.
Thousands of bank employees, he added, would go on strike on December 16 to protest against such merger and consolidation in the banking sector.
Jagada Nanda Singh (RJD) regretted that government was pursing the banking policy only to protect and promote the interest of large borrowers.
Bhartruhari Mahtab (BJD) wanted to know whether there was a difference of opinion between the Finance Ministry and Reserve Bank over consolidation in the banking sector.
T K S Elangovan (DMK) said the merger would not be in the interest of either employees or shareholders or customers.
Sumitra Mahajan (BJP) said it was incorrect on the part of the government to merge associate banks with the SBI as the exercise would not benefit anyone.
The regional character of the associate banks, he said, should be maintained to further the goals of financial inclusion and promote banking in all parts of the country.
P C Chacko (Cong) said that mergers have become the order of the day and would help SBI to compete with international players.
The merger, he said, was accepted and approved by the boards of the two banks.
Shailendra Kumar (SP) said people have emotional attachment with the banks and the merger would end the regional character of the associate banks.
Source:Loksabha News
Banking in India- An anlysis of a decade and Things to watch out for in the next decade
Next decade would be one of credit substitution
and
banks would need to try hard to build their loan books
as corporate borrowers
will increasingly find new avenues
to raise relatively cheap resources....
A few senior bankers do not see much merit in my observation.
According to them, I have oversimplified the issue to get a smart
headline. India will continue to remain a capital-starved country
and banks’ loan business will never shrink, they reckon.
One look at the banking industry’s credit growth in the
last decade makes one see the value in their argument.
At the start of the decade, the industry’s loan book
was Rs4 trillion.
By mid-December 2009, this had grown more than
seven times to Rs29.41 trillion. Bank loans now are
around 52% of the country’s gross domestic product,
or GDP.
At the beginning of the decade, it was not even 19%. In 2000,
the credit deposit ratio was 53.3. Now it has gone up to 70.34,
reflecting firms’ need for money to expand their businesses in
the world’s second fastest growing major economy.
How has the banking infrastructure developed in the past decade?
The number of banks has declined from 297 in 2000 to 171 in
2008 (that’s based on the latest data available with the Reserve Bank of India).
But one shouldn’t read too much into this as many weak regional rural banks
have been either closed down or merged with stronger ones.
The number of bank branches has risen from 65,412 in 2000 to 76,050 in
2008, but the population served by each branch continues to be 15,000.
Also, the spread of the branch network is not uniform. For instance, the
rural branch network has actually shrunk—from 32,734 to 31,076—
while branches in metros have grown by at least 50%, from 8,219 to 12,908.
In urban centres, too, the banks have spread their network well,
from 10,052 to 14,392. This is in sync with the changing profile
of Indian banks—they have been selling loans like Coke in urban India.
How have individual banks fared?
Three private banks have posted phenomenal growth.
Axis Bank Ltd’s assets have grown from Rs6,669 crore
to Rs1.48 trillion, and that of HDFC Bank Ltd from
Rs11,656 crore to Rs1.83 trillion. ICICI Bank Ltd’s
assets have grown from Rs12,073 crore to Rs3.8 trillion
through a series of mergers, including that of the erstwhile
financial institution ICICI Ltd with itself.
During the decade, Axis Bank’s annual net profit has
grown from Rs51 crore to Rs1,815 crore. HDFC Bank’s
net profit has grown from Rs120 crore to Rs2,245 crore,
and that of ICICI Bank from Rs105 crore to Rs3,758 crore.
The public sector banking industry’s growth has been less
spectacular. State Bank of India’s asset base has grown around
four times, from Rs2.61 trillion to Rs9.65 trillion. Punjab National Bank’s
assets have risen from Rs54,000 crore to Rs2.47 trillion, and that of
Bank of Baroda, from Rs58,622 crore to Rs2.27 trillion.
State Bank’s net profit has grown a little more than four times—
from Rs2,056 crore to Rs9,121 crore. Ditto for Bank of Baroda,
from Rs503 crore to Rs2,227 crore. Punjab National Bank’s
net profit has grown faster, from Rs408 crore to Rs3,091 crore.
While most public sector banks have been laggards in asset
and net profit growth, they have cleaned up their books
aggressively, paring non-performing assets, or NPAs.
At least four public sector banks had double-digit net NPAs in 2000,
and three of them have brought that down to less than 1%. Indian Bank’s
net NPAs have come down from 16.18% to 0.18%.
The comparable figures for Allahabad Bank are 12.24% and 0.72%,
State Bank of Bikaner and Jaipur 10.14% and 0.85%, and Dena Bank
13.47% and 1.09%. The movement of NPAs of new generation
private banks in the last decade is not relevant as they came into
existence only in the mid-1990s and were not carrying any baggage.
The past decade has also seen the death of quite a few private banks.
Global Trust Bank Ltd was merged with Oriental Bank of Commerce
while Centurion Bank Ltd first took over Bank of Punjab Ltd and then
merged with HDFC Bank. The pace of mergers will accelerate in the
next decade, with the government taking the initiative.
It has been on the drawing board for quite some time, but no headway
has been made because of political opposition as the Left parties,
until recently allies of the coalition government at the Centre,
believe mergers lead to job losses.
The second largest public sector bank is about one-fourth the
size of State Bank, the country’s largest lender.
We may see the emergence of three-four banks of one-third
or half the size of State Bank, depending on how fast the government can push the plan.
Another dominant theme of the next decade will be the
spread of banking in rural India through branches,
banking correspondents and the mobile phone.
RBI has already directed all banks to come out
with specific plans for covering rural India that can
be rolled out in the next three years.
Only 40% of India’s population have bank accounts,
13% debit cards and 2% credit cards.
This will change in the next decade.
If the first decade of the 21st century in India
belonged to mobile telephony, the next will see mass banking.
Banks are being compelled to reach out to rural India
but soon, they will appreciate the business opportunity
in financial inclusion as urban consumers suffer from
loan fatigue and corporations find other avenues to raise money.
by Tamal Bandyopadhyay
and
banks would need to try hard to build their loan books
as corporate borrowers
will increasingly find new avenues
to raise relatively cheap resources....
A few senior bankers do not see much merit in my observation.
According to them, I have oversimplified the issue to get a smart
headline. India will continue to remain a capital-starved country
and banks’ loan business will never shrink, they reckon.
One look at the banking industry’s credit growth in the
last decade makes one see the value in their argument.
At the start of the decade, the industry’s loan book
was Rs4 trillion.
By mid-December 2009, this had grown more than
seven times to Rs29.41 trillion. Bank loans now are
around 52% of the country’s gross domestic product,
or GDP.
At the beginning of the decade, it was not even 19%. In 2000,
the credit deposit ratio was 53.3. Now it has gone up to 70.34,
reflecting firms’ need for money to expand their businesses in
the world’s second fastest growing major economy.
How has the banking infrastructure developed in the past decade?
The number of banks has declined from 297 in 2000 to 171 in
2008 (that’s based on the latest data available with the Reserve Bank of India).
But one shouldn’t read too much into this as many weak regional rural banks
have been either closed down or merged with stronger ones.
The number of bank branches has risen from 65,412 in 2000 to 76,050 in
2008, but the population served by each branch continues to be 15,000.
Also, the spread of the branch network is not uniform. For instance, the
rural branch network has actually shrunk—from 32,734 to 31,076—
while branches in metros have grown by at least 50%, from 8,219 to 12,908.
In urban centres, too, the banks have spread their network well,
from 10,052 to 14,392. This is in sync with the changing profile
of Indian banks—they have been selling loans like Coke in urban India.
How have individual banks fared?
Three private banks have posted phenomenal growth.
Axis Bank Ltd’s assets have grown from Rs6,669 crore
to Rs1.48 trillion, and that of HDFC Bank Ltd from
Rs11,656 crore to Rs1.83 trillion. ICICI Bank Ltd’s
assets have grown from Rs12,073 crore to Rs3.8 trillion
through a series of mergers, including that of the erstwhile
financial institution ICICI Ltd with itself.
During the decade, Axis Bank’s annual net profit has
grown from Rs51 crore to Rs1,815 crore. HDFC Bank’s
net profit has grown from Rs120 crore to Rs2,245 crore,
and that of ICICI Bank from Rs105 crore to Rs3,758 crore.
The public sector banking industry’s growth has been less
spectacular. State Bank of India’s asset base has grown around
four times, from Rs2.61 trillion to Rs9.65 trillion. Punjab National Bank’s
assets have risen from Rs54,000 crore to Rs2.47 trillion, and that of
Bank of Baroda, from Rs58,622 crore to Rs2.27 trillion.
State Bank’s net profit has grown a little more than four times—
from Rs2,056 crore to Rs9,121 crore. Ditto for Bank of Baroda,
from Rs503 crore to Rs2,227 crore. Punjab National Bank’s
net profit has grown faster, from Rs408 crore to Rs3,091 crore.
While most public sector banks have been laggards in asset
and net profit growth, they have cleaned up their books
aggressively, paring non-performing assets, or NPAs.
At least four public sector banks had double-digit net NPAs in 2000,
and three of them have brought that down to less than 1%. Indian Bank’s
net NPAs have come down from 16.18% to 0.18%.
The comparable figures for Allahabad Bank are 12.24% and 0.72%,
State Bank of Bikaner and Jaipur 10.14% and 0.85%, and Dena Bank
13.47% and 1.09%. The movement of NPAs of new generation
private banks in the last decade is not relevant as they came into
existence only in the mid-1990s and were not carrying any baggage.
The past decade has also seen the death of quite a few private banks.
Global Trust Bank Ltd was merged with Oriental Bank of Commerce
while Centurion Bank Ltd first took over Bank of Punjab Ltd and then
merged with HDFC Bank. The pace of mergers will accelerate in the
next decade, with the government taking the initiative.
It has been on the drawing board for quite some time, but no headway
has been made because of political opposition as the Left parties,
until recently allies of the coalition government at the Centre,
believe mergers lead to job losses.
The second largest public sector bank is about one-fourth the
size of State Bank, the country’s largest lender.
We may see the emergence of three-four banks of one-third
or half the size of State Bank, depending on how fast the government can push the plan.
Another dominant theme of the next decade will be the
spread of banking in rural India through branches,
banking correspondents and the mobile phone.
RBI has already directed all banks to come out
with specific plans for covering rural India that can
be rolled out in the next three years.
Only 40% of India’s population have bank accounts,
13% debit cards and 2% credit cards.
This will change in the next decade.
If the first decade of the 21st century in India
belonged to mobile telephony, the next will see mass banking.
Banks are being compelled to reach out to rural India
but soon, they will appreciate the business opportunity
in financial inclusion as urban consumers suffer from
loan fatigue and corporations find other avenues to raise money.
by Tamal Bandyopadhyay
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