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TMI Blog2014 (2) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... was argued before us as covered by the decision by the apex court in the case of Catholic Syrian Bank Ltd. vs. CIT [2012] 343 ITR 270 (SC), having been since followed by the Tribunal in the assessee's own case for A.Y. 2006-07 (in ITA No.2731/Mum/2011 dated 10.04.2013/copy on record), as well as the decision by the tribunal in Oman International Bank S.A.O.G vs. ACIT (in ITA Nos.1981 & 1982/Mum/2001 dated 29.06.2012/copy on record). 3. We have heard the parties, and perused the material on record, as well as the case law relied upon. The legal position, as apparent, gets settled by the apex court in Catholic Syrian Bank Ltd. (supra), so that in principle there could be and is no dispute. 3.1 It would be relevant to recount the facts of the case in brief. The assessee claimed Rs.275.57 crores by way of provision against Non-Performing Assets (NPAs), of which Rs.53.53 crores was against rural advances, and the balance Rs.222.04 crores against non-rural advances. The assessee also claimed to have written off debts for Rs.318.85 crores during the year, which was communicated per the notes to the return of income (refer para 1.1/pg.4 of the assessment order). The assessee's gross tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner in which the deductions under reference are to be computed: a). sections 36(1)(vii) and 36(1)(viia) of the Act are distinct and independent provisions and operate in their respective fields. There is, thus, no scope for limiting the scope of one with reference to the other; the concept of provision for bad and doubtful debts falls outside the scope of section 36(1)(vii) simpliciter, as clarified by Explanation thereto; b). section 36(1)(vii) in its main part concerns only a bad debt (or part thereof), while proviso and Explanation to s.36(1)(vii) and s.36(2)(v) speak of provision for bad and doubtful debts. The proviso to section 36(1)(vii) has, therefore, to be read with sections 36(1)(viia) and 36(2)(v). Bad debts written off, other than those for which provision u/s. 36(1)(viia) is made, will be covered under the main part of section 36(1)(vii); c). the proviso to section 36(1)(vii) operates in cases under clause (viia), so as to limit the deduction u/s.36(1)(vii) to the extent of the difference between the debt (or part thereof) written off in the relevant previous year and the credit balance in the provision for bad and doubtful debts account made u/s.36(1)(viia); d). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to, for the following reasons, confirm any part of the amount claimed, i.e., including that allowed u/s.36(1)(vii) by the A.O. (Rs.265.32 cr.), for being allowed thereunder: a). the write off of debt in the present case is by way of debit to the provision account, consuming presumably the entire opening balance in the said account, and which (provision) stands allowed (though not fully) in the earlier years, either u/s. 36(1)(viia)(a) or u/s. 36(1)(vii) (refer para 1.2.5 of the assessment order). The same would thus be allowable only to the extent not allowed for the earlier years, details of which are absent. Allowing any amount in excess of the provision not allowed in the earlier years would amount to a double deduction against the same write off. Even if a part of the provision allowed u/s. 36(1)(viia)(a) for the earlier years is in respect of non-rural advances; the decision in the case of Catholic Syrian Bank Ltd. (supra) being only rendered subsequently, a double deduction could not be allowed against the same write off. A claim for deduction for the current year would therefore necessarily warrant a write back of the excess provision made earlier, in the books f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of the branch, would not be fatal to the bank's claim inasmuch as the detail of the debts written off is available, and the aggregate advances as at the year-end per the head office books can only be considered as in agreement with that as per its different units. In the present case, as it would appear to us, it is a case of a provision inasmuch as the assessee claims a continuity of and speaks in terms of a balance in the provision account; rather, contending that only the opening balance in the provision account is to be adjusted (on account of the actual write off of debt) and not that made as at the relevant year-end. If so, i.e., of it being a provision, no amount thereof could be said to be a write off and, as such, allowable u/s. 36(1)(vii). This aspect, however, going to the root of the matter, requires proper verification, arising only in view of the subsequent decision of the apex court in Vijaya Bank (supra). What part of the provision, i.e., as made in the accounts, qualifies as so, and what part of it is in effect a write off, would need to be clarified. We may also clarify here that the write off of the individual accounts though, even if subsequently (i.e., to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment record, while clearly the law envisages a parity between the two; a provision being made and adjusted (debited) only in the books of account. A reconciliation between the two is in any case required/preferable. d). lastly, we wish to clarify that it needs to be appreciated and borne in mind that the deductions in respect of 'bad debts written off' and 'provision for bad and doubtful debts' have necessarily to be with reference to the entries made in the books of account. 3.5 The issue as to the deductions u/ss. 36(1)(vii) and 36(1)(viia)(a) exigible to the assessee in the facts and circumstances of the case, as apparent from the foregoing, is indeterminate, requiring verification and definite findings of fact in respect of the matters /aspects specified/highlighted at sub-paras (a) to (d) of para 3.4 of this order. The said issue is thus restored back to the file of the first appellate authority for fresh adjudication per a speaking order after hearing the parties. He shall, in doing so, at his option, obtain a remand report from the A.O. on any of the matters he considers necessary, also allowing the assessee due opportunity to present its case before him. We decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XII-B of the Act being not applicable to it. The matter, even as was the common contention of the parties, stands squarely covered by a series of decisions by the tribunal in favour of the assessee, including in its own case for A.Y. 2006-07 (in ITA No.2337/Mum/2011 dated 10.04.2013 / PB pgs.8-17), to which, among others, our attention was drawn by the ld. AR during hearing (refer PB pgs.30 to 40). 7. We have heard the parties, and perused the material on record. Respectfully following the consistent view of the tribunal, also adopted in its own case, we reverse the direction of the ld. CIT(A) confirming the computation of income u/s.115JB; on the basis that the assessee, being a banking company, is not exigible to tax under the MAT provisions of Chapter XVII-B. We decide accordingly, allowing the assessee's relevant ground. 8. In the result, the assessee's appeal is partly allowed. Revenue's Appeal (in ITA No. 4112/Mum/2012 for A.Y. 2007-08) 9. Ground # 1 by the Revenue impugns the direction by the ld. CIT(A) in allowing its claim qua bad debts for Rs.287.89 crores on the basis that this was only a provision, and not an actual write off of bad debts. The same stands allowed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.14A to 5% of the tax-exempt income, i.e., as for the immediately preceding year, inasmuch as rule 8D is admittedly applicable only w.e.f. A.Y. 2008-09, as clarified in Godrej & Boyce Mfg. Co. Ltd. (supra). 12. Vide its third and fourth grounds, the Revenue challenges the adjustment to the book profit u/s.115JB on account of the expenditure in respect of tax-exempt income (by way of book profit) as well as for the allowance of the tax credit u/ss.88-D and 88-E against the tax on the book profit. The said grounds, in view of our decision in respect of the assessee's ground no. 2, upholding the non-applicability of section 115-JB to the assessee, a banking company, would not survive for consideration. We decide accordingly, dismissing the relevant grounds. 13. In the result, the Revenue's appeal is partly allowed. Assessee's Appeal (in ITA No.3675/Mum/2012 for A.Y. 2007-08) 14. The revision order concerns the various adjustments that in the opinion of the ld. CIT were required to be considered by the A.O. in computing the assessee's book profit u/s.115JB of the Act. 15. We have heard the parties, and perused the material on record. The appeal, as would be apparent, would become ..... 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