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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 ..... A. M. This is a set of four Appeals, being cross appeals for assessment year (A.Y.) 2007- 08 and an appeal by the Revenue for A.Y. 2005-06, challenging the appellate orders by the first appellate authority for the relevant years, and another appeal by the assessee contesting the revision order u/s.263 in respect of its assessment for A.Y. 2007-08. The appeals raising common issues were listed for hearing and, accordingly, heard together, and are being disposed of vide a common, consolidated order. We shall proceed year wise. Revenue's Appeal (in ITA No.3821/Mum/2009 for A.Y. 2005-06) 2. The only issue in the Revenue's appeal for this year is the allowance of deduction u/ss. 36(1)(vii) and 36(1)(viia) of the Act. The matter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the provision account. That is, the provision being only for rural advances and, two, made at the year-end. The impact of the two arguments was that the assessee is entitled to deduction u/s. 36(1)(vii) at Rs.318.85 cr. as against Rs.265.32 cr. allowed by the A.O., so that there is a short deduction by Rs.53.53 cr. The same stood allowed by the ld. CIT(A), further clarifying that Rs.53.53 cr. allowed u/s.36(1)(viia) would become the opening provision for the following year (i.e., A.Y. 2006-07) (refer para 8.2 of the appellate order). Aggrieved, the Revenue is in appeal. 3.2 We may next delineate the position of the law as clarified by the apex court in Catholic Syrian Bank Ltd. (supra), further stating, in light thereof, the manner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see A.O. CIT(A) Provision for bad doubtful debts u/s.36(1)(viia) 275.57 53.53 53.53 Written off of bad debts u/s.36(1)(vii) --- (*) 265.32 318.85 Total 275.57 318.85 372.38 3.4 The dispute before us is ostensibly qua the quantum of deduction u/s. 36(1)(vii), having been allowed by the ld. CIT(A) at Rs.318.85 cr. as against Rs. 265.32 cr. by the A.O. The break-up of the difference (Rs.53.53 cr.), i.e., in terms of rural and non-rural advances, would be to our mind of no relevance inasmuch as the deduction u/s. 36(1)(vii) covers both the rural and non-rural advances, the quantum (of write off) of each of which is as per the books of account. Further, though there could be no dispute, i.e., in principle, as regards the claim to be allowed, we 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 acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) envisages an actual write off and excludes a provision. The disallowance in its respect, thus, appears to be consistent with law. The apex court in Vijaya Bank vs. CIT [2010] 323 ITR 166 (SC) has clarified that where the provision is reflected as a liability in the balance-sheet, implying its continuity and, thus, carry forward in the books of account as such, i.e., in the form of a credit balance, the same would be a provision. However, where it is adjusted against debts, so that the debt outstanding as at the year-end is reduced, it would, though reflected as a provision, only be a write off. Clearly, in such a case there is no question of the provision account being carried forward inasmuch as the amount of debt carried forward in books gets reduced to that extent. The failure to close the individual accounts (of the debtors), i.e., in the books 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment of the provision made in the accounts as at the year-end and, accordingly, a nil opening balance for the following year. Such a situation could arise only in case of no provision for bad and doubtful debts being made in accounts for the preceding year. The same shall, in any case, be required to be confirmed. The Revenue, in fact, also impugns (vide its ground # 2) the direction by the ld. CIT(A) to this effect, i.e., to adjust the provision made (to the extent of Rs.53.53 cr.) in the following (subsequent) year, i.e., by way of opening balance for that year. The Revenue's stand, though to no moment in view of our clear verdict of only the opening balance being adjustable, may perhaps be responsible for the anomaly afore-referred and, in any case, explain or help explain the variance in the provision account, i.e., as per books and as per the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh any satisfactory answer to the said query by the Bench. Further on, on a perusal of the record, it was found that the said ground stood not raised before the first appellate authority, so that it does not arise out of his order. Again, though the issue involves a legal plea, the relevant facts being not on record, it was wondered by the Bench as to how the said alternate ground is eligible for being admitted. He conceded to the same, as well as to the fact that no facts and details have been brought on record by the assessee. Under the circumstances, therefore, we find no merit in the assessee's ground no.1, including the alternate ground, which stands dismissed. 6. The second and the only other ground in the assessee's appeal is toward confirmation of the assessee's liability u/s.115JB of the Act, rejecting its claim of the MAT provisions of Chapter 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 atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 8D, the ld. CIT(A) restricted the same to 5% following his predecessor for A.Y. 2006-07. 11. We have heard the parties, and perused the material on record. This is again a subsisting issue in the assessee's case. For A.Y. 2003-04, whereat the disallowance was restricted by the ld. CIT(A) to 2% (of the tax-exempt income), the tribunal, following the dictum of Godrej Boyce Mfg. Co. Ltd. v. Dy. CIT [2010] 328 ITR 81 (Bom), restored the matter to the file of the A.O. for fresh determination on a reasonable basis. For A.Y. 2006-07, the disallowance was, as afore-noted, confirmed at 5%. The same stood accepted by the assessee by not pressing its relevant ground before the tribunal, while the Revenue did not contest the same. Under the circumstances, we consider it fit and proper, and particularly to give a quietus to the matter, to restrict the disallowance u/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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