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TMI Blog2015 (5) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. Moreover, all these facts and figures were furnished by the assessee before the learned CIT(A) for the first time and the Assessing Officer therefore, did not have any opportunity to verify the same. - Matter remanded back - Decided in favour of revenue for statistical purposes. Deduction on account of salary arrears disallowed disallowed - Held that:- After examining all the relevant aspects of the matter, a finding has been given by the learned CIT(A) in his impugned order that the liability on account of salary arrears in question has arisen vide the proceedings dated 24.7.2010, i.e. much later than the closure of the year under consideration. The said liability thus had neither arisen nor discharged by the assessee during the year under consideration and the learned counsel for the assessee has not been able to bring anything on record to rebut or controvert this finding of fact recorded by the learned CIT(A) in his impugned order. The liability on account of salary arrears in question thus neither related to the year under consideration nor crystallized in that year, and this being so, we find no infirmity in the impugned order of the learned CIT(A) c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards provision other than that mentioned in clause (viia~, is available to assessee since the deduction towards provision on non specified/doubted assets in accordance with First proviso to Clause (viia) of Sec.36(1) is applicable for AYs 2000- 01 to 2004-05 only. 7. The CIT(Appeals) ought not to have allowed the further deduction of ₹ 9,93,40,0 15/ - towards provision for bad and doubtful debts in the computation since the assessee has already claimed such provision in P L account. 8. The CIT(Appeals) ought to have appreciated that the issue regarding claim u/s 36(1) (viia) in assessee's own case for AY 2009-10 has not yet been decided by the Hon ble ITAT, Hyderabad as claimed by the assessee and a M.A. was filed by the Department before the Hon'ble ITAT. 9. Any other ground(s) that may be urged at the time of hearing. 3. The assessee in the present case is a Regional Rural Bank which is deemed to be a cooperative society for the purposes of Income Tax Act,1961. The return of income for the year under consideration was filed by it on 7.10.2010 declaring total income of ₹ 122,51,93,517. In the assessment originally completed under S.143(3), the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provision for bad and doubtful debts under S.36(1)(viia) was not admissible in the facts and circumstances involved in the case of the assessee and the same was disallowed by him. 5. The disallowance made by the Assessing Officer on account of its claim for deduction under S.36(1)(viia) amounting to ₹ 9,93,44,015 was challenged by the assessee in an appeal filed before the learned CIT(A) and after considering the submissions made by the assessee as well as the relevant facts and figures furnished in support, the learned CIT(A) allowed the claim of the assessee for deduction under S.36(1)(viia) for the following reasons given in paragraph 6.3 of his impugned orderITA 6.3 Perused the submissions of the appellant and the observations of the Assessing Officer. As could be seen from the 'assessment order, the Assessing Officer was of the opinion that the assessee is eligible to write-off the bad debts on actual basis and the provision for doubtful and bad debts can be made on the basis of the assessment of the health of the advances given by bank and as per the guidelines issued on this regard, and the deduction u/s 36(1)(viia) is not allowable to non-specified asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng five per cent of the total income computed before making any deduction under this clause and chapter VIA) Section 36(2): In making any deduction for a bad debt or part thereof, the following provisions shall apply- (v) where such debt or part of the debt relates to advances made by an assessee to which clause (viia) or sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause. Thus, reading of the clause (vii) of Section 36(1) makes it clear that bad debts written off during the year are eligible to be claimed as deduction and in case where the provisions of Section 36(1)(viia) also applicable, the claim u/s 36(1)(vii) is restricted to availability of credit balances of the provision for bad and doubtful debts, relatable to Rural Branches of Banking Institutions. As it reveals there appears 00 restriction on claiming the deduction u/s 36(1)(viia), towards the provision for bad and doubtful debts, which in turn held to be confined to 7.5% of the net profits after the claim of deductions under chapter V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii), will relate to cases covered under section 36(1)(viia), and has to be read with Section 36(2)(v) of the I.T.Act, and the said proviso would not permit the benefit of double deduction, operating with reference to rural loans, while the clause vii of Section~36(1) would entitle general deduction for bad debts or debts written off, for the previous year. Applying the interpretation to the facts of the assessee for the year under reference the provisions for bad and doubtful debts for rural branches stood at ₹ 4752 laksh including teh opening balance of ₹ 3050 lakhs and ₹ 1702 lakhs. towards provision made for the year. Thus, there is a closing balance of ₹ 2936 lakhs, towards provision even after write off of bad debts to the extent of ₹ 1690 lakhs in the rural branches of the banks during the year, against which the claim of ₹ 9,93,40,015/- was made as deduction u/s 36(1)(viia), for the year which being 7.5% of the total profits computed. Thus, based on the interpretation of the law that governs the deduction on provisions of bad and doubtful debts u/s 36(1)(viia) and the judicial decisions cited, I am of the considered opinion that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a country outside India or a nonscheduled bank or a co-operative bank other than primary agricultural credit society or a primary cooperative agricultural and rural, development Bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year; Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame. Having regard to all these facts and circumstances of the case, we are of the view that it would be fair and proper and in the interests of justice to restore the issue relating to the assessee s claim for deduction under S.36(1)(viia) to the file of the Assessing Officer for deciding the same afresh, in accordance with the provision of S.36(1)(viia) after giving proper and sufficient opportunity of hearing to the assessee and after verifying all the relevant facts and figures. We order accordingly. This appeal of the Revenue is accordingly treated as allowed for statistical purposes. Assessee s Appeal - ITA No.88/Hyd/2015 9. The appeal of the assessee involves a solitary issue relating to the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of its claim for deduction on account of salary arrears amounting to ₹ 12,73,60,121. 10. As per the directions of the learned Commissioner given in the order passed under S.263, the claim of the assessee for deduction on account of salary arrears for the period from 1.11.2007 to 31.3.2009 amounting to ₹ 12.73 cores was examined by the Assessing Officer. On such examination, he foun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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