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TMI Blog2016 (3) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year and the credit balance in the provision for the bad and doubtful debts accounts made under clause (viia). - Decided in favour of assessee - ITA No. 1802-1803/Kol/2009 - - - Dated:- 3-2-2016 - N. V. Vasusdevan, JM And Waseem Ahmed, AM For the Appellant : Shri B K Ghosh, FCA And Shri Pijush Dey, FCA For the Respondent : Shri G Mallikaujana, CIT-DR ORDER Per Waseem Ahmed, Accountant Member Both appeals by same assessee are arising out of orders of Commissioner of Income Tax (Appeals)-VI, Kolkata dated 25.08.2009 26.08.2009. Assessments were framed by ACIT, Circle-6 Kolkata u/s 143(3)/263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his orders dated 17.12.2007 27.12.2006 for assessment years 2003-04 2004-05 respectively. 2. Both the appeals are filed by the same assessee, and we decided to take up both the appeals together and pass a consolidated order for the sake of convenience. First we take up ITA No.1803/Kol/2009 for A.Y.04-05 3. Assessee has raised following grounds:- 1. That the learned CIT(A) has erred in disallowing ₹ 311,17,10,637/- being the amount of claim for bad debts relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the total income of the assessee. 6. Aggrieved, assessee preferred an appeal before ld. CIT(A) and demonstrated that the proviso to section 36(1)(vii) of the Act is applicable in respect of bad debts written off relatable to the non-rural branches of assessee-bank. However the ld. CIT(A) disregarded the claim of the assessee and upheld the action of the AO by observing as under: I have gone through the submissions of the appellant and also perused the order of AO. The issue is recurring for the last few Asst. years. In my opinion the argument of the Ld.AR that intention of the legislature as explained in the CBDT circulars is, the debts written off by the Rural branches of the bank are only to be adjusted against the credit balance in the provision account is not the correct legal position as per law. The argument of Ld. AR that the debts written off by the non rural branches of the bank are not controlled by the proviso to section 36(1)(vii) and as such allowable in full does not deserve any merit. 36(1)(vii) nor the proviso talk about rural advances and urban advances. Section 36(1)(viia) provides for deduction of provision made on account of percentage of total pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the appellant. If the same were adjusted against the claim made 36(1)(viia) in the AY 2001-2002 and 2003-2004 then claim u/s 36(1)(vii) cannot be made by the ape now for this A.Y The appellant has not furnished any information and details on this .Further if the claim was adjusted against the claim made us/s 36(1)(viia), the remaining amount if any would have been allowed by the AO. The optional deduction cannot be an additional deduction along with deduction u/s 36(1)(viia). According to the 1st proviso to section 36(1)(viia)(a)of the IT Act 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 my provision made by it for any assets classified by the RBI as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five percent 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 first day of April 2003 and ending before the 1st day of April 2005, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.2486/Kol/2007, the issue has been decided in favour of assessee. The relevant extract of the order is reproduced below: We have carefully considered the submissions of the learned Representatives of the parties and the orders of the authorities below. We have also gone through the cases cited by the Ld. AR of the assessee (supra). On consideration of the provisions of Section 36(1)(viia), as also Sec. 36(2)(v) and also considering the provisions of Section 36(1)(vii) of the Act, we find substance n the submissions of the Ld. AR of the assessee. Hon'ble Kerala High Court has held that the scope of the proviso to clause (vii) of Sec. 36(1)(vii) has to be ascertained from a cumulative reading of the provisions of clauses (vii) (viia) of Sec. 36(1) and clause (v) of Sec. 36(2) of the Act. It was held that the intention of the Legislatures in enacting the proviso to clause (vii) of Sec. 36(1) and clause (v) of Sec. 36(2) simultaneously is only to see that a double benefit in respect of the same bad debt is not given to a scheduled bank. A scheduled bank may have both urban and rural branches and advances given from other branches. It was also held that as a result of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's own case for A.Y 2003-04 in ITA No. 2486/Kol/2007 and for the A.Y. 2001-02 ITA No. 1349/Kol/2009. Therefore, we dismiss ground No. 3 4 respectfully following the Tribunal's order in assessee's own case dated 30th September, 2009 and 14th May, 2012. The extract relevant portion for the assessment year 2001-02 is reproduced below:- 7. We have carefully considered the orders of the authorities below and the submissions of the learned Representatives of the parties. We have also considered the provisions of Section 36(1)(viia) of the Act. We are of the considered view that the claim of 10% of doubtful assets and loss as provided in first proviso to Section 36(1) (viia)(a) of the Act as amended by the Finance Act, 2002 w.e.f. 1.4.2003 and applicable to the Assessment ear under consideration as an alternate claim and the additional deduction could not be allowed if the claim of the assessee under clause (a) of Section 36(1)(viia) has been allow. Since the Department has allowed the deduction to the assessee us. 36(1)(viia)(a) of the Act, we held that the learned CIT(A) has rightly confirmed the action of the Assessing Officer to disallow the additional claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant with reference to Guide to Companies Act by A Ramaiya are not relevant here because the context mentioned there was with reference to public servants , I uphold the disallowance made by the AO and the ground of Appeal is dismissed. Being aggrieved by this order of Ld. CIT(A) assessee preferred second appeal before us. 13. We have heard both the parties and perused the materials available on record. Before us the ld. AR submitted that the assessee is a Govt. Company within the meaning of Sec. 617 of the Companies Act,1956, therefore it is entitled to claim deduction u/s. 36(1)(viii) of the Act. The assessee also submitted in support of its claim the order of ITAT Mumbai Bench in the case of Union Bank of India v. ACIT in ITA No. 4704 to 4706/Mum/2010 for AYs 2002-03 to 2006-07. On the other hand, Ld DR relied on the orders of Authorities Below. 13.1 From the aforesaid discussion we find that the assessee has claimed a deduction of ₹ 30 crores by virtue of Sec. 36(1)(viii) of the Act by creating a special reserve in the books of account. However, the AO found that the deduction as specified u/s 36(1)(viii) of the Act is applicable to a financial corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral and rural development bank) The amendment also provides definitions of the expressions banking company, co-operative bank , primary agricultural credit society . Further, the restructuring done to define the financial corporation is only clarificatory as we can see from the notes on clauses which read as follows:- The proposed amendment further seeks to define certain terms including'specified entities and eligible business' for the purposes of deduction. Since the definition is only clarificatory in nature, it can be presumed that the entity such as the assessee was covered in the definition from the inception of the section. Even otherwise the assessee is a govt. Company since the Central Govt. holds more than 51% of the share capital of the bank and as defined in Sec. 617 of the Companies Act the assessee is a govt. company. Hence the deduction u/s. 36(1)(viii) has to be allowed to the assessee as it is engaged in the business of providing long term finance for industrial, agriculture and infrastructure development in India and is a govt. company. The assessee is a financial corporation within the meaning of Sec. 36(1)(viii) since it is govt. co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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