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TMI Blog2016 (4) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the relevant year. The AO is, therefore, directed to verify the Bad and Doubtful Debts claimed by the assessee in the revised computation of income. The assessee is also directed to produce all the documents to substantiate Bad and Doubtful Debts made by it either in the computation of total income or under Profit & Loss account. The AO shall decide the matter on merit without being influenced by the arithmetical calculation mentioned herein above. However, the AO shall be guided by the law stated herein above i.e. that the assessee is entitled to the benefit of Bad and Doubtful Debts made by it during the relevant year. - ITA Nos. 897/JP/2014 - - - Dated:- 24-2-2016 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For The Assessee : Shri P.C. Parwal (C.A) For The Revenue : Smt. Neena Jeph (JCIT) ORDER PER SHRI LALIET KUMAR, J.M. This is an appeal filed by the assessee against the order of ld. CIT (A)-III, Jaipur dated 17.11.2014 for the A.Y. 2010-11. The grounds of appeal states as under :- 1. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in restricting the claim of deduction u/s 36(1)(viia) at ₹ 11,17,000/- i.e p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of any provision for bad and doubtful debts made by- (a) a scheduled bank The importance of the word made being present in the relevant statute cannot be missed. The intent of the legislature while framing the statute is incontrovertibly specific and bereft of any confusion by way of which the actual quantification and provisioning of the amount of debts considered to be bad and doubtful is a primary requirement. In a case where the computation of the aggregate deduction available u/s 36(viia) exceeds the actual provision made, the deduction available to the assessee in such a case would be limited to the actual provision made. In the instant case, the actual provision made for bad and doubtful debts in the balance sheet is only ₹ 11,17,000/-, therefore even while the computation of the deduction has been worked out at a figure exceeding the actual provision made, the available deduction u/s 36(viia) shall be restricted to ₹ 11,17,000/- only. 3. The assessee being aggrieved by the order passed by the AO, carried the matter before ld. CIT (A), who vide the impugned order dated 17.11.2014 has confirmed the order passed by the AO. The reasoning given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Debts u/s 36(1)(vii)(a) of such amount. In other words provision for Bad and Doubtful Reserves of earlier years which were not allowed to the assessee can not be given credit against the total income of assessment year under consideration. Accordingly the action of the AO is confirmed. 4. Feeling aggrieved by the above said order, the assessee is now before us. 4.1. The ld. A/R for the assessee has submitted that the deduction u/s 36(1)(viia) is allowed in respect of any provision for bad and doubtful debts made by the assessee not exceeding 7.5% of the total income and 10% of the aggregate advance made by the rural branches. In the present case the assessee has made the provision for bad and doubtful debts for ₹ 11,17,000/-. The ld. CIT (A) has wrongly held that in the computation of the total income as also the revised computation, the provision for bad and doubtful debts was claimed only for ₹ 11,17,000/-. In fact, this is not the amount claimed but it is the amount which is added in computing the income. Against this the claim for bad and doubtful debts was made at ₹ 91,07,187/-. The ld. A/R further submitted that without prejudice to above, in case d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.2010 44,00,000 6,96,116 53,06,672 1,89,95,149 1,93,97,936 The ld. A/R has submitted that in view of the provisions of section 36(10)(viia), deduction should not be restricted to the provisions made during the year and it should be permitted for the total purchases made in the books of account. 4.2. Per contra, the ld. D/R for the revenue has submitted that the claim of the assessee before this Tribunal is not maintainable on various grounds including (1) that the assessee has not claimed deduction under section 36(1)(viia) in the original return of income filed by it and has only submitted the revised computation of income by way of which the deduction under section 36(1)(viia) for bad and doubtful debit was claimed at ₹ 91,07,187/-. It is also the case of the ld. D/R that the literal meaning of section 36(1)(viia) is required to be given by the Tribunal. Further, the ld. D/R also relied upon the Circular issued by the CBDT bearing no 17/2008 dated 26.11.2008 wherein in respect of section 36(1)(viia) it has been mentioned as under :- INSTRUCTION No. 17/2008, DATE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of such provision actually created in the books of the assessee in the relevant year or the amount calculated as per provisions of section 36(1)(viia), whichever is less. (c) For working out the aggregate average advances by rural branches, the Assessing Officer should verify whether the branch (es) in question actually qualify to be categorized as rural branches' as per the definition in Explanation (ia) below section 36(1)(viia). The aggregate average advances of such rural branches should thereafter be computed in accordance with Rule 6ABA of IT. Rules, 1962. (iv) Third proviso to section 36(1)(viia) of the Act, allows a scheduled bank or nonscheduled bank, at its option, to claim a further deduction in excess of the limits specified in the preceding two provisos, for an amount upto the income derived from redemption of securities made in accordance with a scheme framed by Central Government. Before allowing deduction under this provision, it should be ensured that such income has been disclosed in the return of income under the head Profits and gains of business or profession . (v) Section 44C of the Act provides that in the case of a non-resident, head offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und or superannuation fund or gratuity fund or any other fund for the welfare of employees is allowable in computing total income of the assessee only on actual payment basis. Therefore, it should be verified as to whether the expenditure claimed in respect of above heads has actually been met. (x) Section 35DDA of the Act provides that where an assessee incurs any expenditure by way of payment of, any sum to an employee at the time of his retirement in accordance with any scheme of voluntary retirement, one fifth of the amount so paid shall be deducted in computing the profit and gains of the business and the balance shall be deducted in equal instalments for each of the four immediately succeeding years. Therefore, only one-fifth of such expenditure should be allowed in each of the five years. (xi) Section 37 of the Act envisages that an amount debited in the P L account in respect of an accrued or ascertained liability only is an admissible deduction, while any provision in respect of any unascertained liability or a liability which has not accrued, do not qualify for deduction. However, it has been found that Banks are claiming provisions on different accounts, probably u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has distinguished various authorities relied upon by the assessee wherein deductions had been allowed under various provisions which also required creation of reserve after the assessee had created such reserve in the account books before the completion of the assessment. It has been correctly pointed out that in all those cases, reserves/provisions had been made in the books of account of the same assessment year and not of the subsequent assessment year. 8. In the present case, the assessee has not made any provision in the books of account for the assessment year under consideration, ie.1985-86, by making supplementary entries and by revising its balancesheet. The provision has been made in the books of account of the subsequent year. In the light of the above, the ld. D/R has submitted that the issue no. 1 of the assessee is required to be dismissed. 4.4. We have heard the rival contentions and perused the material on record. In our view the provisions of section 36(1)(viia) provides as under :- (viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank not being a bank incorporated by or under the laws of a country ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, an amount not exceeding five per cent. of the total income (computed before making any deduction under this clause and Chapter VI-A) : Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, 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, of an amount not exceeding ten per cent. of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. From the bare perusal of the provisions, it is clear that the statute has provided that the provision for bad debt is required to be made by the scheduled Bank. Further, it is also provided in the section under consideration that the rate of 7.5% and 10% was dependent on the aggregate advances made. Thus the focal point of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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