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TMI Blog2016 (4) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner of Income Tax - Decided against assessee - I.T.A. Nos.496 & 497/Mds/2015 - - - Dated:- 23-2-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. R. Vijayaraghavan, Advocate and Shri.C. Naresh, C.A. For The Respondent : Shri. Shaji P. Jacob, Adl. CIT ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: The appeals filed by the assessee bank are directed against different orders of the Commissioner of Income Tax Large Taxpayer Unit, dt 12.02.2015 for the assessment years 2010-2011 and 2011-12 passed u/s. 263 and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). Since the issues in these appeals are common in nature, hence these appeals are combined, heard together, and disposed off by this common order for the sake of convenience. 2. We take up Appeal No.496/Mds/2015 of assessment year 2010-2011 for adjudication and the assessee raised the following grounds of appeal:- 2.The CIT erred by invoking revisionary powers u/s 263 of the Income Tax Act, by adopting his own interpretation of 'obiter dicta' in the Apex court decision in Catholic Syrian Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny case has no force of a binding authority. Therefore, CIT grossly erred in overlooking the plain wordings of the statute in sec 36(1)(viia), and order of the CIT restricting the allowance under section is patently against the plain provision of that section. 9.The CIT ought to have appreciated that deduction in respect of non rural debt is being claimed ever since the introduction of the said clause, and allowed by the department after examining specific provision in section 36(1) (viia), the clarification issued by CBDT and the subsequent amendment made by Finance Act, 2013 and could not have changed her view as to the ambit of said clause all of a sudden based on an obiter dicta and terming the deduction claimed and allowed as erroneous and therefore prejudicial to the Revenue. 10.The CIT ought to have appreciated that the true purport and legislative intention having being clarified by the clarificatory amendment in the said section to dispel the doubt over the tenability of said obiter dicta of the Apex Court, the disallowance by the CIT ignoring the clarified legislative intent is unreasonable and unwarranted. 11.The Commissioner of Income tax ought to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of Income Tax and in the business of bank. The return of income was filed on 29.9.2010 declaring Nil income. The return was processed u/s.143(1) of the Act and the case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued. In compliance to notice, the ld. Authorised Representative appeared on various dates and filed information. The Assessing Officer considered the submissions and material before finalization of assessment. The ld. Assessing Officer made other disallowances alongwith issue in dispute of Disallowance u/s.36(1)(viia) of the Act. The Assessing Officer found that the assessee has made provision for Bad and Doubtful debts in the books of accounts B886,39,17,850/- and also deduction u/s.36(1)(viia) was claimed considering 7.5% of Gross total income and 10% of rural advances and worked out eligible claim of B810,60,18,384/- as the deduction u/s.36(1)(viia) being on the lower side compared to the debit made in the Profit and Loss. On verification the assessee company has submitted detailed working for calculation of 10% of rural branches advances and filed details and computation specified under Rule 6ABA of the Income Tax Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Average thereof for 12 months Rule 6ABA(6) 4162,76,34,730 346,89,69,560 Deduction u/s.36(1)(viia) @10% 34,68,96,956 Since the bank has made provisions for Bad and Doubtful debts in the books of accounts including standard asset and country-wise risk. As per the provisions it cannot be part and parcel of debts and excluded the value of B6,50,57,148/- and allowed deduction as per calculation in the assessment order B162,49,74,682/- and assessee filed appeal against the order with Commissioner of Income Tax (Appeals). 4. Subsequent to the decision of Commissioner of Income Tax (Appeals), the Assessing Officer passed consequential order and the matter pending against the order of Commissioner of Income Tax (Appeals) before the Tribunal. Meanwhile, Commissioner of Income Tax found on perusal of records of assessment found the assessee claimed deduction u/s.36(1)(viia) B810,60,18,384/-. Further, the Assessing Officer by verifying the claim has restricted the deduction u/s.36(1)(viia) to B162,49,74,682/- by order u/s.143(3) dated 31.01.2013 were the Assessing Officer reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially on the basis of clause (viia) and again on the basis of actual write -off under clause (vii) Proviso to clause (vii) refers only to rural advances as clause (viia) applies only to rural advances. In respect of bad debts actually written off in the accounts relating to urban advances ,the assessee is entitled to the general deduction u/s 36(1)(vii).This deduction is not affected by the proviso to clause (vii a) because it was not to be allowed on provision basis. Thus, with respect to urban debts as well as rural debts there is no scope to allow double deduction . As per the directions and decision of Apex Court the assessee bank is eligible to claim deduction u/s.36(1)(viia) to the extent of provisions made by it in the Books of Accounts of the assessee bank in respect of bad and doubtful debts pertaining to rural branches. The Commissioner of Income Tax found that the Assessing Officer has not called for details regarding provisions made for rural debts and non rural debts included in the provision in the Books of Accounts pertaining to bad debts B886,39,17,650/- in the light of the decision of Supreme Court in the case Catholic Syrian Bank (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it, retrospective operation shall not be given to a statute and similarly as held by Jurisdictional High Court in the case of Varadharaja Theaters 250 ITR 523 and also Finance Bill 2013 is very clear that amendment to Sec. 36(1)(vii) will take effect from 1st April, 2014 and shall apply from assessment year 2014-2015 onwards. Further, Explanations to Sec.36(1)(vii) of the Act is very clear that this is not retrospective and also clarification was sought in Finance Bill, 2013 to substantive with the provision is prospective but the provisions of law has a legislative intention and explanations are clear that they are prospective in nature and cannot be applied prior to 01.04.2014. The assessee s contention and objections are rejected by the Commissioner of Income Tax. Similar view was taken in several decisions relying on the ratio of Catholic Syrian Bank (supra) much after insertion of Sec. 36(1)(vii) of the Act and the High Court of Kerala in the case of South India Bank Ltd vs. CIT 223 Taxman 260 where the substantial question of law was raised on deciding the issue of write off bad debts . Whether on the facts and in the circumstances of the case the Tribunal is correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act for both rural debts and urban debts in a consolidated account. The assessee has been claiming double deduction for past several years by not set off bad debts written off against the provisions made to Sec.36(1)(vii) of the Act. Hence, both conditions u/s.36(1)(viia) for the provisions made and Sec. 36(1)(vii) on actual write off is being claimed by the assessee on the same bad debt. So there is no provision to allow double deduction for bad debts. Further as per chart no.1 at page 14 the assessee has been claiming deduction u/s.36(1)(viia) of the Act in respect of provisions made for bad debts of both rural and non rural branches. 5. The next contention of the assessee that assessment order is not erroneous. On the issue of validity of proceedings, the ld. Commissioner of Income Tax has relied on the decision of Apex Court in the case of Malabar Industrial Co. Ltd vs. CIT 243 ITR 83, it has been held that CIT within his jurisdiction to set aside the order if it is passed without examination of the relevant details and provision of law. On the decision of Apex Court also the objection of the assessee are not acceptable. Finally alternate contention of the assessee being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ITA No.1803/Mds/2011 in assessee s own case for earlier years allowed deduction. The assessee s alternative claim of Vijaya Bank at para 6. The provisions require in respect of advances and also circular of CBDT dated 24.01.2013 at para no.11.1 11.6 were referred. The contention being Catholic Syrian Bank decision is not applicable to the present assessment and therefore the order of the Commissioner of Income Tax is bad in law. 7. Contra, the ld. Departmental Representative submitted judicial decisions, circulars and notification and read the provisions of Sec. 36(1)(viia) of the Act on the issue of foreign bank was also considered. The misconception of the bank on that provision of bad debts as per Sec. 36(1)(viia) of the Act. The decision of Catholic Syrian Bank is on the basis of Sec.36(1)(vii) and Sec.36(1)(viia) for the purpose of rural branches only. The Apex Court has considered the rural advances benefit given without writing off in the books of accounts and also submitted the relevant para of the decisions relied and Finance Act and prayed for dismissal of the appeals. 8. We heard the rival submissions and perused the material on record and judicial decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36(1)(vii), while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). In case of rural advances which are covered by clause (viia), there would be no double deduction. The proviso, in its terms, limits its application to the case of a bank to which clause (viia) applies. Indisputably, clause (viia) applies only to rural advances. If the amount of bad debt actually written off in the accounts of the bank represents only debt arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). A statue is not normally construed to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. Proviso to sec 36(1)(vii) would not permit benefit of double deduction, operating with reference to 'rural' loans, while under Section 36(1)(vii), the assessee would be entitled to general deduction upon an account having become bad debt an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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