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TMI Blog2016 (5) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals) VII, Chennai dated 03.6.2014 for the above assessment years passed u/s.143(3) r.w.s. 147 and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). Since the issue in these two appeals is common in nature, hence these appeals are combined, heard together, and disposed of by a common order for the sake of convenience. 2. The grounds of appeal raised by the assessee are under :- 2. The Learned Commissioner of Income Tax (Appeals) erred in dismissing the appeal without distinguishing the ratios relied by the Appellant laid in the decision of Catholic Syrian Bank vs CIT decided by Supreme court reported in 18 taxmann.com 282. 2.1 The Ld CIT(A) ought to have considered section 36(1 )(vii) and Section 36(1 )(viia) are independent and cannot be intermingled or read into each other. . 2.2 The Ld CIT(A)grossly erred in not considering the word Deduction appearing in the section 36(viia) implies that an expenditure which an Assessee may subtract from Gross Total Income to determine taxable income 2.3 The Ld CIT(A) failed to appreciate and consider provision already made by the Appellant in the books of account t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Sec. 36(1)(viia) of the Act the assessee bank should make provision equal to amount claimed as deduction in accounts for claiming deduction, further on perusal of the computation of income, the bank has not provided provision of ₹ 2.13 crores in the financial accounts for claiming deduction. The ld. Assessing Officer on verification of books of accounts and provisions of law and conclude that bank has debited ₹ 95,50,416/- as provision for Bad and doubtful debts in the books of accounts but at the time of filing of return of income made an disallowance of ₹ 35,50,416/- since the balance provision was not disallowed, the Assessing Officer made addition of ₹ 60,00,000/- to the retuned income alongwith ₹ 2,13,92,491/- claimed as deduction u/s.36(1)(viia) of the Act on adhoc basis at 7.5% of gross total income as no satisfactory explanations was furnished in hearing proceedings, assessed total income of ₹ 29,12,33,214/- and raised demand. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). 5. The ld. Authorised Representative contested the action of the Assessing Officer in denying the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner: 5.2 The Finance Act 2007 extended the benefit of deduction u/s. 36(1)(viia) of the Act to a co-operative bank. The assessee being a co- operative bank is therefore entitled for the deduction u/s 36( l)(viia) of the Act. The deduction is restrictred to 7.5% of the total income computed before making any deduction under this clause and Chapter VIA produced he assessee makes a provision for bad and doubtful debts to the extent required. In this, case, the assessee is eligible for deduction of an amount not exceeding 7.5% of the total income ( in this case upto Rs. 7,61,10,421/- ) provided provision to the same amount is made in this accounts. In the assessee s case, provisions was made only to the extent of Rs. 1,06,63,566/- and the same was allowed. The assessee s further claim of Rs. 6,54,46,855/- was negative by the Assessing Officer. The assessee contended that the provision has been debited in the books of accounts and hence the same IS to be allowed as deduction and reliance was placed on the case of SBP vs CIT (2005) 272 ITR 54 (P H). The con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, this Court went on to state how these provisions operate in the case of a Non Banking Financial Corporations (NBFC) vis-A-vis bank covered under Section 36(1)(viia). The Court held as under:- 37. To understand the above dichotomy, one must understand how to write off. If an assessee debits an amount of doubtful debt to the P L account and credits the asset account like sundry debtor's account, it would constitute a write-off of an actual debt. However, if an assessee debits provision for doubtful debt to the P L account and makes a corresponding credit to the current liabilities and provisions on the liabilities side of the balance sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after 1-4-1989. ** ** ** 58. Section 36(1)(vii) provides for a deduction in the computation of taxable profits for the debt established to be a bad debt. Section 36(1)(viia) provides for a deduction in respect of any provision for bad and doubtful debt made by a scheduled bank or non-scheduled bank in relation to advances made by its rural branches, of a sum not exceeding a specified percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per ratio laid down in Catholic Syrian Bank (supra) and in assessee s own case the decisions has been considered. Basically Co-operative bank is eligible for deduction at 7.5% of gross total income. The ld. Counsel filed paper book and explained applicability of ratio of Apex Court decision and other decisions of Tribunal in the case of Oriental Bank of Commerce and Citibank NA (supra) and assessee s own case of assessment year 2009- 2010 and produced copy of computation of income. On perusal of the computation of income for the assessment year 2008-09, the assessee has disallowed provision for bad debts and doubtful debts ₹ 35,50,416/- and also claimed deduction u/s.36(1)(viia) but based on the ratio laid down in State Bank of Patiala (Supra) provision entries has to be passed in the books of accounts for the claims. The ld. Authorised Representative demonstrated the legal aspect of provision for Bad debts and non performing assets and deductions claimed by the bank. Considering the activities of the bank and the provision of NPA and provisions of Bad debts, the judicial decisions and claim u/s.36(1)(viia) of the Act and the decision of Apex Court, the assessee claim of B ..... 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