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TMI Blog2016 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 - Shri B. Ramakotaiah, Accountant Member And Shri Laliet Kumar, Judicial Member For the Revenue : Smt. S. Narasamma (D.R.) For the Assessee : Shri Laxminiwas Sharma (AR) ORDER Per Laliet Kumar, J. M. This is the appeal filed by the Revenue arises against the order dated 25/01/2016 passed by the ld. CIT(A)-3, Hyderabad for the A.Y. 2013-14, wherein the Revenue has raised the following grounds: 1. The ld. CIT(A) erred both in law and on facts of the case 2. The ld. CIT(A) erred in allowing separate deduction U/s 36(1)(vii) of ₹ 337,30,00,000/- when the provision U/s 36(1)(viia) is inclusive of urban advances, which amounts to double deduction and not permissible in law. 3. The ld. CIT(A) oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tirely rests on this undisputed fact that provision U/s 36(1)(viia) is specific and relates only to the rural advances. A reference is made to para 4.13 of this order wherein the Hon ble Supreme Court clearly held that clause (viia) in Sub Section 1 of Section 36 was inserted to promote the rural banking and to assist the scheduled commercial banks in making adequate provisions against the risks of their rural advances. The Hon ble Supreme Court expressly stated that the deduction is limited to a specific percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules. Therefore, what follows is that the Hon ble Supreme Court relied on the facts of Catholic Syrina Bank in which case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Relevant paragraph of the order of ITAT relied upon by the ld CIT(A) is as under:- 39. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. On careful analysis of section u/s 36(1)(viia) of the Act, it is very much clear that assessee being a schedule bank can claim deduction in respect of provision for bad and doubtful debts made in its books of account, which does not exceed the aggregate of amount not exceeding 7.5% of the total income computed before making any deduction u/s 36(1)(viia) and Chapter-VIA and an amount not exceeding 10% of the aggregate average advances made by rural branches of such bank computed in terms with the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of any provision for bad and doubtful debts made by a scheduled bank in relation to the advances made by its rural branches. At this stage the PBDD had to be linked to the advances made by Bank s rural branches. At stage-II of Sec.36(1)(viia), the deduction while computing the taxable profits was allowed of an amount not exceeding ten per cent of the total income (computed before making any deduction under the proposed new provision) or two per cent of the aggregate average advances made by rural branches of such banks, whichever is higher. At this stage also the PBDD had to be created and debited to the profit and loss account but was not required to be done in relation to advances made by Bank s rural branches and can be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed originally, now it is 10%) of the aggregate average advances made by rural branches of the banks concerned. This will imply that all scheduled or non-scheduled banks having rural branches would be allowed the deduction (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) a further deduction upto 5% of their total income in respect of provision for bad and doubtful debts. The further deduction of 5% of total income was available to banks which did not have rural branches. 36. Therefore after 1.4.1987, scheduled or non-scheduled banks having rural branches were allowed deduction., (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) Schedule or non-scheduled banks whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject to the permissible upper limits referred to above, the deduction has to be allowed to the Assessee. The question of bifurcating the PBDD as one relating to rural advances and other advances (Non-rural advances) does not arise for consideration. As can be seen from the aforesaid observation of the Bangalore Bench, it has been held in clear terms that actual provision made by assessee on account of provision for bad and doubtful debt irrespective of the fact whether it is rural or non-rural, has to be seen while examining assessee s claim of deduction u/s 36(1)(viia). If the bank does not have rural branch, it will not get deduction relating to 10% of aggregate average advances made by rural branches. However, it will be eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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