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TMI Blog2017 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 56 - ITAT DELHI]. We, therefore, considering the totality of the facts as discussed hereinabove, do not see any valid ground to interfere with the findings given by the learned Commissioner of Income-tax (Appeals). - Decided against revenue. - I. T. A. No. 4090/Delhi/2013 - - - Dated:- 14-7-2017 - N. K. Saini (Accountant Member) And Beena Pillai (Judicial Member) For the Appellant : Paramita Tripathy, Commissioner of Income-tax-Departmental representative For the Respondent : Piyush Kaushik, Advocate ORDER N. K. Saini (Accountant Member) 1. This is an appeal by the Department against the order dated April 17, 2013 of the learned Commissioner of Income-tax (Appeals), Bareilly. 2. The following grounds have been raised in this appeal : 1. In the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in allowing the relief to the assessee on the issue of deduction under section 36(1)(viia) by placing reliance on the order of the hon'ble Supreme Court in the case of Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 (SC) ; [2010] 228 CTR (SC) 440 which is not relevant to the issue under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act at ₹ 105,69,80,000 which was 10 per cent. of the aggregate rural advances of the bank but the assessee had claimed ₹ 5,45,49,000 as provision for bad and doubtful debts in the profit and loss account. He asked the assessee to answer the following queries : 1. Whether all stake holders of your bank have been informed about the loss claimed by you in your books as a result of allowance of deduction under section 36(1)(viia) of the Income-tax Act, 1961? 2. Whether the balance-sheet has been revised as per claim made under section 36(1)(viia) ? 3. As a result of this claim, this year and as well as in the next 2-3 years will result in of wiping out the reserve surplus with your bank. Whether this particular issue has been conveyed to the Reserve Bank of India. Reduction in surplus will reduce the net worth of the bank and will affect its activities in future. 4. Whether this issue has been put forward by the auditors of the bank infront of board of directors. 5. The last and important point, which I want to convey is that the case law which has been quoted by your authorised representative i.e. Syndicate Bank v. Deputy CIT [2001] 78 ITD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the statute irrespective of the quantum provided by the assessee in its accounts towards provision for bad and doubtful debts. The above findings are quite specific and cover the issue under consideration in all respects. How such findings can be said to be in a 'passing phrase' ? Further, ignoring the findings of the Income-tax Appellate Tribunal calling the same to be in a 'passing phrase' would tent amount to contempt of court unless, of course, the contrary is established by law. Moreover, these findings find support from the verdict of the Kerala High Court. 6. The reliance was placed on the following case law : South Indian Bank Ltd. v. CIT [2003] 262 ITR 579 (Ker) Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 (SC) ; [2010] 228 CTR (SC) 440. 7. It was further submitted as under : 3. You have relied upon the judgment of the hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala v. CIT which, according to you restricts the deduction under section 36(1)(viia) to the amount of reserve created in the books of account. In this connection, reference is invited to the judgment of the hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 36(1) (viia) and section 43D of the Income-tax Act, 1961 . It basically brings out the fact that non- banking financial companies are not allowed to get the benefits of the section 36(1)(viia) and section 43D of the Income-tax Act, 1961. It does not at any place deals with the limit on which this deduction has to be restricted to. As regards, the case of State Bank of Patiala v. CIT [2005] 272 ITR 54 (P H), the ratio of the judgment directly applies to the current case of M/s. Prathama Bank, Moradabad. It concludes with the following words : We are, therefore, satisfied that the Tribunal was right in holding that since the assessee had made a provision of ₹ 1,19,36,000 for bad and doubtful debts, its claim for deduction under section 36(1)(viia) of the Act had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this court. The appeal is accordingly, dismissed No costs. 9. Accordingly, the Assessing Officer completed the assessment at business income of ₹ 73.58,65,000 and accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;is late and does not qualify for benefit of losses claimed during the year'. In this connection, it is submitted that, for the assessment year 2010-11, the Central Board of Direct Taxes had extended the due date of filing the return in the cases covered under section 44AB up to October 15, 2010 vide order under section 119 issued under F. No. 225/72/2010/IT(A-II) dated September 27, 2010. The relevant order is reproduced below : CBDT order under section 119 dated September 27, 2010 order [F. No. 225/72/2010/IT(A-II)], dated September 27, 2010 On consideration of the reports of disturbance of general life caused due to floods and heavy rains, the Central Board of Direct Taxes, in powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the due date of filing of returns of income for the assessment year 2010- 11 from September 30, 2010 to October 15, 2010. Accordingly the due date for tax audit report under section 44AB of the Income-tax Act is also extended to October 15, 2010. Apart from corporate taxpayers, the extension also applies to all other categories of taxpayers who are subjected to any other audit including a tax audit. Thus, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision for bad and doubtful debts and hence the decision of the hon'ble Kerala High Court has a direct bearing on the case of the assessee and the action of the Assessing Officer not following the said order was arbitrary and bad in law. It was stated that the Assessing Officer through a specific query pointed out to the assessee that the opening words of section 36(1)(viia) of the Act i.e. in respect of provision for bad and doubtful debts amount of deduction has got to be restricted to the amount of provision made by the assessee in the books of account. In response, the assessee submitted as under : The interpretation of the language of section 36(1)(viia) as done by you does not come out from the language used therein. On the contrary, there is no restriction of the amount of deduction under section 36(1)(viia) anywhere in the section except the restriction made in later part of the section which is a percentage of profit of the bank and a percentage of aggregate average rural advances. Thus, interpretation of section 36(1)(viia) as deduced from the language used therein is that the amount of deduction should not exceed the percentage of profit and percentage o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. in the books but claims at 15 per cent. in the computation of income after adding back, the amount of depreciation provided in the books, whether the claim for depreciation in this case would be allowed at 15 per cent. or it will be restricted to 5 per cent. only as provided in the books. The simple answer to this question is that the depreciation provided in the books at 5 per cent. will be added back and then correct depreciation at 15 per cent. will be allowed. Sir, kindly give a deep thought to this situation and consider as to whether the answer pointed out hereinabove regarding applicability of section 32(1) is correct or not. If the answer is correct, the same interpretation is to be given to the provisions of sections of section 36(1)(viia) (as language used in both the sections is identical) and the amount provided in the books to be added back and then deduction is to be allowed at prescribed percentage and if the answer given hereinabove is considered to be wrong, the reasons for the same and the basis on which the same is considered to be wrong may kindly be communicated so that the assessee may be able to explain its case. Through this illustration the issue stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there are two divergent views of two different High Courts on the same issue. In this connection, your kind attention is invited to the landmark decision of the hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) wherein the apex court has opined and observed that, 'On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in section 271(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee. Thus, in view of this judgment of the apex court, the interpretation of section 36(1)(viia) which is favourable to the assessee has got to be construed and applied. 15. The assessee submitted before the learned Commissioner of Income-tax (Appeals) that the Assessing Officer totally ignored the aforesaid arguments and did not mention a single word about this argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of provision for bad and doubtful debt made by a scheduled bank or a non-scheduled bank, an amount not exceeding a specified per cent. of the total income or a specified per cent. of the aggregate average advances made by rural branches, whichever is higher, shall be allowed as deduction in computing the taxable profits. 17. The learned Commissioner of Income-tax (Appeals) held that the assessee was entitled to claim deduction under section 36(1)(viia) of the Act at 10 per cent. in view of the decision of the hon'ble apex court and other various judicial pronouncement cited by the assessee. 18. Now the Department is in appeal. The learned Departmental representative although supported the order of the authorities below and reiterated the observations made by the Assessing Officer in the assessment order dated March 20, 2013 and further submitted that non-banking finance companies (NBFC) are not allowed to get the benefits of section 36(1)(viia) and section 43D of the Act. Therefore, the Assessing Officer was justified in disallowing the claim of the assessee for deduction under section 36(1)(viia) of the Act. It was further submitted that the Assessing Officer r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its rural branches. The said claim was disallowed by the Assessing Officer. However, the learned Commissioner of Income-tax (Appeals) allowed the claim by following the ratio laid down by the hon'ble Supreme Court in the case of Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 (SC) wherein it has been held as under : 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 of the aggregate average advances by such branches. Having regard to the increasing social commitment, section 36(1)(viia) has been amended to provide that in respect of provision for bad and doubtful debt made by a scheduled bank or a non-scheduled bank, an amount not exceeding a specified per cent. of the total income or a specified per cent. of the aggregate average advances made by rural branches, whichever is higher, shall be allowed as deduction in computing the taxable profits. 21. It is also an admitted fact that for the preceding year on an identical issue the learned Commissioner of Income-tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheduled commercial banks would continue to get the benefit of the write off of the irrecoverable debts under section 36(1)(vii) in addition to the benefit of deduction of the provision for bad and doubtful debts under section 36(1)(viia). 23. In the present case, the Assessing Officer himself admitted in the assessment order at page No. 3 that the assessee had claimed deduction under section 36(1)(viia) of the Act at ₹ 105,69,80,000 which is 10 per cent. of the aggregate rural advances of the bank. The aforesaid claim was allowable to the assessee as per the ratio laid down by the Hon'ble Supreme Court in the aforesaid referred to cases of Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 (SC) and Catholic Syrian Bank Ltd. v. CIT [2012] 343 ITR 270 (SC). The impugned order passed by the learned Commissioner of Income-tax (Appeals) is in consonance with the observations made by the Income-tax Appellate Tribunal F Bench, New Delhi having the same combination in the assessee's own case for the assessment year 2009-10 i.e., Prathma Bank v. CIT [2016] 52 ITR (Trib) 454 (Delhi). We, therefore, considering the totality of the facts as discussed hereinabove, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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