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TMI Blog2020 (7) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the purpose of working out the disallowance u/s.14A of the Act read with Rule 8D(2)(iii) of the Rules. Deduction for provision for bad and doubtful debts u/s.36(1)(viia) - HELD THAT:- We find that the ld. CIT(A) in principle had accepted to the fact that assessee would be entitled for deduction u/s.36(1)(viia) of the Act which would be restricted to 7.5% of total business income plus 10% of average rural advances. This is the benefit provided to the assessee in the statute which had to be duly provided to the assessee. The ld. AO is hence directed to apply this statutory provision and consider the claim of deduction u/s.36(1)(viia) of the act for the year under consideration after suitable verification of the details provided by the assessee. Claim of deduction towards bad debts written off u/s.36(1)(vii) - HELD THAT:- As opening credit balance brought forward as on 1st April of the relevant accounting year in provision for bad and doubtful account is more than the bad debts written off during the year, the appellant will not be entitled to any deduction u/s.36(1)(viia) in the above manner. The AO after examining the balance in provision for bad and doubtful debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided in Rule 8D(2) of the Rules. Accordingly, ld. AO proceeded to compute the disallowance as per Rule 8D(2) of the rules as under:- (i) Under Rule 8D(2)(ii) - ₹ 24.69 Crores (ii) Under Rule 8D(2)(iii) - ₹ 3.30 Crores ₹ 27.99 Crores 3.2. The ld. AO reduced the amount already disallowed by the assessee u/s.14A amounting to ₹ 32,56,564/- and made disallowance thereon in the assessment to the extent of ₹ 27,66,43,436/-. The ld. CIT(A) deleted the disallowance of interest made under second limb of Rule 8D(2) of the Rules, against which action, the revenue is not in appeal before us. Hence, what is left to be adjudicated is only disallowance made under third limb of Rule 8D(2) of the Rules. 3.3. We find that the ld. CIT(A) with regard to disallowance made under third limb of Rule 8D(2) of the rules is concerned, held as under:- (a) Securities held as stock in trade should not be reckoned for the purpose of making disallowance u/s.14A of the Act. (b) Strategic investments made by the assessee should be excluded fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestments held as stock in trade should not be considered for the purpose of working of disallowance u/s.14A of the Act irrespective of the fact whether exempt income was derived from such investments or not. (b) Strategic investments held by the assessee which had yielded exempt income alone are to be considered for the purpose of working out the disallowance u/s.14A of the Act read with Rule 8D(2)(iii) of the Rules. Accordingly, the ground No.II raised by the assessee is disposed off as per the directions given hereinabove. 4. The ground NO.III raised by the assessee is with regard to claim of deduction for provision for bad and doubtful debts u/s.36(1)(viia) of the Act. 4.1. We have heard rival submissions and perused the materials available on record. We find from the computation of total income in the A.Y.2011-12 enclosed in page 149 of the paper book filed before us by the assessee, assessee had claimed deduction u/s.36(1)(viia) of the Act towards provision for bad and doubtful debts as under:- (a) 7.5% of total business income before deduction u/s.36(1)(viia) - ₹ 516,59,81,934/- (b) 10% of average rur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten off u/s.36(1)(vii) be reduced by ₹ 2,64,21,552/-, from the original amount claimed and allowed of ₹ 732,98,97,520/-. This is on the basis that the difference amount pertains to bad debts written off relating to rural advances which probably the appellant does not want to claim because the credit balance in the provision for bad and doubtful debts account u/s.36(1)(viia) is more than the said write off. However, no details of the credit balance in the Provision, account u/s.36(1)(via) has been filed by the appellant. 8.8. I have already held in the earlier para that the amendment made by finance Act, 2013 in inserting Explanation 2 is only a clarificatory amendment for removal of doubt and will have application for all pending proceedings including the case at hand. Therefore, the balance in provision account u/s.36(1)(viia) has to be seen for both rural and non rural branches. The claim of bad debts written off can be allowed only if it exceeds the credit balance in the provision of bad and doubtful debts made u/s.36(i)(viia) and for this purpose, the provision account has to be considered for both rural and non rural debts. Therefore, the appellant withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count credited under section 36(1)(viia) of the Act. The balance for this purpose will be the opening credit balance i.e. the opening credit balance brought forward as on 1st April of the relevant accounting year. (Underlining provided by us) 6.1. Hence the direction of the ld. CIT(A) in Para 8.8. as reproduced above requires to be modified. The relevant operative portion of the said order of the ld. CIT(A) in para 8.8 shall have to be read as under:- If, however, the opening credit balance brought forward as on 1st April of the relevant accounting year in provision for bad and doubtful account is more than the bad debts written off during the year, the appellant will not be entitled to any deduction u/s.36(1)(viia) in the above manner. The AO after examining the balance in provision for bad and doubtful debts account 36(1)(viia) shall allow deduction of bad debts written off only if it exceeds the credit balance in the provision account as explained above. 6.2. In our considered opinion, this modification in order of ld. CIT(A) suggested as above would meet the ends of justice to the assessee and to the first proviso u/s.36(1)(vii) and the CBDT Instruction No.17/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order beyond 90 days from the date of conclusion of hearing by excluding the days for which the lockdown announced by the Government was in force. The relevant observations of this tribunal in the said binding precedent are as under:- 7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following manners :- (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c ) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon‟ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown . Hon‟ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present situation Hon‟ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made time- bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly . The extraordinary steps taken suo motu by Hon‟ble jurisdictional High Court and Hon‟ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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