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TMI Blog2020 (11) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... re of profit after tax and reduced Other Incomes while computing the deductions - CIT-A deleted addition - HELD THAT:- There is no dispute that the Assessee was an eligible entity and that to the extent of 20% of the profits derived from the eligible business, the Assessee was entitled to claim deduction u/s.36(1)(viii). A perusal of the CIT(A) order shows that the relief allowed by the CIT(A) to the assessee is based on the decision of Karnataka State Finance Corporation [ 1985 (10) TMI 5 - KARNATAKA HIGH COURT ] - CIT(A) has not given a factual finding as to how the deduction claimed by the Assessee is in accordance with the statutory provisions - since no finding has been given by the CIT(A) as to the basis on which the relief was given by the CIT(A), we deem it fit and proper to set aside the order of the CIT(A) and remand to the AO for fresh consideration the question of proper deduction to be allowed u/s 36(1)((viii) - Appeal by the revenue is allowed for statistical purposes. - Shri N.V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Appellant : Shri Pradeep Kumar, CIT(DR)(ITAT), Bengaluru. For the Respondent : Shri S.V. Ravishankar, Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (viia) of Sec.36(1) of the Act towards provisions for bad and doubtful debts; (ii) 10% of the Aggregate average advances made by rural branches of the bank computed in the manner prescribed. The Assessee claimed a sum of ₹ 13,34,67,416 towards provision for bad and doubtful debts @7.5% of the total income and a sum of ₹ 367,91,99,569/- towards provision for bad and doubtful debts in respect of aggregate average advances made by the Assessee s rural branches, in all an aggregate sum of ₹ 381,26,66,985/-. U/S.36(2)(v) of the Act the condition for claiming deduction u/s.36(1)(viia) of the Act is that the sum claimed as deduction should be debited to the provision for bad and doubtful debts account. There is no discussion in the order of assessment as to whether the sum claimed as deduction u/s.36(1)(viia) of the Act had been debited to the provision for bad and doubtful debts account. The question that the AO ought to have analysed is as to whether the assessee can claim deduction u/s.36(1)(viia) of the Act without debiting the same to the provision for bad and doubtful debts account. 5. The AO however proceeded to discuss the provisions of Sec.36(1)(vii) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Vs. DCIT (2014) 150 ITD 0103 (Bangalore), wherein the Hon ble ITAT Bangalore Bench preferred to follow the view taken by the Hon ble Punjab Haryana High Court in the case of State Bank of Patiala (supra) rather than the decision of the Syndicate Bank (supra) of the Bangalore Bench relied upon by the learned CIT(A) in giving relief to the Assessee on this issue. The ld. counsel for the assesses submitted that the decision of the Bangalore Bench of ITAT in the case of Syndicate Bank (Supra) should be followed by the Tribunal in preference to the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra)and in this regard submitted that the decision of co-ordinate Bench of the Tribunal should be followed in preference to the decision of non jurisdictional High Court decision. In this regard, the ld counsel for the assessee placed reliance on the decision of the Hon ble Karnataka High Court in the case of Patil Vijayakumar Others Vs. Union of India 151 ITR 48 (Kar). 8. We have considered the rival submission. The provisions of Section 36(1)(viia)(a) of the Act lays down as follows: viia) in respect of any provision for bad and doubtful debts ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra) and held that the decision rendered by the Hon ble High Court has to be followed. The above decision though of a non jurisdiction High Court was followed as the said decision of the Hon ble High Court was rendered after the decision in the case of Syndicate Bank 78 ITD 103 (Bang.). The Tribunal held that Judicial discipline demands that the Tribunal should follow the later decision which has considered both the decisions on the issue. The Tribunal following the said decision held deduction on account of Provision for Bad and Doubtful Debts u/s.36(1)(viia) of the Act has to be allowed only to the extent such provision is actually debited in the Profit Loss Account by the Assessee for the relevant previous year. We therefore respectfully following the decision of the Tribunal in the case of Canara Bank (supra), allow Gr.No.2 to 4 raised by the Revenue and hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clause shall be made in respect of such excess. Explanation.-In this clause,- ( a ) specified entity means,- ( i ) a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956)71; ( ii ) a financial corporation which is a public sector company; ( iii ) a banking company; ( iv ) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; ( v ) a housing finance company; and ( vi ) any other financial corporation including a public company; ( b ) eligible business means,- 72 [(i) in respect of the specified entity referred to in sub-clause (i) or subclause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for- ( A ) industrial or agricultural development; ( B ) development of infrastructure facility in India; or ( C ) development of housing in India;] ( ii ) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and ( iii ) in respect of the specified entity referred to in sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6481.52 crores Eligible advances as on 31.03.2014 as per list enclosed ₹ 2123.29 crores % of eligible advance to total advance 32.76% Total income as worked out above (20.00% of ₹ 189.48 crores) ₹ 37.90 crores Profit from eligible business, at 32.76% of above ₹ 12.41 crores Reserve created and deduction claimed ₹ 11.52 crores 12. But the learned assessing officer worked out the deduction u/s 36(i)(viii) of the Act in the following manner and allowed the claim of the appellant to extent of ₹ 4,54,37,000 :- Total Advances made ₹ 6481,52,00,000/- Eligible Advance ₹ 2123,29,00,000/- % of Eligible advances over Total Advances 32.76% Income considered for deduction u/s 36(1)(viii) Gross Income ₹ 1033,03,34,000/- Less Other income ₹ 70,67,86,000/- Total income ₹ 962,35,48,000/- Less expenses ₹ 893,00,59,000/- Net Profit ₹ 69,34,89,000/- 32.76% of Net Profit ₹ 22,71,86,000/- 20% of ₹ 22,71,86,000/- ₹ 4,54,37,000/- 13. It was the plea of the Assessee before CIT(A) that the AO has erred in restricting the deduction under section 36(i)(viii) of the Act to ₹ 4,54,37,000.00 against deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in section 5 computed in the manner laid down in this Act. The only exception which has to be made u/s. 36(1)(viii) is that, the total income for the purpose of this section must be the one computed before making any deduction under chapter-VIA. The assessee has calculated the deduction u/s. 36(1)(viii) based on the above decision which has been worked out by the AO in the case of Karnataka High Court. 23. In the very same case i.e. the assessee, my predecessor the CIT (Appeals), Hubli for the AY 2008-09 has accepted the working made by the assessee about the deduction u/s. 36(1)(viii) to be made. 24. Since the AO for the present AY has not given his reasons as to why he is not agreeing with the assessee's calculation of deduction to be given u/s. 36(1)(viii) , and the assessee has given its working based on the decision of the jurisdictional High Court and also other decisions, and my predecessor CIT(A) Hubli has accepted the said calculation for the assessment year 2008-09 in the very same case, it is held that, the assessee's working of deduction u/s. 36(1)(viii) of ₹ 11.52cr is found to be in order and not ₹ 4,54,37,000/-. In the result the disallowance ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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