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TMI Blog2024 (9) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT PUNE] wherein it was held that a co-operative bank is entitled to claim deduction of bad debts provided in first part of section 36(1)(viia)(a) being 7.5 per cent of total income even in absence of rural branches. Actual provision made in the books by the Assessee on account of provision for bad and doubtful debts (PBDD) (irrespective of whether it is rural or non-rural) has to be seen. To the extent PBDD is so created, then subject to the permissible upper limits referred in section 36(1)(viia) (a), the deduction has to be allowed to the Assessee. For availing the benefit of 7.5% (present limit 8.5%) of total income, there is no condition that it should be in respect of any rural branches. All types of banks described under sub-clause (a) of clause (viia) are entitled to seek deduction of an amount not exceeding 7.5% (present limit 8.5%) of total income and only condition is that there should be provision for bad and doubtful debts in the books of account. Based on these facts and circumstances, we delete the addition made by the assessing officer and allow the appeal of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... t have any rural advances, this limit is not applicable on assessee, while calculating the amount of deduction u/s 36(1)(viia). Plain text of section 36/1) viial is as follows……. Please also note that during the year assessee had incurred bad debts of Rs. 50,44,149.48 which would otherwise have been allowable to assessee u/s 36(1)(vii) being actual bad debt written off during the year. As assessee has claimed deduction of Rs. 20,38,284/- u/s 36(1)(viia), being 7.5% of total income, balance amount of Rs. 30,05,865.48 is claimed u/s 36(1)(vii) being the difference of actual bad debt incurred and deduction u/s 36 (1)(viia). Hence, effectively, there is no loss to the revenue on claiming the deduction u/s 36 (1) (viia). 6.3 Another angle to this issue is that, the Hon Supreme Court in the case of Catholic Syrian bank has held as under. The gist of which is given below The Supreme Court had to consider whether a bank was eligible to claim a deduction for bad debts u/s 36(1)(vii) in respect of its (rural & urban) advances and also claim a provision for bad and doubtful debts u/s 36(1)(viia) in respect of its rural advances in view of the Proviso to section 36(1)(vii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , though they cannot be enforced adversely against the assessee. Normally, these circulars cannot be ignored. A circular may not override of detract from the provisions of the Act but it can seek to mitigate the rigour of a particular provision for the benefit of the assessee in certain specified circumstances. So long as the circular in force, it aids the uniform and proper administration and application of the provisions of the Act (UCO Bank vs. CIT 237 ITR 889 (SC) followed) Per S. H. KAPADIA, CJI (concurring) (iii) S. 36(1) (vii) & 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields. Section 36(1)(vii) allows deduction for bad debts in respect of urban and rural debts. However, by virtue of the Proviso to s. 36(1)(vii), the deduction in respect of rural debts is limited to the extent of difference between the debt or part thereof written off in the previous year and the credit balance in the provision for bad and doubtful debts account made under section 36(1) (viia). The proviso prevents benefit of double deduction with reference to rural loans. This is in consonance with the CBDT's interpretation in the Circulars." 6.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commitments of banks regarding provision made out of income for bad and doubtful debts i.e 10% of total income of 2 is of rural advance whichever is higher there is no mention that income should be of rural advance but we have to count taxable income before this clause. d) CBDT CIRCULAR NO 421 DATED 12-06-1985 "Having regard to the increasing social commitments of banks, section 36(1)(viia) been amended to provide that in respect of any provision for bad and doubtful debt made by a scheduled bank [not being a bank approved by the Central Government for the purposes of section 36(1)(viia) or a bank incorporated by or under the laws of a country outside India) or a non- scheduled bank, 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, shall be allowed as a deduction to computing the taxable profits." e) Then in 1986 the Finance Ministry separated this clause in two parts one of 2% of rural advances and the second of 10% of total taxable income before this clause. f) Explanatory Notes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of the provision which had already been allowed under clause (viia). The proviso by and large protects the interests of the Revenue. In case of rural advances which are covered by clause (via), there would be no such double deduction. The proviso, in its terms, limits its application to the case of a bank to which clause (viia) applies. Indisputably, clause (viia) applies only to rural advances." 1) Observations and judgement by the Chief Justice of India Shri S. KAPADIA in the above Apex Court Judgement 2. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation of taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits in order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in sub-section (1) of Section 36 to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section 36(1) (viia) given above it is clear that since its inception the only intention behind is to promote rural banking. In the beginning only scheduled and non -scheduled bank are eligible for the deduction. As you have rightly, pointed out in the budget speech for 2006-07 the relevant portion which talks about the reason for removing the cooperatives from section 80P begins as "…cooperative banks like any other banks are lending institutions and should pay tax on their profits…" 6.6 Therefore in the changed position after 1/4/2007 along-with scheduled and non scheduled banks, cooperative banks are also included for deduction u/s 36(1)(viia). However this doesn't change the nature of deduction available under section 36(1)(viia). From the beginning it was for rural advances and the status quo is still maintained." 5. However, the assessing officer, rejected the contention of the assessee and the claim of the assessee of deduction u/s 36(i)(viia) of the Act, of Rs.20,38,284/- towards provision for bad and doubtful debt was disallowed. 6. Aggrieved by the order of the assessing officer (AO), the assessee carried the matter in appeal, before Ld. CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed in respect of the matters dealt with therein, in computing the income referred to in section 68 - …………… (viia) In respect of any provision for bad and doubtful debts made by - (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank [or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount not exceeding eight and one-half per cent, of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten per cent, of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner…." 9. The Ld. Counsel for the assessee stated that Finance Act, 2017, substituted rate of deduction for 7.50%, with effect from 1st April 2018, at 8.50%. In assessee's case, under consideration, the assessment year involved is the assessment year 2014-15, therefore, the deduction available, to the assessee bank, is at the rate of 7.5% and 10% as per clause (viia) of sub- section 1 of section 36 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of allowing the deduction u/s 36(1)(viia) of the Act. The ld. DR further stated that there were no rural bank branches, in the assessee's case under consideration, therefore deduction should not be allowed under section 36(1)(viia) of the Act. Besides, as per the provisions of section 36(1)(viia) of the Act, the assessee is not entitled to claim deduction, under section 36(1)(viia) of the Act. To support his arguments, Ld. Sr. DR for the Revenue, relied on the following judgements. i. Hon'ble Supreme Court in the case of ACIT Vs. Saurashtra Kutch Stock Exchange Ltd., [2008] 173 Taxman 322(SC) ii. Co-ordinate Bench of ITAT Cochin in the case of DCIT vs. Catholic Syrian Bank Ltd. iii. Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. Vs. CIT [2012]18 taxmann.com 282(SC) 11. We have considered arguments of both sides and we find that the solitary issue in appeal by assessee is, whether the presence of both rural advances and non-rural advances by a bank, is a must in order to be eligible to claim deduction towards provision for bad and doubtful debts, under section 36(1) (viia) of the Act. We note that section 36(1) (viia) of the Act, lays down upper limit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions directly on the issue, which have already been considered by the judgement of Hon'ble Supreme Court, which were relied upon by the assessing officer. During the course of hearing, the ld D.R. for the revenue, argued that no provision in profit and loss account for the year was made and hence on this ground, the impugned deduction should not be allowed and hence the matter may be remitted back to the file of the assessing officer. 14. However, we find that the assessing officer, nowhere stated that no provision in profit and loss account was claimed by the assessee, in fact, the assessing officer held that assessee has claimed the deduction, u/s 36(1)(viia) of the Act, even, ld. CIT held that assessee has claimed the deduction, u/s 36(1)(viia) of the Act. At this juncture, the ld Counsel for the assessee, argued that the ground for the disallowance made by the assessing officer could not be changed at the stage of second appeal; the assessee is in appeal on subject- matter, as per memo of appeal; the scope of appeal before the Tribunal is limited to the subject-matter of appeal only; therefore, Ld. Sr. DR for the revenue, cannot set up an altogether new case as held by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their rural advances. The Circular reads thus:-- 'Deduction in respect of provisions made for bad and doubtful debts relating to rural branches of scheduled commercial banks - Sec. 36(1)(viia) 13.1 Under s. 36(1)(viia) of the IT Act, a taxpayer carrying on business or profession is entitled to a deduction, in the computation of the taxable profits, of the amount of any debt which is established to have become bad during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debts is not allowed as a deduction in the computation of the taxable profits. 13.2 In order to promote rural banking and assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act has inserted a new cl. (viia) in sub-s. (1) of s. 36 of the IT Act to provide for a deduction, the computation of the taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debts relating to advances made by the rural branches. The deduction will be limited to 1-1/2 per cent of the aggregate average advances made by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5 of the Banking Regulation Act, 1945 (10 of 1949) which is not a scheduled bank'. 26. As explained in para 17 of the CBDT Circular No. 346, dt. 30th June, 1982, the object of the amendment was to extend the benefit of the deduction to advances by rural branches of non-scheduled commercial banks as well. Stage-II Deduction enhanced - Amendment by the Finance Act, 1985 27. For the portion beginning with the words "in respect of any provision" and ending with the words "in the prescribed manner", the following was substituted w.e.f. 1st April, 1985: "in respect of any provision for bad and doubtful debts made by a scheduled bank [not being a bank approved by the Central Government for the purposes of cl. (viiia) or a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank, an amount not exceeding ten per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) or an amount not exceeding two per cent of the aggregate average advances made by the rural branches of such banks, computed in the prescribed manner, whichever is higher." 28. Proviso to Sec.36(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o per cent of the aggregate average advances made by rural branches of such banks, which ever is higher, shall be allowed as a deduction in computing the taxable profits. 17.4 Sec. 36(1)(vii) of the Act has also been amended to provide that in the case of a bank to which s. 36(1)(viia) applies, the amount of bad and doubtful debts shall be debited to the provision for bad and doubtful debts account and that the deduction admissible under s. 36(1)(vii) shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account. 17.5 Sec. 36(2) has been amended by insertion of a new cl. (v) to provide that where a debt or a part of a debt considered bad or doubtful relates to advances made by a bank to which s. 36(1)(viia) applies, no such deduction shall be allowed unless the bank has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debt account made under cl. (viia) of s. 36(1)." Stage-III: 31. The IT (Amendment) Act, 1986 substituted the present cl. (viia) for the one as substituted by the Finance Act, 1985. These provisions came into effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005. (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A); Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent. of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to all banks including foreign banks. "Modification in respect of deduction on provision for bad and doubtful debts made by the banks. 5.1 Under the existing provisions of cl. (viia) of sub-s. (1) of s. 36 of the IT Act inserted by the Finance Act, 1979, provisions for bad and doubtful debts made by a scheduled or a non-scheduled Indian bank is allowed as deduction within prescribed limits. The limit prescribed is 10% of the total income or 2% of the aggregate average advances made by the rural branches of such banks, whichever is higher. It had been represented to the Government that the foreign banks were not entitled to any deduction under this provision and to that extent they were being discriminated against. Further, it was felt that the existing ceiling in this regard i.e. 10% of the total income or 2% of the aggregate average advances made by the rural branches of Indian banks, whichever is higher, should be modified. Accordingly, by the Amending Act, the deduction presently available under cl. (viia) of sub-s. (1) of s. 36 of the IT Act has been split into two separate provisions. One of these limits the deduction to an amount not exceeding 2% of the aggregate av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt but it was not required to be done in relation to advances made by Bank's rural branches and can be in relation to any debt. PBDD need not be in relation to rural advances but can be in relation to any advances both rural and non-rural advances. The two percent AAA made by rural branches of such banks had to be computed and the PBDD made in books has to be in relation to rural advances. The other eligible sum which can be considered for deduction u/s.36(1)(viia) of the Act viz., ten per cent of the total income (computed before making any deduction under the proposed new provision) does not require computation in relation to rural advances. Nevertheless the debit of PBDD to Profit and Loss account is necessary of the higher of the two sums to claim deduction u/s.36(1)(viia) of the Act. If the concerned bank does not have rural branches then they could not claim the deduction. Therefore the deduction was confined only to banks that had rural branches. 35. At Stage-III of the provisions of Sec.36(1)(viia) of the Act, the deduction allowed earlier was enhanced. The enhancement of the deduction was consequent to representation to the Government that the existing ceiling in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the permissible upper limits of deductions u/s.36(1)(viia) of the Act. The actual provision made in the books by the Assessee on account of PBDD (irrespective of whether it is rural or non-rural) has to be seen. To the extent PBDD is so created, then 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. 38. In the present case as far AY 03-04 is concerned, the Assessee debited in the Profit and Loss A/C. on account of PBDD in respect of rural and non- rural advances of Rs.88,30,47,000 (Rs.88,20,47,000 for non-rural advances and Rs.10,00,000 for rural advances). A sum of Rs.4,36,165 was actually written off out of the PBDD of rural advances. The Assessee wrote off a sum of Rs.88,26,10,825 as bad debts on account of non rural advances and claimed the same as deduction u/s.36(1)(vii) of the Act. The said claim for deduction was allowed by the AO. The Assessee made a claim for deduction u/s.36(1)(viia)(a) of the Act of Rs.23,80,55,247. This was rejected by the AO for the reason that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to Sec.36(1)(vii) of the Act and also Sec.36(2)(v) of the Act was of the view that the Assessee could not be allowed the deduction claimed because (i) the amount claimed as deduction on account of bad debts was not the excess available in the credit of the Provision for Bad and Doubtful Debts Account created u/s.36(1)(viia)(a) of the Act and; (ii) that u/s.36(2)(v) of the Act the amount of bad debts written off should first be debited in the Provision for Bad and Doubtful Debts Account created u/s.36(1)(viia) (a) of the Act. The stand of the Assessee was that since the claim of deduction of Bad debts made by the Assessee was u/s.36(1)(vii) of the Act and pertained to bad debts of non-rural advances, the credit balance in the PBDD account should not be looked into at all. The Hon'ble Supreme Court held: (i) The provisions of Section 36(1)(vii) and 36(1)(viia) are separate items of deduction. These are independent provisions and, therefore, cannot be intermingled or read into each other. (ii) Clear legislative intent of the relevant provisions and unambiguous language of the circulars with reference to the amendments to s. 36 demonstrate that the deduction on account of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Ltd. (supra) has to be understood in the context of its assumption that Banks would maintain separate PBDD A/C. in respect of rural branches and non- rural branches and therefore it is possible to discern PBDD as one in respect of rural branches and non-rural branches and therefore there is no basis for the assumption that Bank's would get double benefit of deduction by way of Provision for Bad and Doubtful Debts and also by way of Bad Debts written off. The following observations of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. (supra) would be relevant in this regard. '30. The scope of the proviso to cl. (vii) of s. 36(1) has to be ascertained from a cumulative reading of the provisions of cls. (vii), (viia) of s. 36(1) and cl. (v) of s. 36(2) and only shows that a double benefit in respect of the same debt is not given to a scheduled bank. A scheduled bank may have both urban and rural branches. It may give advances from both branches with separate provision accounts for each. 31. It was neither in dispute earlier, nor disputed before us, that the assessee bank is maintaining two separate accounts, one being a provision for bad and doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued in 2003, which concerns treatment of 'provisions, contingent liabilities and contingent assets'. Under the head 'Use of Provisions', cls. 53 and 54 state as under: "53. A provision should be used only for expenditures for which the provision was originally recognised. 54. Only expenditures that relate to the original provision are adjusted against it. Adjusting expenditures against a provision that was originally recognised for another purpose would conceal the impact of two different events." 35. The above clauses justify maintenance of distinct and different accounts. 36. Merely because the Department has some apprehension of the possibility of double benefit to the assessee, this would not by itself be a sufficient ground for accepting its interpretation. Furthermore, the provisions of a section have to be interpreted on their plain language and could not be interpreted on the basis of apprehension of the Department. This Court, in the case of Vijaya Bank v. CIT & [2010] 231 CTR (SC) 209, held that under the accounting practice, the accounts of the rural branches have to tally with the accounts of the head office. If the repaid amount in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for bad and doubtful debts. In other words, deduction could be claimed in respect of bad and doubtful debts subject to the terms and conditions which are provided in the Act itself. Explanation to section 36 of the Act defines the terms used in sub- clause (a) of clause (vii), wherein it was defined as non-scheduled banks, rural branches, co-operative banks and scheduled banks. The assessee before us is a co- operative bank. In the initial years, co-operative banks were entitled to the benefit of deduction under section 80P of the Act. However, the said deduction has been withdrawn by the Finance Act, 2007 w.e.f. 01.04.2007. Thereafter, the Legislature has extended the benefit of section 36(1)(viia) of the Act to co-operative banks also. Initially, only scheduled banks were entitled to the aforesaid deduction but w.e.f. 01.04.2007, the benefit has been extended to co-operative banks and they are entitled to claim the deduction on account of provision for bad and doubtful debts, subject to the condition that provision to that extent is made in the books of account. Sub-clause (a) refers to deduction of an amount not exceeding 7.5% of total income, before allowing any deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never have rural branches in India. In such scenario, the intent of the Legislature was to provide deduction to the scheduled or non-scheduled banks; first on account of rural advances and second on account of total income other than the rural advances and two different types of deductions were provided. It may be clarified herein itself that the Circular which is dated 18.07.1986 was in respect of scheduled or non-scheduled banks and extending to the foreign banks but the Co-operative banks were not included at that relevant point for the aforesaid deduction. It was only w.e.f. 01.04.2007, amendment was made to section 36(1)(viia) of the Act in respect of any provision for bad and doubtful debts. It was provided that scheduled banks or non-scheduled banks, all Co-operative banks other than primary agricultural credit society or primary co-operative agricultural and rural development banks, deduction was allowable to the extent of an amount not exceeding 7.5% of total income computed before making any deduction under Chapter VI-A and an amount not exceeding 10% of aggregate average advances made by rural branches of such banks, computed in the prescribed manner. The scope of said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduction of an amount not exceeding 7.5% of the total income (computed before making any deduction under this clause and chapter VIA). Section one refers to deduction of an amount not exceeding10% of the aggregate average advances made by rule branches of such bank while computing in the prescribed manner. So far as benefit of 7.5% of the total income, there is no condition that it should be in respect of any rural branch. All types of banks described under sub claque (a) of clause (viia) are entitled to seek deduction of an amount of exceeding 7.5% of the total income. Only condition is there should be a provision for bad and doubtful debts………… 10 & 11.** ** ** 12 So far as sub-clause (a) of clause (viia) to Section 36(1), two types of deductions are provided to non-scheduled bank, a scheduled bank and a co- operative bank other than a primary agricultural society, etc. It is to be noted that appellants/assessees are not primary agricultural credit co- operative society or other kind of bank so as to go out of the definition of co- operative bank under sub-clause (a) to clause (viia) of Section 36(1). No doubt, Explanation (ia) to Section 36(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of the Act. The Hon'ble High Court clearly held that reading the definition of non-scheduled bank along with meaning of rural branch under Explanation to section 36(1) of the Act clearly indicate that co-operative bank also falls under the category of non-scheduled bank for the purpose of said section. It further goes on to hold that reading the entire section along with Explanation would mean two kinds of deductions referred to in section would be allowed to all those banks only if they satisfy the terms and conditions referred to in the provision. Since the assessee bank in the said case did not have any rural branches, it was held that the benefit of deduction of 10% of aggregate average advances was not available to them. Hence, appeal of Revenue was decided in their favour i.e. on the second issue of deduction in respect of rural branches. 19. The Cochin Bench of Tribunal in a subsequent decision relating to assessment year 2010-11 in the case of Kodungallur Town Co-Op. Bank Ltd. (supra) again decided the aforesaid issue of claim of deduction under section 36(1)(vii) of the Act, especially in view of the ratio laid down by the Hon'ble Supreme Court in Catholic Sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment dated 03.04.2014 and it was held that invoking of jurisdiction by the Commissioner was held to be not justified, relying on the ratio laid down by the Apex Court in Catholic Syrian Bank Ltd., which is dated 17.02.2012. 21. The Bangalore Bench of Tribunal in Dy. CIT v. ING Vysya Bank Ltd. [2014] 149 ITD 611/92 taxmann.com 303 vide its order dated 25.10.2013 had held vide para 32 that the object of substitution of clause (viia) as explained in para 5 of CBDT Circular No.464, dated 18.07.1986 was to give separate deduction. The first was in respect of rural advances and second for provision for bad and doubtful debts in general. 22. Similar proposition has been laid down by the Hyderabad Bench of Tribunal in State Bank of Hyderabad v. Dy. CIT [2015] 63 taxmann.com 322 (Hyderabad- Trib.), order dated 14.08.2015 and also by Visakhapatnam Bench of Tribunal in Chaitanya Godavari Grameena Bank (supra), judgment dated 04.05.2016). 23. The learned Authorized Representative for the assessee has pointed out before us that no other decision of any Hon'ble High Court, whether in favour or contrary, is available. The learned Departmental Representative for the Revenue has not poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships was whether the Tribunal, while sitting in Bombay, was justified in following the Madras High Court decision holding the relevant section as unconstitutional Hon'ble High Court concluded as follows: "It should not be overlooked that Income Tax Act is an all India statute, and if a Tribunal in Madras has to proceed on the footing that Section 140A(3) was non existent, the order of penalty under that section cannot be imposed by any authority under the Act. Until a contrary decision is given by any other competent High Court, which is binding on the Tribunal in the State of Bombay (as it then was), it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land...an authority like Tribunal has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision on that issue by any other High Court "' 26. The Tribunal had also referred to the decision of Hon'ble Bombay High Court in CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727, wherein the limited question was whether or not the decision of one of the High Court was bind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdictional High Court, but the only decision available on the said issue squarely binds the Tribunal and hence, applying the said ratio, we hold that the assessee is entitled to the claim of deduction under section 36(1)(viia) of the Act to the extent of 7.5% of total income. The assessee co-operative bank do not have any rural branches, hence is not entitled to the second part claim of 10% of advances made by rural branches. The deduction is allowable with a rider to satisfy the provisions of said section i.e. making a provision to that extent in the books of account. The first issue which is raised in the case of different co-operative banks stands decided in favour of assessee." 17. From the above judgments, it is vivid that actual provision made in the books by the Assessee on account of provision for bad and doubtful debts (PBDD) (irrespective of whether it is rural or non-rural) has to be seen. To the extent PBDD is so created, then subject to the permissible upper limits referred in section 36(1)(viia) (a), the deduction has to be allowed to the Assessee. For availing the benefit of 7.5% (present limit 8.5%) of total income, there is no condition that it should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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