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TMI Blog2024 (12) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... o rural advances - HELD THAT:- As decided in [ 2022 (12) TMI 1544 - ITAT RAJKOT] in assessee's case, wherein the Tribunal passed order to allow assessee's claim under section 36(1) (viia), what is to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created, irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for doubtful debts so created, assessee is entitled for deduction subject to upper limit of deduction laid down in said section. In the case of Kodungallur Town Co-op Bank Ltd. [ 2016 (7) TMI 1413 - ITAT COCHIN] a Cooperative Bank is entitled to claim deduction of bad debts provided in first part of clause (viia) (a) of section 36(1) being 7.5 per cent of total income and same cannot be denied linking it to rural advances. Appeal of the Revenue is dismissed. - DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER For the Revenue: Shri Shramdeep Sinha, CIT.DR For the Assessee: Shri Akit Anadkat, AR ORDER PER ARJUN LAL SAINI, AM: The captioned appeal filed by the Revenue, pertaining to the Assessment Year 2017-18, is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re held by the assessing officer that assessee bank have not fulfilled the conditions as mandated in the sub -clause (b) regarding holding of the fixed assets of the predecessor bank continuously for minimum 5 years, immediately succeeding the date of reorganization and continuing of the business of the predecessor bank, for a minimum period of five years. During the assessment proceedings, the assessee submitted before the assessing officer that assessee has fulfilled the conditions mentioned in section 72AB of the Act, therefore, assessee bank is eligible to claim, carry forward of losses and claim of unabsorbed depreciation under section 72AB of the Act. The assessee has replied to the assessing officer that as per section 72AB(2)(b)(ii) of the Act, if business continues, the business of the predecessor co-operative bank, for minimum period of five year from the business re-organization and it was clarified by assessee that business of Shatabdi Mahila bank is running today also. However, according to the assessing officer, this was the first year of the reorganization and the deduction claimed is therefore in clear violation of the provision of the section 72AB of the Act, hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry forward of loss and unabsorbed depreciation, under section 72AB of the Act. The Ld. Counsel took us through the Income-tax return filed by the Satabdi Mahila Shakti Bank limited (amalgamating bank) wherein the assessee bank has claimed the loss of un-absorbed loss to the extent of Rs. 3,68,20,599/-. The Ld. Counsel also took us through the paper book at page no.7 and the Income-tax return of M/s. Satabdi Mahila Shakti Bank Limited wherein the bank has claimed the un-absorb depreciation to the tune of Rs. 10,34 626. Thus, the Ld. Counsel contended that the amalgamating bank (Satabdi Mahila Shakti Bank Limited) has shown un-absorbed depreciation and business loss in its return of income and balance sheet. Likewise, the Ld. Counsel explained that the assessee bank (Citizen Co-operative Bank), which is amalgamated bank has also shown in the computation of total income the carry forward losses and un-absorbed depreciation of Satabdi Mahila Shakti Bank Limited, due to merger to the tune of Rs. 3,78,55,225/-, which is placed at paper book at page no.8 of the assessee s paper book. Therefore, the ld Counsel for the assessee, contended that order passed by the ld CIT(A), is a speaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of reorganization is more than three-forths of the book value of the predecessor co-operative bank, by the suceeding bank. (12-19) (ii) continues the business of the predecessor co-operative bank for a minimum period of five years from the date of business reorganisation; and The suceeding bank has continued the business of predecessor bank as the Thane branch of the suceeding Co-Operative Bank. (iii) fulfils such other conditions as may be prescribed to ensure the revival of the business of the predecessor co-operative bank or to ensure that the business reorganisation is for genuine business purpose. The suceeding bank has continued the business of predecessor bank as the Thane branch of the suceeding Co-Operative Bank. 11. We note that after taking into account the factual aspect of assessee s case under consideration, we note that the assessee has fulfilled the conditions mentioned u/s 72AB of the Act and hence, the assessee is eligible to claim set-off of accumulated loss and un-absorbed depreciation. Therefore, we support the findings of the ld. CIT(A), which is reproduced below: 5.5 From a plain reading of the provisions of section 72AB, it is seen that the main c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 10,34,666/- of the predecessor entity, Shatabdi Mahila Shakti Bank Limited in the hands of the appellant to the extent it is allowable in the hands of the predecessor entity as per records, in accordance with the provisions of Section 72BA of the Act. Appellant s Ground No.2 is partly allowed. 12. We have gone through the above findings of learned CIT(A) and noted that there is no infirmity in the conclusion reached by ld. CIT (A). That being so, we decline to interfere with the order of Ld. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 13. In the result, ground No. 1 raised by the Revenue, is dismissed. 14. Ground No.2 raised by the Revenue, relates to deleting the disallowance of deduction u/s 36(1)(viia) of Rs. 32,17,825 15. Succinct facts qua the issue are that during the assessment proceedings, the assessing officer noticed that the provisions of sections 36(1)(vii) and 36(1) (viia) of the Act are distinct and independent items of deduction and operate in their respective fields. Bad debt written off relating to non-rural or urban advances are allowable in full and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubtful debts made by such entities subject to certain limits specified therein. The limit specified under section 36(1)(viia)(a) of the Income-tax Act restricts the claim of deduction for provision for bad and doubtful debts for certain banks (not incorporated outside India) and certain cooperative banks to 7.5 percent of gross total income (before deduction under this clause) of such banks and 10 percent of the aggregate average advance made by the rural branches of such banks. This limit is 5 percent of gross total income (before deduction under this clause) under sections 36(1) (viia) (b) and 36(1) (viia) (c) for a bank incorporated outside India and certain financial institutions. 11.2 Provisions of clause (vii) of sub-section (1) of section 36 of the Income-tax Act provides for deduction for bad debt actually written off as irrecoverable in the books of account of the assessee. The proviso to this clause provides that for an assessee, to which section 36(1) (viia) of the Income-tax Act applies, deduction under said clause (vii) shall be limited to the amount by which the bad debt written off exceeds the credit balance in the provision for bad and doubtful debts account made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation in clause (vii) of sub-section (1) of section 36 has been inserted stating that for the purposes of the proviso to clause (vii) of sub-section(1) of section 36 and clause (v) of sub-section (2) of section 36, only one account as referred to therein is made in respect of provision for bad and doubtful debts under clause (viia) of sub-section (1) of section 36 and such account relates to all types of advances, including advances made by rural branches. Therefore, for an assessee to which clause (viia) of sub-section (1) of section 36 applies, the amount of deduction in respect of the bad debts actually written off under clause (vii) of subsection (1) of section 36 shall be limited to the amount by which such bad debts exceeds the credit balance in the provision for bad and doubtful debts account made under clause (viia) of sub-section (1) of section 36 without any distinction between rural advances and other advances. 11.8 Applicability: - This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. 18. The ld CIT(A) noticed that the amendment referred to by the assessee, pertains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Catholic Syrian bank [2012] 18 taxmann.com 282 (SC). 9. In appeal, Ld. CIT(Appeals) allowed the assessee's appeal. In appeal, Ld. CIT(Appeals) held that the Honourable Supreme Court in the case of Catholic Syrian bank was concerned with the issue whether the assessee bank could avail of deduction under section 36(1)(vii) of the Act and under section 36(1)(viia) of the Act simultaneously, and whether these amounted to double deduction. The Ld. CIT(Appeals) held that evidently there is no requirement in section 36(1)(viia) of the Act or the judgement cited by the assessing officer in the assessment order that the deduction u/s. 36(1)(viia) is available only to banks having rural credits. While allowing the assessee's appeal, the Ld. CIT(Appeals) made the following observations: 3.3.4 Decision of Ground of Appeal No.3 Having considered the facts and circumstances of the case and rival contentions I find that the assessing officer has applied the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. which in my view is distinguishable from facts of the instant case. The Hon'ble Supreme Court in the cited case was concerned with the issue whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 322 (Hyderabad Trib.), it was held that deduction under section 36(1)(viia) cannot be restricted to extent of provision for bad and doubtful debts relating to rural advances only. In the case of Chaitanya Godavari Grameena Bank [2018] 93 taxmann.com 400 (Visakhapatnam Trib.), in order to allow assessee's claim under section 36(1) (viia), what is to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created, irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for doubtful debts so created, assessee is entitled for deduction subject to upper limit of deduction laid down in said section. In the case of Kodungallur Town Co-op Bank Ltd. [2016] 72 taxmann.com 205 (Cochin - Trib.), a Cooperative Bank is entitled to claim deduction of bad debts provided in first part of clause (viia) (a) of section 36(1) being 7.5 per cent of total income and same cannot be denied linking it to rural advances. In the case of ING Vysya Bank Ltd[2014] 42 taxmann.com 303 (Bangalore - Trib.), the ITAT held that in order to allow assessee's claim under section 36(1)(viia), what has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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