Tamilnad Mercantile Bank Ltd., Tuticorin V. DCIT, Tuticorin

CO 68/CHNY/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4062 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 20-05-2016
• Court: TRIBUNAL
• Department Lawyers: ARUN C BHARAT
• Keywords: Reasonable cause; Bad and doubtful debts; Set aside
• Section: 143(3); 143(1); 143(2); 28

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 22 97/MDS/2015 / ASSESSMENT YEAR : 20 11 - 12 & C.O. NO. 6 8 /MDS/201 6 [IN I.T.A. NO. 22 97 /MDS/201 5 ] THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I , TUTICORIN . VS. M/S. TAMILNADU MERCANTILE BANK LTD., 5 7, V.E. ROAD, TUTICORIN. [PAN: A A A C T5558K ] ( APPELLANT ) ( RESPONDENT /CROSS OBJECTOR ) ./ I.T.A.NO. 2119/MDS/2015 / ASSESSMENT YEAR : 20 11 - 12 M/S. TAMILNADU MERCANTILE BANK LTD., 57, V.E. ROAD, TUTICORIN. VS. THE DEPUTY COMMISSI ONER OF INCOME TAX, CIRCLE I, TUTICORIN. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI ARUN C. BHARAT , CIT ASSESSEE BY : SHRI S. ANANTHAN, C.A. / DATE OF HEARING : 23 . 05 .201 6 / DATE OF P RONOUNCEMENT : 20 . 0 7 .2016 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THE APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION AS WELL AS APPEAL FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 2 COMMISSIONER OF INCOME TAX (APPEALS) 1 , MA DURAI DATED 2 3 .0 9 .201 5 FOR THE ASSESSMENT YEAR 20 11 - 12 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS OUGHT TO HAVE SEEN THAT THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] R. W. RULE 6ABA RESTRICTS THE DEDUCTION ONLY TO THE RURAL BRANCHES AND HENCE OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF CLAIM MADE FOR NON - RURAL BRANCHES BY THE ASSESSING OFFICER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SCHEDULED BANK AND EN GAGED IN BANKING BUSINESS. IT FILED ITS RETURN OF INCOME ON 29.09.2011 FOR THE ASSESSMENT YEAR 2011 - 12 ADMITTING AN INCOME OF .3,52,11,48,518/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 02.08.2012. IN RESPONSE THERETO, THE ASSESSEE FILED THE DETAILS CALLED FOR AND AFTER VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE, T HE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT .3,89,60,89,322/ - AFTER MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT, A FTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 3 DECISION OF THE BANGALORE BENCHES OF THE TRIBUNAL IN THE CASE OF JCIT V. VIJAYA BANK IN I.T.A. NO. 578/B ANG /2012 FOR THE ASSESSMENT YEAR 2008 - 09 DATED 27.02.2015, THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF .37,49,40,804/ - . WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT IN RESPECT OF NON - RURAL ADVANCES, THE LD. CIT(A) DISMISSED THE GROUND SINCE THE ASSESSEE HAS NOT MADE ANY CLAIM BEFORE THE ASSESSING OFFICER. 4. ON BEING AGGRIEV ED, BOTH THE REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AGAINST THE APPEAL OF THE REVENUE TO SUPPORT THE FINDINGS AND DIRECTIONS OF THE LD. CIT(A) WITH REGARD TO THE CLAIM OF DEDUCTION UNDER S ECTION 36(1)(VIIA) OF THE ACT. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND CONSIDERED THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE . THE ASSESSEE IS A SCHEDULED BANK AS PER THE SECOND SCHEDULE OF SCHEDULED BANKS OF RESERVE BANK OF INDIA ACT, 1934. AS PER RBI GUIDELINES, THE ASSESSEE MADE PROVISIONS FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNTS AND CLAIMED DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT BY CONSIDERING THE TOTAL PRO VISION MADE IN THE BOOKS AND WITHOUT BIFURCATING THE SAME INTO RURAL AND NON - RURAL BRANCHES. BY FOLLOWING THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 4 CATHOLIC SYRIAN BANK V. CIT 343 ITR 270, THE ASSESSING OFFICER HAS HELD THAT THE CLAIM OF DE DUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS ALLOWABLE RELATING ONLY TO RURAL ADVANCES. ACCORDINGLY, THE PROVISION MADE FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHES AMOUNT TO .46,72,089/ - OUT OF THE TOTAL PROVISION OF .37,96,12,893/ - FOR THE YEAR END ED 31.03.2011 ALON E IS ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AND THE EXCESS CLAIM MADE FOR .37,49,40,804/ - WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF .37,49,40,804/ - BY OBSERVING AS UNDER: 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND PERUSED THE ASSESSMENT ORDER AND THE DECISION OF THE APEX COURT IN THE CASE OF M/S. CATHOLIC SYRIAN BANK (CITED ABOVE). SECTION 36(1)(VIIA) READS AS UNDER: - 'SECTION 36 - OTHER DEDUCTIONS THE SECTION READS AS UNDER . - OTHER DEDUCTIONS. - (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATT ERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 - 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 CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE - HALF PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS C LAUSE 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. ' I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 5 A PLAIN AND SIMPLE READING OF THE ABOVE SECTION SHOWS THAT THE DEDUCTION IS I N RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS BUT THE QUANTUM OF DEDUCTION IS DETERMINED WITH REFERENCE TO 7.5% OF THE TOTAL INCOME AND AN AMOUNT NOT EXCEEDING 10% OF AGGREGATE OF AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. FROM THE ABOVE, IT IS C LEAR THAT THE DEDUCTION IS NOT RESTRICTED TO PROVISION FOR BAD AND DOUBTFUL DEBT IN RESPECT OF RURAL BRANCHES ONLY. THE ASSESSING OFFICER HAS READ A PORTION OF THE JUDGMENT OF THE HON'BLE SUPREME COURT DIVESTING IT FROM THE CONTEXT IN WHICH SUCH LANGUAGE W AS USED AND WRONGLY HELD THAT THE DEDUCTION IS AVAILABLE ONLY IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCHES. IT IS SEEN THAT THE ASSESSING OFFICER HAS MISUNDERSTOOD THE DECISION OF THE HON'BLE SUPREME COURT AND HELD THAT D EDUCTION U/S.36(1 )(VIIA) IS ALLOWABLE ONLY TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBT IN RESPECT OF RURAL BRANCHES ONLY. A READING OF THE DECISION OF THE APEX COURT SHOWS THAT IN THAT CASE THE BANK MADE A CLAIM TOWARDS PROVISION OF RS.15,01,29,990/ - FOR BAD AND DOUBTFUL DEBTS U/S.36(1)(VIIA) AND FURTHER CLAIMED RS.12,65,95,770/ - AS DEDUCTION ON ACCOUNT OF BAD DEBTS U/S.36(1)(VII) WHICH WAS NOT ALLOWED AS IT DID NOT EXCEED THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS PER PROVISO TO SEC.36(1)(VII) OF THE ACT . ACCORDINGLY, THE ISSUE DECIDED BY THE APEX COURT WAS NOT THE SAME AS IN THE CASE OF THE APPELLANT. IN THE CASE OF THE APPELLANT, THE ISSUE IS WHETHER THE PROVISION FOR BAD AND DOUBTFUL DEBTS IS TO BE ALLOWED IN RESPECT OF ALL BRANCHES INCLUDING NON - RURAL BRANCHES OR ONLY IN RESPECT OF RURAL BRANCHES. ACCORDINGLY, THE ISSUE INVOLVED IN THIS APPEAL IS TOTALLY DIFFERENT AND THE ASSESSING OFFICER WRONGLY APPLIED THE DECISION OF THE APEX COURT TO THE FACTS OF THIS CASE. FURTHER AS RIGHTLY CONTENDED BY THE REPR ESENTATIVE, THE HON'BLE BANGALORE TRIBUNAL 'C' BENCH IN ITA NO.578/BANG/2012 AND ITA NO.653/BANG/ 2012 FOR THE ASST. YEAR 2008 - 09 BY ORDER DATED 27.02.2015 DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AFTER DULY CONSIDERING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK. IN THE ABOVE CASE, THE CIT(A) ALLOWED DEDUCTION U/S.36(1)(VIIA) AT RS.1,92,57,72,764/ - WHICH IS THE OUTER LIMIT PRESCRIBED IN SEC.36(1)(VIIA) EVEN THOUGH THE PROVISION MADE BY THE ASSESSEE WAS ONLY RS.1,00,55,67, 213/ - WHICH INCLUDED THE PROVISION FOR BAD AND DOUBTFUL DEBTS RELATING TO RURAL BRANCHES ONLY AT RS.7,45,51,455/ - . THE HON'BLE TRIBUNAL HELD THAT THE APPELLANT WAS ENTITLED TO DEDUCTION U/S.36(1)(VIIA) AT RS. 100,55,67,213/ - WHICH REPRESENTS THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN THE BOOKS OF ACCOUNTS AND NOT THE PROVISION RELATING TO RURAL BRANCHES ONLY WHICH WAS RS.7,45,51,455/ - . ACTUALLY, IN THE ABOVE CASE, THE APPELLANT MADE A I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 6 PLEA BEFORE THE HON'BLE TRIBUNAL TO ALLOW 7.5% OF THE TOTAL INCOME AND 10% OF THE AGGREGATE ADVANCES OF THE RURAL BRANCHES, WHICH WAS MORE THAN THE PROVISION MADE BY THE ASSESSEE BUT THE HON'BLE TRIBUNAL DECLINED TO ALLOW THE SAME. ACCORDINGLY, I FIND THAT THE HON'BLE BANGALORE TRIBUNAL HAS CONSIDERED THE EXACT ISSUE INVO LVED IN THIS APPEAL (VIZ) WHETHER THE DEDUCTION U/S_36(1)(VIIA) SHOULD BE ALLOWED IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF ALL THE BRANCHES OR ONLY FOR RURAL BRANCHES AND DECIDED THAT IT SHOULD BE BASED ON THE PROVISION IN RESPECT O F ALL THE BRANCHES. AS ALREADY STATED, WHILE COMING TO THE ABOVE CONCLUSION, THE HON'BLE TRIBUNAL HAS ELABORATELY DISCUSSED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK WHICH IS RELIED ON BY THE ASSESSING OFFICER IN THE IMPUGN ED ORDER. FOLLOWING THE DECISION OF THE HON'BLE BANGALORE TRIBUNAL, I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION U/S.36(1)(VIIA) ONLY IN RESPECT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCHES O NLY AND I, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.37,49,40,804/ - . THIS GROUND IS ALLOWED. 6 . IN THIS CASE, THE ISSUE RAISED BEFORE US RELATES TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT IN RESPECT OF ALL BRANCHES INCLUDING NON - RURAL BRANCHES OR ONLY IN RESPECT OF RURAL BRANCHES. VIDE ITS LETTER DATED 29.03.2013, THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PROVISION FOR BAD AND DOUB TFUL DEBTS FOR RURAL BRANCHES WAS .46,72,089/ - OUT OF THE TOTAL PROVISION OF .37,96,12,893/ - MADE BY THE ASSESSEE FOR THE YEAR ENDED 31.03.2011 UNDER SECTION 36(1)(VIIA) OF THE ACT. THUS, THE ASSESSING OFFICER RESTRICTED THE CLAIM OF DEDUCTION FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHE S TO THE EXTENT OF .46,72,089/ - B Y FOLLOWING THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT (SUPRA) AND MADE ADDITION OF .37,49,40,804/ - AS CLAIMED BY THE I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 7 ASSESSEE, WHICH IS NOT PERTAINING TO RURAL BRANCHES . THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ABOVE ADDITION ON TWO COUNTS VIZ., (I) THE RATIO LAID DOWN BY THE HON BLE SUPREME IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT(SUPRA) WAS NOT THE SAME AS IN THE CASE OF THE ASSESSEE AND (II) THE RATIO LAID DOWN BY THE BANGALORE BENCHES OF THE TRIBUNAL IN THE CASE OF JCIT V. VIJAYA BANK (SUPRA) IS SQUARELY APPLIES TO THE FACTS OF THE ASSESSEE S CASE. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF JCIT V. VIJ AYA BANK, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 15. WE HAVE CONSIDERED THE SUBMISSIONS AND ARE OF THE VIEW THAT THE SAME CANNOT BE ACCEPTED. THE CREATION OF A SPECIAL RESERVE U/S.32A OR SEC.36(1)(VIII) OF THE ACT CANNOT BE EQUATED WITH CREATION OF PBDD U/S.36(1)(VIIA) OF THE ACT. CREATION OF PROVISION U/S.36(1)(VIIA) OF THE ACT IS GOVERNED BY CERTAIN RULES LIKE RULE 6ABA OF THE RULES IN RESPECT OF RURAL ADVANCES. IT CANNOT BE CREATED AT THE BANK S WHIMS AND FANCY. MOREOVER THE ASSESSEE IS NOT MAKING A C LAIM FOR CREATION OF PBDD IN THE BOOKS OF ACCOUNTS OF PY RELEVANT TO AY 08 - 09. THE EXCESS RESERVE CREATED IN THE SUBSEQUENT YEAR CANNOT BE EQUATED TO THE PBDD CREATED IN THE BOOKS FOR THE PRESENT AY. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE DO NOT LAY DOWN A PROPOSITION THAT EXCESS PROVISION CREATED IN THE SUBSEQUENT YEAR CAN SUPPLEMENT THE INADEQUATE CREATED IN AN EARLIER YEAR. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE LAY DOWN PROPOSITION THAT THE ASSESSEE SHOULD BE GIVEN LIBERTY TO CREATE A RESERVE IN THE BOOKS OF ACCOUNTS OF THE RELEVANT AY. FOR THE REASONS GIVEN ABOVE, WE REJECT THE SECOND ALTERNATE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. THUS THE ASSESSEE WILL BE ENTITLED TO DEDUCTION U/ S.36(1)(VIIA) OF THE ACT OF RS.100,55,67,213/ - ONLY. GROUND NO.2 OF THE REVENUE IS ALLOWED TO THIS EXTENT. 7. WITH REGARD TO THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS, THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT DOES NOT SPEAK ANYTHING ABOUT I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 8 NON - RUR AL BRANCHES. BY AND LARGE, THE INTENTION OF LEGISLATURE FOR INSERTION OF CLAUSE (VIIA) TO SECTION 36(1) OF THE ACT WAS TO ENCOURAGE RURAL ADVANCES AND TO PROVIDE FOR DEDUCTION IN THE COMPUTATION OF THE TAXABLE PROFITS OF ALL SCHEDULED COMMERCIAL BANKS IN R ESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCES MADE BY THEIR RURAL BRANCHES. THEREFORE, THE PROVISO IS LIMITED IN ITS APPLICATION TO BAD DEBTS ARISING OUT OF RURAL ADVANCES OF A BANK AND NOT FOR NON - RURAL ADVANCES. OVER A ND ABOVE THE STATUTE, SINCE THE PROVISIONS OF SECTIONS 36(1)(VII) AND (VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS, THE DECISION IN THE CASE OF VIJAYA BANK V. CIT (SUPRA) DID NOT CLARIFY AS TO HOW THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION OF THE AMOUNT WHICH INCLUDES BOTH THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RURAL AND NON - RURAL ADVANCES . THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ABOVE DECISION RELIED ON BY THE LD. CIT(A) CANNOT BE ACCEPTED. 8. FURTHER, THE CONCURRENT FINDINGS OF THE HON BLE CHIEF JUSTICE OF INDIA IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT (SUPRA) ARE REPRODUCED AS UNDER: PER S. H. KAPADIA C. J. I . (CONCURRING) : THE PROVISIONS OF CLAUSE (VIIA) OF SECTION 36( 1) RELATING TO THE DEDUCTION ON ACCOUNT OF THE PROVISION FOR BAD AND DOUBTFUL DEBIT ( S) ARE DISTINCT AND INDEPENDENT OF THE PROVISIONS OF SECTION 36(1)(VII) RELATING TO ALLOWANCE OF THE BAD DEBT(S), IN OTHER WORDS, SCHEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF OF THE IRRECOVERABLE DEBITS) UNDER SECTION 36(1)(VII) IN ADDITION TO THE BENEFIT OF DEDUCTION FOR THE PROVISION MADE FOR BAD AND DOUBTFUL DEBT(S) UNDER SECTION 36(1)(VIIA). NORMALLY, A DEDUCTION FOR BAD DEBIT(S) CAN BE ALLOWED ONLY IF THE DEBT IS WRITTEN OFF IN THE BOOKS AS BAD DEBT(S), BUT IN THE CASE OF RURAL I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 9 ADVANCES, A DEDUCTION WOULD BE ALLOWED EVEN IN RESPECT OF A MERE PROVISION WITHOUT INSISTING ON AN ACTUAL WRITE OFF. HOWEVER, THIS MAY RESULT IN DOUBLE ALLOWA NCE IN THE SENSE THAT IN RESPECT OF THE SAME RURAL ADVANCE THE BANK MAY GET ALLOWANCE ON THE BASIS OF CLAUSE (VIIA) AND ALSO ON THE BASIS OF ACTUAL WRITE OFF UNDER CLAUSE (VII). THIS SITUATION IS TAKEN CARE OF BY THE PROVISO TO CLAUSE (VII) WHICH LIMITS TH E ALLOWANCE ON THE BASIS OF THE ACTUAL WRITE OFF TO THE EXCESS, IF ANY, OF THE WRITE OFF OVER THE AMOUNT STANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). THE CBDT ITSELF HAS RECOGNIZED THE POSITION THAT A BANK WOULD BE ENTITLED TO BOTH TH E DEDUCTIONS, ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF A MERE PROVISION. IT WOULD BE MEANINGLESS TO INVOKE THE PROVISO WHERE THERE IS NO THREAT OF DOUBLE DEDUCTION. IN CASE OF RURAL AD VANCE, WHICH ARE COVERED BY THE PROVISIONS OF CLAUSE (VIIA), THERE WOULD BE NO SUCH DOUBLE DEDUCTION. THE PROVISO LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. THIS HAS BEEN EXPLA INED BY CIRCULARS ISSUED BY THE CBDT. THUS, THE PROVISO LIMITED IN ITS APPLICATION TO BAD DEBIT(S) ARISING OUT OF RURAL ADVANCES OF A BANK. IT FOLLOWS THAT IF THE AMOUNT OF BAD DEBIT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNT OF THE BANK REPRESENTS ONLY DEBT(S ) ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII). 9. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF CATHOLI C SYRIAN BANK V. CIT (SUPRA), WE ARE OF THE OPINION THAT THE ASSESSEE CANNOT CLAIM DEDUCTION OF BAD AND DOUBTFUL DEBTS OF NON - RURAL BRANCHES UNDER SECTION 36(1)(VIIA) OF THE ACT. THUS, WE REVERSE THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THA T OF THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS ALLOWED. 10. COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, THE SAME IS FOUND TO HAVE FILED LATE BY 93 DAYS IN FILING THE CO BEFORE THE TRIBUNAL. THE DEPARTMENT FILED ITS APPEAL BEFORE THE TRIBUNAL ON 21.12.2015 AND I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 10 ACCORDINGLY NOTICE HAS BEEN SERVED ON THE ASSESSEE ON 18.01.2016 AND THE CROSS OBJECTION SHOULD HAVE BEEN FILED BY THE ASSESSEE ON OR BEFORE 18.02.2016. HOWEVER, THE ASSESSEE FILED THE CO ON 20.05.2016, THEREBY ; THERE IS A DELAY OF 93 DAYS IN FILING THE CO BEFORE THE TRIBUNAL. IN THE AFFIDAVIT, THE ASSESSEE HAS NOT STATED ANY REASONABLE CAUSE FOR THE DELAY. MOREOVER, THE ASSESSEE HAS FILED THE CO IN SUPPORT OF THE ORDER OF THE LD. CIT(A). SINCE WE HAVE SET ASIDE THE ORDER OF THE LD. CIT(A) WITH REGARD TO THE GROUND RAISED BY THE REVENUE, THE CO FILED BY THE ASSESSEE IS MERE ACADEMIC IN NATURE AND ACCORDINGLY, ON BOTH COUNTS, THE CO FILED BY THE ASSESSEE IS DISMISSED. 11. AGAINST THE ORDER OF THE LD. CIT(A) DAT ED 23.09.2015 FOR THE ASSESSMENT YEAR 2011 - 12, THE ASSESSEE HAS ALSO FILED AN APPEAL BY RAISING LEGAL ISSUE S RELATING TO NON - TAXING OF RECOVERY FROM BAD DEBTS WRITTEN OFF ACCOUNT NOT ALLOWED AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT AND ALSO THE CLA IM UNDER SECTION 36(1)(VII) IN RESPECT OF THE BAD DEBTS WRITTEN OFF BY THE NON - RURAL BRANCHES. THE LD. CIT(A) DISMISSED THE GROUNDS BY HOLDING THAT THE ISSUES DID NOT ARISE OUT OF THE ORDER OF THE ASSESSING OFFICER. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT MADE THE CLAIMS IN THE RETURN OF INCOME FILED BY THE ASSESSEE , BUT MADE AN ATTEMPT TO CLAIM DURING THE COURSE OF APPELLATE PROCEEDINGS . THEREFORE, W E ARE OF THE CONSIDERED OPINION THAT SINCE THE POWERS OF THE LD. CIT(A) ARE CO - TERMINUS THAT OF THE I.T.A. NO S . 22 97 & 2119 /M/ 1 5 & C.O. NO . 6 8 /M/1 6 11 ASSESSING OFFICER, THE LD. CIT(A) SHOULD HAVE DECIDED THE ISSUES RAISED BY THE ASSESSEE AFTER OBTAINING REMAND REPORT FROM THE ASSESSING OFFICER. THUS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTERS FOR ADJUDICATION AFTER OBTAINED REMAND R EPORT FROM THE ASSESSING OFFICER AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 1 2 . IN THE RESULT, THE A PPEAL FILED BY THE REVENUE IS ALLOWED , THE CO FILED BY THE ASSESSEE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 20 TH JULY , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 20 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.