United Bank of India, Kolkata V. A.C.I.T., Cir -6, Kolkata, Kolkata

ITA 1092/KOL/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3150 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-07-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 04-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA LD CITSR
• Assessee Lawyers: SOUMITRA CHOWDHURY LD AR
• Keywords: General deduction; Depreciation; Earning of tax free income; Retrospective amendment; Bad and doubtful debts; Provision of bad debts
• Section: 11; 15; 14A; 115JB

Judgement Text

ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B CALCUTTA ( ) BEFORE . . , SHRI N.S. SAINI, ACCOUNTANT MEMBER ! /AND '#'$ 1 & , SHRI GEORGE MATHAN, JUDICIAL MEMBER !' / ITA NO. 346/ KOL/2012 ASSESSMENT YEAR : 2008-09 UNITED BANK OF INDIA PAN: AAACU5624P - - -VERSUS -. D.C.I.T, CIRCLE-6, KOLKATA ( &) / APPELLANT ) ( *+&) / RESPONDENT ) !' / ITA NO. 605/ KOL/2012 ASSESSMENT YEAR : 2008-09 D.C.I.T, CIRCLE-6, KOLKATA - - -VERSUS -. UNITED BANK OF INDIA PAN: AAACU5624P ( &) / APPELLANT ) ( *+&) / RESPONDENT ) !' / ITA NO. 1092/ KOL/2007 & 1178/KOL/2007 ASSESSMENT YEAR : 2001-02 & 2003-04 UNITED BANK OF INDIA PAN: AAACU5624P - - -VERSUS -. A.C.I.T, CIRCLE-6, KOLKATA ( &) / APPELLANT ) ( *+&) / RESPONDENT ) &) - /FOR THE APPELLANT / SHRI SOUMITRA CHOWDHURY, ADVOCATE, LD.AR *+&) - / FOR THE RESPONDENT: / SHRI A.K. MAHAPATRA, LD. CIT/SR.DR . / 0 1 /DATE OF HEARING : 19-06-2013 23 0 1 /DATE OF PRONOUNCEMENT: 19-06-2013 4 / ORDER 567 / PER BENCH ITA NO. 346/KOL/2012 A.Y 2008-09 (BY THE ASSESSEE) 1. ITA NO. 346/KOL/2012 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS),VI, KO LKATA IN APPEAL NO. 114/CIT(A)-VI, R- 6/10-11/KOL DATED 26.12.2011 FOR THE ASSESSMENT YE AR 2008-09. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 2 ITA NO. 605/KOL/2012 A.Y 2008-09 (BY THE REVENUE) 2. ITA NO. 605/KOL/2012 IS AN APPEAL FILED BY THE R EVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), VI, K OLKATA IN APPEAL NO. 114/CIT(A)-VI/R- 6/10-11 DATED 26-12-2011 FOR THE ASSESSMENT YEAR 20 08-09. 3. THE APPEAL BEING ITA NO. 605/KOL/2012 FILED BY THE REVENUE IS TIME BARRED BY 14 DAYS. FOR WHICH A CONDONATION PETITION OF DELAY IN FILING THE APPEAL HAS BEEN FILED BY THE REVENUE. AFTER CONSIDERING THE SAME THE DELAY IN FILING THE APPEAL BY THE REVENUE IS CONDONED AND THE APPEAL IS ADMITTED . ITA NO. 1092/KOL/2007 A.Y 2001-02 (BY THE ASSESSEE) 4 ITA NO. 1092/KOL/2012 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), VI, K OLKATA IN APPEAL NO. 848/CIT(A)/2004-05/AC. CIR 6/KOL DATED 28.02.2007 F OR THE ASSESSMENT YEAR 2001-02. ITA NO. 1178/KOL/2007 A.Y 2003-04 (BY THE ASSESSEE) 5. ITA NO. 1178/KOL/2007 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), VI, K OLKATA IN APPEAL NO. 57/CIT(A)- VI/2004-05/AC. CIR 6/KOL DATED 28-02-2007 FOR THE A SSESSMENT YEAR 2003-04. 6. SHRI SOUMITRA CHOWDHURY ADVOCATE, LEARNED .A UTHORISED REPRESENTATIVE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI A. K . MAHAPATRA, LEARNED. CIT/SR.DR REPRESENTED ON BEHALF OF THE REVENUE. . ITA NO.346/KOL/2012 A.Y 2008-09 (BY THE ASSESSEE) 7. IN THIS ASSESSEES APPEAL, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PA SSED BY THE LD. C.I.T. (APPEAL) IS COMPLETELY ARBITRARY, UNJUSTIFIE D AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(APPEAL) WAS WRONG IN ADJUSTING ENTIRE BAD DEBT WRITTEN OFF AMOU NTING TO RS.274,52,16,243/- FROM PROVISION FOR BAD DEBT ALLO WED U/S 36(1)(VII INSTEAD OF ADJUSTING RS.5,40,58,676/- WHICH IS MEAN T FOR RURAL WRITE OFF, THEREFORE, THE ORDER IS COMPLETELY ARBITRARY, UNJUS TIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(APPEAL) WAS WRONG IN DISALLOWING THE OPENING CREDIT BALANCE U/S . 36(1)(VIIA) AMOUNTING TO RS. 11,96,49,538/- IN COMPUTING BOOK P ROFIT U/S. 11 5JB WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(APPEAL) WAS WRONG IN NOT CONSIDERING THE FACT THAT SECTION 11 5 JB IS NOT APPLICABLE TO ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 3 ASSESSEE BANK, THEREFORE, THE ORDER PASSED BY THE L D. C.I.T.(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(APPEAL) WAS WRONG IN DISALLOWING U/S. 14A RS.76,00,000/- AS NOT IONAL EXPENDITURE U/S. 1 15JB WHICH IS COMPLETELY ARBITRARY, UNJUSTIF IED AND ILLEGAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD C.I.T . (APPEAL) WAS WRONG IN CONFIRMING THE ORDER OF THE A.O. WHEREIN T HE A.O. HAS CHARGED INTEREST U/S 234D WHICH IS COMPLETELY ARBITRARY, UN JUSTIFIED AND ILLEGAL. 7. FOR THAT THE APPELLANT RESERVES THE RIGHT TO AD DUCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE H EARING OF THE APPEAL. 8. IN REGARD TO GROUND NO.2, IT WAS SUBMITTED BY TH E LEARNED AR FOR THE ASSESSEE THAT THIS ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS) IN DIRECTING THE ADJUSTMENT OF THE ENTIRE BAD DEBTS W RITTEN OFF AMOUNTING TO RS.274,52,16,243/- FROM THE PROVISIONS FOR BAD DEBT ALLOWED U/S. 36(1 )(VII) OF THE ACT. IT WAS SUBMITTED THAT THE CLAIM UNDER THIS GROUND WAS RESTRICTED TO THE AM OUNT OF RS.6.56 CRORES IN SO FAR AS THE ASSESSING OFFICER HAS ALREADY ALLOWED THE WRITE O FF OF THE BAD DEBTS TO THE EXTENT OF RS. 266.56 CORRES. IT WAS FAIRLY AGREED BY BOTH THE SID ES THAT THE ISSUE IN THIS APPEAL WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1497 & 1498/KOL/09 DATED 14-02-13, WHEREIN THE CO-ORDINATE BENCH HAS HELD AS FOLLOWS:- 4. REGARDING GROUND NO.2, WHICH WAS AGAINST THE A CTION OF THE LEARNED CIT(A) IN NOT ALLOWING BAD DEBT U/S. 36(1) (VII) AMOUNTING TO RS. 77 CRORES, IT WAS FAIRLY AGREED BY BOTH THE SIDES TH AT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF ALLAHABAD BANK VS. DCIT, CIRCLE-6, KOLKATA REPO RTED IN (2012) 23 TAXMAN.COM 406(KOL), WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- 5. AS REGARDING GROUND NOS. 3 AND 4 THE ISSUE INV OLVED RELATES TO BAD DEBTS WRITTEN OFF PERTAINING TO NON-RURAL BRANCHES CLAIMED U/S 36(1)(VII) OF THE IT ACT. 6. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL BEFORE US HAS SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY TH E TRIBUNAL IN THE SAME ORDER FOR A.YR.2003-04 IN ITA NO.2486/KOL/2007 AND ALLOWED THE APPEAL OF ASSESSEE. HE FURTHER RELIED ON THE DECISION OF H ONBLE SUPREME COURTS DECISION IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V . CIT [2012] 206 TAXMAN 182 / 18 TAXMANN.COM 282 (SC) ALONG WITH SEV ERAL CIVIL APPEALS ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 4 DECIDED BY HONBLE SUPREME COURT BY SWATANTER KUMAR , JUDGE ON 17.02.2012 AS REPORTED IN TAX INDIA ONLINE.COM. 7. ON THE OTHER HAND, THE ID. DR, APPEARING ON BEH ALF OF THE REVENUE COULD NOT CONTRADICT THE ABOVE SUBMISSION OF ASSESS EE. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE CONSIDER IT FIT TO REPRODUCE THE OBSERVATIONS MADE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YR.2003- 04 VIDE ITA NO.2486/KOL2007 DATED 30.09.2009 WHICH ARE PLACED AT PARAS 10 AND 10.1 ARE AS UNDER 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LEARNED REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF TH E AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASES CITED BY THE LE ARNED AR OF THE ASSESSEE (SUPRA). ON CONSIDERATION OF THE PROVISION S OF SECTION 36(1)(VIIA), AS ALSO SECTION 36(2)(V) AND ALSO CONS IDERING THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, WE FIN D SUBSTANCE IN THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE. HON BLE KERALA HIGH COURT HAS HELD THAT THE SCOPE OF THE PROVISO TO CLA USE (VII) OF SECTION 36(1)(VII) HAS TO BE ASCERTAINED FROM A CUMULATIVE READING OF THE PROVISIONS OF CLAUSES (VII) & (VIIA) OF SECTION 36( 1) AND CLAUSE (V) OF SECTION 36(2) OF THE ACT. IT WAS HELD THAT THE INTE NTION OF THE LEGISLATURE IN ENACTING THE PROVISO TO CLAUSE (VII) OF SECTION 36(1) AND CLAUSE (V) OF SECTION 36(2) SIMULTANEOUSLY IS ONLY TO SEE THAT A DOUBLE BENEFIT IN RESPECT OF THE SAME BAD DEBT IS NOT GIVE N TO A SCHEDULED BANK. A SCHEDULED BANK MAY HAVE BOTH URBAN AND RURA L BRANCHES AND ADVANCES GIVEN FROM BOTH BRANCHES. IT WAS ALSO HELD THAT AS A RESULT OF THE AMENDMENT, THE SCHEDULED BANK WOULD BE ENTIT LED TO THE DEDUCTION OF THE ENTIRE BAD DEBT RELATING TO ADVANC ES MADE BY THE URBAN BRANCHES WRITTEN OFF IN THE BOOKS AND ALSO TH E DIFFERENCE BETWEEN THE AMOUNT WRITTEN OFF IN THE BOOKS RELATIN G TO ADVANCES MADE BY THE RURAL BRANCHES DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND CREDIT BALANCE IN THE PROVISION S FOR BAD AND DOUBTFUL DEBT ACCOUNT RELATING TO ADVANCES MADE BY THE RURAL BRANCHES MADE IN CLAUSE (VIIA). IT WAS HELD THAT IF THE BAD DEBT WRITTEN OFF RELATES TO DEBTS OTHER THAN FOR WHICH PROVISION IS MADE UNDER CLAUSE (VIIA) , SUCH DEBT WILL FALL SQUARELY UNDER THE MAIN PART OF CLAUSE (VII) WHICH IS ENTITLED TO DEDUCTION AND IN RESPECT OF THAT PART OF THE DEBT WITH REFERENCE TO WHICH THE PROVISION I S MADE UNDER CLAUSE (VIIA) , THE PROVISO WILL OPERATE TO LIMIT THE DEDU CTION TO THE EXTENT OF THE DIFFERENCE BETWEEN THAT PART OF DEBT WRITTEN OF F IN THE PREVIOUS YEAR AND THE CREDIT BALANCE IN THE PROVISION FOR TH E BAD AND DOUBTFUL DEBTS ACCOUNTS MADE UNDER CLAUSE (VIIA). FURTHER, T HE SPECIAL BENCH OF THE ITAT IN THE CASE OF CATHOLIC SYRIAN BANK LTD (SUPRA) HAS HELD THAT THE DEBTS ACTUALLY WRITTEN OFF WHICH DO NOT AR ISE OUT OF THE RURAL ADVANCES ARE NOT AFFECTED BY THE PROVISO TO CLAUSE (VII) AND THAT ONLY ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 5 THOSE BAD DEBT WHICH ARISES OUT OF THE RURAL ADVANC ES ARE TO BE LIMITED IN ACCORDANCE WITH THE PROVISO. 10.1. CONSIDERING THE ABOVE DECISIONS AND ALSO THE FINDINGS GIVEN BY THE ITAT IN ASSESSEES OWN CASE IN AYS 1994-95, 199 6-97 AND 1997- 98 AND ALSO CONSIDERING THE DETAILS PLACED ON PAGES 26 TO 39 OF THE PAPER BOOK, WE ALLOW THE CLAIM OF THE ASSESSEE BY R EVERSING THE ORDERS OF THE AUTHORITIES BELOW. HENCE, GROUND NO.2 TAKEN BY THE ASSESSEE IS ALLOWED. 8.1 IT IS FURTHER OBSERVED THAT WHILE PASSING THE O RDER IN THE CASE OF CATHOLICS SYRIAN BANK LTD. (SUPRA) THE HONBLE APEX COURT JUDGE SHRI SWATANTER KUMAR HAS OBSERVED AS UNDER 36. MERELY BECAUSE THE DEPARTMENT HAS SOME APPREHE NSION OF THE POSSIBILITY OF DOUBLE BENEFIT TO THE ASSESSEE, THIS WOULD NOT BY ITSELF BE A SUFFICIENT GROUND FOR ACCEPTING ITS INTERPRETATIO N. FURTHERMORE, THE PROVISIONS OF A SECTION HAVE TO BE INTERPRETED ON T HEIR PLAIN LANGUAGE AND COULD NOT BE INTERPRETED ON THE BASIS OF APPREH ENSION OF THE DEPARTMENT. THIS COURT, IN THE CASE OF VAYA BANK V. COMMISSIONER OF INCOME TAX & ANR. [(2010) 5 SCC 416], HELD THAT UND ER THE ACCOUNTING PRACTICE, THE ACCOUNTS OF THE RURAL BRAN CHES HAVE TO TALLY WITH THE ACCOUNTS OF THE HEAD OFFICE. IF THE REPAID AMOUNT IN SUBSEQUENT YEARS IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE HEAD OFFICE, WHICH IS WHAT ULTIMATELY MATTERS, THEN THERE WOULD BE A MISMATCH BETWEEN THE RURAL BRANCH ACCOUNTS AND THE HEAD OFFICE ACCOUNTS. THEREFORE, IN ORDER TO PREVENT SUCH MISMA TCH AND TO BE IN CONFORMITY WITH THE ACCOUNTING PRACTICE, THE BANKS SHOULD MAINTAIN SEPARATE ACCOUNTS. OF COURSE, ALL ACCOUNTS WOULD UL TIMATELY GET MERGED ACCOUNT INTO THE ACCOUNT OF THE HEAD OFFICE, WHICH WILL ULTIMATELY REFLECT INTO ACCOUNT (BALANCE SHEET), TH OUGH CONTAINING DIFFERENT ITEMS. 37. ANOTHER EXAMPLE THAT WOULD SUPPORT THIS VIEW IS THAT, A BANK CAN WRITE OFF A LOAN AGAINST THE ACCOUNT OF A ALONE WH ERE IT HAS ADVANCED THE LOAN TO PARTY A. IT CANNOT WRITE OFF SUCH LOAN AGAINST THE ACCOUNT OFB. SIMILARLY, A LOAN ADVANCED UNDER THE RURAL S CHEMES CANNOT BE WRITTEN OFF AGAINST AN URBAN OR A COMMERCIAL LOAN B Y THE BANK IN THE NORMAL COURSE OF ITS BUSINESS. 38. THE FULL BENCH OF THE KERALA HIGH COURT EXPRESS ED THE VIEW THAT THE LEGISLATURE DID NOT MAKE ANY DISTINCTION BETWEE N PROVISIONS CREATED IN RESPECT OF ADVANCES BY RURAL BRANCHES AN D ADVANCES BY OTHER BRANCHES OF THE BANK. IT ALSO RETURNED A FIND ING WHILE PLACING EMPHASIS ON THE PROVISO TO SECTION 36(1)(VII), REA D WITH CLAUSE (V) OF SECTION 36(2) OF THE ACT THAT THE INTERPRETATION GI VEN BY A DIVISION BENCH OF THAT COURTS IN THE CASE OF SOUTH INDIAN BA NK (SUPRA) WAS NOT A CORRECT ENUNCIATION OF LAW, INASMUCH AS THE SAME WOULD LEAD TO DOUBLE DEDUCTION. IT TOOK THE VIEW THAT IN A CLAIM OF DEDUCTION OF BAD DEBTS WRITTEN OFF IN NON-RURAL/URBAN BRANCHES IN TH E PREVIOUS YEAR, BY ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 6 VIRTUE OF PROVISO TO SECTION 36(1 )(VII), THE BANKS ARE ENTITLED TO CLAIM DEDUCTION OF SUCH BAD DEBTS ONLY TO THE EXTENT IT E XCEEDS THE PROVISION CREATED FOR BAD OR DOUBTFUL RURAL ADVANCES UNDER CL AUSE (VIIA) OF SECTION 36(1) OF THE ACT. WE ARE UNABLE TO PERSUADE OURSELVES TO CONTRIBUTE TO THIS REASONING AND STATEMENT OF LAW. 39. FIRSTLY, THE FULL BENCH IGNORED THE SIGNIFICANT EXPRESSION APPEARING IN BOTH THE PROVISO TO SECTION 36(1) (VI I) AND CLAUSE SECTION 36(1)(VII) AND CLAUSE (V) OF SECTION 36(2), I.E., ASSESSEE TO WHICH CLAUSE (VIIA) OF SUB-SECTION (1) APPLIES. IN OTHER WORDS, IF THE CASE OF THE ASSESSEE DOES NOT FAIL UNDER SECTION 36 (1)(VIIA), THE PROVISO/LIMITATION WOULD NOT COME INTO PLAY. 40. IT IS USEFUL TO NOTICE THAT IN THE PROVISO TO S ECTION 36(1)(VII), THE EXPLANATION TO THAT SECTION, SECTION 36(1)(VIIA) AN D 36(2)(V), THE WORDS USED ARE PROVISION FOR BAD AND DOUBTFUL DEBT S WHILE IN THE MAIN PART OF SECTION 36(1)(VII), THE LEGISLATURE HA S INTENTIONALLY NOT USED SUCH LANGUAGE. THE PROVISO TO SECTION 36(1)(VI I) AND SECTIONS 36(1)(VIIA) AND 36(2)(V) HAVE TO BE READ AND CONSTR UED TOGETHER. THEY FORM A COMPLETE SCHEME FOR DEDUCTIONS AND PRESCRIBE THE EXTENT TO WHICH SUCH DEDUCTIONS ARE AVAILABLE TO A SCHEDULED BANK IN RELATION TO RURAL LOANS ETC., WHEREAS SECTION 36(1)(VII) DEA LS WITH GENERAL DEDUCTIONS AVAILABLE TO A BANK AND EVEN NON-BANKING BUSINESSES UPON THEIR SHOWING THAT AN ACCOUNT HAD BECOME BAD AND WR ITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR, SATISFYING THE REQUIREMENTS CONTEMPLATED IN THAT BE HALF UNDER SECTION 36(2). THE PROVISIONS OF SECTION 36(1)(VII) OPERATE IN THEIR OWN FIELD AND ARE NOT RESTRICTED BY THE LIMITATIONS OF SECTIO N 36(1)(VIIA) OF THE ACT. IN ADDITION TO THE REASONS AFORE-STATED, WE AL SO APPROVE THE VIEW TAKEN BY THE SPECIAL BENCH OF ITAT AND THE DIVISION BENCH OF THE KERALA HIGH COURT IN THE CASE OF SOUTH INDIAN BANK (SUPRA). 41. TO CONCLUDE, WE HOLD THAT THE PROVISIONS OF SEC TIONS 36(1)(VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPE NDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS. T HE BAD DEBTS \WRITTEN OFF IN DEBTS, OTHER THAN THOSE FOR WHICH T HE PROVISION IS MADE UNDER CLAUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTION TO THE EXTENT OF DIFFERENCE BETW EEN THE DEBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U NDER CLAUSE (VIIA). THE PROVISO TO SECTION 36(1)(VII) WILL RELA TE TO CASES COVERED UNDER SECTION 36(1)(VIIA) AID HAS TO BE READ WITH S ECTION 36(2)(V) OF THE ACT. THUS, THE PROVISO WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO RURAL LOANS WHILE UNDER SECTION 36(1 )(VII), THE ASSESSE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HAVING BECOME BAD DEBT AND BEING WR ITTEN OF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 7 THIS, OBVIOUSLY, WOULD B SUBJECT TO SATISFACTION OF THE REQUIREMENTS CONTEMPLATED UNDER SECTION 36. 8.2 WHILE CONCLUDING WITH THE VIEW OF THE HONBLE A PEX COURT JUDGE SHRI SWATANTER KUMAR IT IS FURTHER OBSERVED THAT 2. UNDER SECTION 36(1)(VII) OF THE ITA 1961, THE T AX PAYER CARRYING ON BUSINESS IS ENTITLED TO A DEDUCTION, IN THE COMP UTATION OF TAXABLE PROFITS, OF THE AMOUNT OF ANY DEBT WHICH IS ESTABLI SHED TO HAVE BECOME A BAD DEBT DURING THE PREVIOUS YEAR, SUBJECT TO CERTAIN CONDITIONS. HOWEVER, A MERE PROVISION FOR BAD AND D OUBTFUL DEBT(S) IS NOT ALLOWED AS A DEDUCTION IN THE COMPUTATION OF TA XABLE PROFITS. IN ORDER TO PROMOTE RURAL BANKING AND IN ORDER TO ASSI ST THE SCHEDULED COMMERCIAL BANKS IN MAKING ADEQUATE PROVISIONS FROM THEIR CURRENT PROFITS TO PROVIDE FOR RISKS IN RELATION TO THEIR R URAL ADVANCES, THE FINANCE ACT, INSERTED CLAUSE (VIIA) IN SUB-SECTION (1) OF SECTION 36 TO PROVIDE FOR A DEDUCTION, IN THE COMPUTATION OF TAXA BLE PROFITS OF ALL SCHEDULED COMMERCIAL BANKS, IN RESPECT OF PROVISION S MADE BY THEM FOR BAD AND DOUBTFUL DEBT(S) RELATING TO ADVANCES M ADE BY THEIR RURAL BRANCHES. THE DEDUCTION IS LIMITED TO A SPECIFIED P ERCENTAGE OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES COMPUTED IN THE MANNER PRESCRIBED BY THE IT RULES, 1962. THUS, THE PROVISIONS OF CLAUSE (VIIA) OF SECTION 36(1) RELATING TO THE DEDU CTION ON ACCOUNT OF THE PROVISION FOR BAD AND DOUBTFUL DEBT(S) IS DISTI NCT AND INDEPENDENT OF THE PROVISIONS OF SECTION 36(1)(VII) RELATING TO ALLOWANCE OF THE BAD DEBT(S). IN OTHER WORDS, THE SCHEDULED COMMERCIAL B ANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF O F THE IRRECOVERABLE DEBT(S) 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(L)(VIIA). A READING OF THE CIRCULARS ISSUED BY C BDT INDICATES THAT NORMALLY A DEDUCTION FOR BAD DEBT(S) CAN BE ALLOWED ONLY IF THE DEBT IS WRITTEN OFF IN THE BOOKS AS BAD DEBT(S). NO DEDU CTION IS ALLOWABLE IN RESPECT OF A MERE PROVISION FOR BAD AND DOUBTFUL D EBT(S). BUT IN THE CASE OF RURAL ADVANCES, A DEDUCTION WOULD BE ALLOWE D EVEN IN RESPECT OF A MERE PROVISION WITHOUT INSISTING ON AN ACTUAL WRITE OFF. HOWEVER THIS MAY RESULT IN DOUBLE ALLOWANCE IN THE SENSE TH AT IN RESPECT OF SAME RURAL ADVANCE THE BANK MAY GET ALLOWANCE ON TH E BASIS OF CLAUSE (VIIA) AND ALSO ON THE BASIS OF ACTUAL WRITE OFF UNDER CLAUSE (VII) . THIS SITUATION IS TAKEN CARE OF BY THE PROV ISO TO CLAUSE (VII) WHICH LIMITS THE ALLOWANCE ON THE BASIS OF THE ACTU AL WRITE OFF TO THE EXCESS, IF ANY, OF THE WRITE OFF OVER THE AMOUNT ST ANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). HOWEVER , THE REVENUE DISPUTES THE POSITION THAT THE PROVISO TO CLAUSE (V II) REFERS ONLY TO RURAL ADVANCES. :IT SAYS THAT THERE ARE NO SUCH WOR DS IN THE PROVISO WHICH INDICATES THAT THE PROVISO APPLY ONLY TO RURA L ADVANCES. WE FIND NO MERIT IN THE OBJECTION RAISED BY THE REVENUE. FI RSTLY, CBDT ITSELF HAS RECOGNIZED THE POSITION THAT A BANK WOULD BE EN TITLED TO BOTH THE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 8 DEDUCTION, ONE UNDER CLAUSE (VII) ON THE BASIS OF A CTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN RESPECT O F A MERE PROVISION. FURTHER, TO PREVENT DOUBLE DEDUCTION, THE PROVISO T O CLAUSE (VII) WAS INSERTED WHICH SAYS THAT IN RESPECT OF BAD DEBT(S) ARISING OUT OF RURAL ADVANCES, THE DEDUCTION ON ACCOUNT OF ACTUAL WRITE OFF WOULD BE LIMITED TO THE EXCESS OF THE AMOUNT WRITTEN OFF OVE R THE AMOUNT OF THE PROVISION ALLOWED UNDER CLAUSE (VIIA). THUS, THE PR OVISO TO CLAUSE (VII) STOOD INTRODUCED IN ORDER TO PROTECT THE REVE NUE. IT WOULD BE MEANINGLESS TO INVOKE THE SAID PROVISO WHERE THERE IS NO THREAT OF DOUBLE DEDUCTION. IN CASE OF RURAL ADVANCES, 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 T O RURAL ADVANCES. THIS HAS BEEN EXPLAINED BY THE CIRCULARS ISSUED BY CBDT. THUS, THE PROVISO INDICATES THAT IT IS LIMITED IN ITS APPLICA TION TO BAD DEBT(S) ARISING OUT OF RURAL ADVANCES OF A BANK. IT FOLLOWS THAT IF THE AMOUNT OF BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE BANK REPRESENTS ONLY DEBT(S) ARISING OUT OF URBAN ADVANC ES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLL ED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII) 3. ACCORDINGLY, THE ABOVE QUESTION IS ANSWERED IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE(S) . FOR THE ABOVE REASONS, I AGREE THAT THE APPEALS FILED B Y THE ASSESSEES STAND ALLOWED AND THE APPEALS FILED BY THE REVENUE STAND DISMISSED WITH NO ORDER AS TO COSTS 8.3 KEEPING IN VIEW OF THE TRIBUNAL ORDER IN ASSESS EES OWN CASE AND THE DECISIONS OF HONBLE APEX COURT IN THE CASE OF CATH OLICS SYRIAN BANK LTD. (SUPRA) WE FIND NO JUSTIFICATION ON THE PART OF REV ENUE TO DISALLOW THE CLAIM OF ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE ORDERS OF THE REVENUE ON THIS ISSUE AND DIRECT AO TO GIVE RELIEF OF RS. 44,10,54,680/- IN RESPECT OF BAD DEBT WRITTEN OFF P ERTAINING TO NON-RURAL BRANCHES ULS 36(1)(VII) OF THE IT ACT. . 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE SAID DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ALLAHABD BANK ( REFER TO SUPRA)., RE SPECTFULLY FOLLOWING THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL , THE SAID GROUND STANDS ALLOWED. 9. IT WAS, HOWEVER, SUBMITTED BY THE LEARNED SR.DR THAT THE REVENUE HAS NOT ACCEPTED THE ORDER. 10. WE HAVE CONSIDERED THE SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS NOW SQUARELY COVERED BY THE SAID DECISION OF THE CO-ORDINATE BE NCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 9 IN ITA NOS. 1497 & 1498/KOL/09 FOR THE ASSESSMENT Y EAR 2004-05 & 2006-07 DATED 14-02- 2013 (REFER TO SUPRA), THE ASSESSING OFFICER IS DIR ECTED TO ALLOW THE ASSESSEES CLAIM OF WRITTEN OFF OF BAD DEBTS U/S. 36(1)(VIII) TO THE E XTENT OF RS.6.56 CRORES. BEING THE BALANCE AMOUNT OF BAD DEBTS WRITTEN OFF. THIS GROUND OF ASS ESSEE IS ALLOWED AS ABOVE. 11. IN REGARD TO GROUND NOS. 3,4 & 5, WHICH WAS AGA INST THE ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) IN HOLDING THA T THE PROVISIONS OF SECTION 115JB OF THE ACT WERE APPLICABLE TO ASSESSEE BANK AND THE CORRES PONDING ADJUSTMENTS, WHICH HAD BEEN MADE THEREUNDER, IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSESSEE THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1765 TO1768/KOL/2009 FOR THE ASSE SSMENT YEARS 1998-99 TO 2002-03 DATED 19-03-2013, WHEREIN THE CO-ORDINATE BENCH HELD AS FOLLOWS:- 13. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD THIS IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT BEEN INCORPORATED UNDER THE COMPANIES ACT, 1956 AND THE ASSESSEE HAS NOT TO PREPARE ITS:P.ROFIT &:LOSSAJC. IN ACCORDANCE WITH PARTS II. AND III OF SCHEDULE-VT TO THE COMPANIES ACT. W HAVE ALSO GONE :THROUGH THE SUBMIS SIONS OF THE ID. DR. THIS ISSUE HAS COME U4P BEFORE THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF STATE BANK OF HYDERABAD VS- DCIT IN ITA NO578/HYD /2010 & 779/HYD/2010 DATED 07.09.2012. THE COORDINATE BENCH, WHILE DEALI NG WITH THE APPLICABILITY OF THE PROVISIONS OF SECTION .11 5JB TO THE STATE BANK OF HYDERABAD VIDE ORDER DATED 7.9.12, HELD AS UNDER:-: 12. THE NEXT ISSUE IS REGARDING THE APPLICABILITY. OF PROVISION OF SEC. JISJB TO THE ASSESSEE BANK. .THE CONTENTION, OF THE ASSESSEE IS THAT THE. ASSESSEE BEING A BANK, THE PROVISIONS OF COMPANIES ACT WILL NOT APPLY TO T HE ASSESSEE AND HENCE THE ASSESSE WILL NOT BE LIABLE, TO TAX U/S. 115JB THE PROVISIONS OF SEC.] ]5JB WILL BE APPLICABLE TO ALL COMPANIES. HOWEVER, IT IS CONTENDED THAT SEC. I J5JB WILL BE. APPLICABLE ONLY WHERE THE ASSESSEE IS REQUIRED TO SHOW PROFIT & LOSS- ACCOUNT IN ACCORDANCE WITH S CHEDULE VI OF (-OLNPANIES ACT. AS THE BANKS ARE REQUIRED TO PREPARE BALANCE SHEET AND PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH THE BANKING REGULATION ACT, PROVISI ON OF I]5JB CANNOT BE APPLIED TO THE BAN/CS. IN THE CASE OF MAHARASHTRA S TATE ELECTRICITY BOARD VS. JCIT (82 ITD 422) IT WAS HELD THAT PROVISIONS OF HONK PR OFIT CANNOT BE APPLIED TO ELECTRICITY COMPANIES. BANKING COMPANIES ANTI COMPA NIES ENGAGED IN GENERATION AND SUPPLY OF ELECTRICITY DOES NOT HAVE TO PREPARE THEIR ACCOUNTS IN ACCORDANCE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 10 WITH PARTS II AND III OF SCH. VI OF THE COMPANIES ACT BY THE VIRTUE OF PROVISION TO SEC 211(2) F THE COMPANIES ACT. WE FIND THAT BY TH E FINANCE ACT 2012, WITH EFFECT FROM 1.4.2013, EVEN COMPANIES TO WHICH PROVISO TO S EC 211(2) APPLIES (THE BANKING COMPANIES AND COMPANIES ENGAGED IN GENERATI NG AND DISTRIBUTION OF ELECTRICITY,), SHOULD PREPARE THEIR P&L AND BALANCE SHEET IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANIES. THI S WOULD MEAN THAT PRIOR TO AY 2013-14, PROVISIONS OF SEC ]]5JB WILL NOT APPLY TO COMPANIES TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT, 1956 APPLIES. T HE ASSESSEE BEING A COMPANY TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT 1956 APPLIES, WILL NOT BE LIABLE TO BE TAXED UNDER SEC 1]5JB. 14. THE MUMBAI TRIBUNAL IN THE CASE OF KRUNG THAI B ANK S. JCIT (133 TTJ 435,), TO WHICH ONE OF US IS A PARTY HAS HELD THAT PROVISION OF SEC. 115JB CANNOT BE APPLIED TO THE BANKING COMPANY. 15. IN VIEW OF THE ABOVE, AS THE AMENDMENT TO SEC .] 1.SJB BY THE FIN ANCE ACT 2012 WILL BE APPLICABLE ONLY FROM THEAY.2013-2014 , WE UPHOLD THE CLAIM OF THE ASSESSEE THAT PROVISION OF SEC JJ5JB WILL NOT BE AP PLICABLE TO THE ASSESSEE BANK AND SET ASIDE THE ASSESSMENT MADE U/S ,J15JB ON THE ASSESSEE COMPANY. . 13.1 SIMILAR VIEW HAS BEEN TAKEN BY THE MUMBAI BENC H OF THE ITAT IN THE CASE OF TIMES BANK LTD. VS- ACIT IN ITA NO.4355/MUM/2008 D ATED 08.Q5.2012. SIMILAR VIEW HAS ALSO BEEN TAKEN BY CHENNAI BENCH O F THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF INDIAN BANKVS- ADDL.CIT IN ITA NO.469IMDS/2O DATED 03.08.2011. IN VIEW OF ALL THESE DECISION OF THE CO ORDINATE BENCH AND NO CONTRARY DECISION BEING BROUGHT TO OUR KNOWLEDGE ON THE SAME ISSUE, WE ARE BOUND TO FOLLOW THE- DECISION OF THE COORDINATE BENCH AND WE ACCORDINGLY HOLD THAT, THE PROVISIONS OF SECTION 11 5JB ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THUS, THIS GROUND STANDS ALLOWED. 12. IT WAS SUBMITTED BY THE LEARNED SR.DR THAT THE EXPLANATION HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 W.E.F 1-4-2013 CLARIFYING THAT TH E PROVISIONS OF SECTION 115JB OF THE ACT WOULD APPLY. IT WAS THE SUBMISSION THAT THE EXPLAN ATION WAS CLARIFICATORY IN NATURE AND WAS TO TAKE CARE OF THE EARLIER YEARS AND TO BRING THE BANKING COMPANIES UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. IT WAS THE SUBMISSION TH AT IT WAS CLARIFICATORY IN NATURE AND SHOULD BE READ ALONG WITH THE EXPLANATION (2), WH ICH WAS HAVING RETROSPECTIVE EFFECT FROM 1-4-2001. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (REFER TO SUPRA) HAS TAKEN INTO CONSIDERATION THE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 11 SAID EXPLANATION, WHICH WAS INTRODUCED BY THE FINA NCE ACT 2012 W.E.F 1-4-2013 TO THE PROVISIONS OF SECTION 115JB TO HOLD THAT THE PROVI SIONS OF SECTION 115JB ARE NOT APPLICABLE IN THE CASE OF ASSESSEE BANK, RESPECTFULLY FOLLOWIN G THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE (REFER TO S UPRA), IT IS HELD THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. IN THE CIRCUMSTANCES, GROUND NOS. 3,4 & 5 OF THE ASSESSEES APPEAL STAND ALLOWED AS STATED ABOVE. THESE GROUNDS OF ASSESSEES APPEAL ARE ALLOWED. 14. GROUND NO.6 OF ASSESSEES APPEAL IS CONSEQUENT IAL IN NATURE. 15. THE ABOVE ASSESSEES APPEAL IN ITA NO. 346/KOL/ 2012 FOR THE ASSESSMENT YEAR 2008- 09 IS PARTLY ALLOWED AS STATED ABOVE. ITA NO. 605/KOL/2012 A.Y 2008-09 (BY THE REVENUE 16. IN THIS REVENUES APPEAL, THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN DIRECTING THE A.O. TO RESTRICT THE DISALLOWANCE TO 76,OO,OOO/- INSTEAD OF THE DISALLOWANCE 9.O5 CRORES COMPUTED U/S.14A READ WITH RULE 8D UNDER THE LT.ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN ALLOWING THE PROVISION OF BAD DEBTS TO THE EXTEN T OF 262.56 CRORES FOR THE PURPOSES OF COMPUTING BOOK PROFIT U/S.1 15JB OF THE LT.ACT, 1961 WITHOUT APPRECIATING THE FACT TH PROVISION FOR BAD DEBTS IS IN THE NATURE OF PROVISION FOR DIMINUTION IN VALUE OF ASSETS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN HOLDING THA PROVISION FOR DEPRECIATION ON INVEST MENT IS IN THE NATURE OF LOSS AND NOT PROVISION FOR DIMINUTION IN VALUE OF A SSET THEREBY DELETING THE ADDITION OF 73,O4,94,OOO/- MADE WHILE COMPUTING BOO K PROFIT U/S. 11 5JB OF THE LT.ACT, 1961. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN ALLOWING DEDUCTION OF PROVISION FOR FRAUD TO THE EXTENT OF8,45,OOO/- IN THE COMPUTATION OF BOOK PROFIT U/S. 11 5JB OF THE I .T.ACT. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN ALLOWING DEDUCTION OF PROVISION FOR STAFF WELFAR E TO THE EXTENT OF 4,O6,OOO/- IN THE COMPUTATION OF BOOK PROFIT U/S. 1 15JB OF THE I.T.ACT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN RESTRICTING DISALLOWANCE U/S.14A ONLY TO 76 LAOS INSTEAD OF 9.O5 CRORES AS EXPENDITURE INCURRED IN RELATION TO EARNING EXEMPT INCOME IN COMPUTING BOOK PROFIT U/S. 11 5JB OF THE I.T.ACT. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 12 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITION OF PROVISION FOR WEALTH TA X OF2,OO,OOO/- MADE U/S. 115JB OF THE I.T.ACT. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN LAW IN ALLOWING DEDUCTION OF REVERSAL OF DEFERRED TAX A SSET OF 5.8O CRORES FROM THE COMPUTATION OF BOOK PROFIT COMPUTED U/S. 11 5JB OF THE I.T.ACT, 1961. 9. THAT THE APPELLANT CRAVES FOR LEAVE TO ADD, DELE TE OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 17. IN REGARD TO GROUND NO.1, IT WAS SUBMITTED BY THE LEARNED SR.DR THAT THIS ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE I.T RULES 1962 TO RS.76,00,000/- AS AGAINST RS. 9.05 CORRES. IT WA S THE SUBMISSION THAT ORIGINALLY THE ASSESSING OFFICER HAD COMPUTED THE DISALLOWANCE U/ S. 14A ON THE BASIS OF THE COMPUTATION OF THE ASSESSEE AT RS. 9.05 CRORES. IT WAS THE SUB MISSION THAT SUBSEQUENTLY ON RE-WORKING OF THE DISALLOWANCE BY THE APPLICABILITY OF THE PROVIS IONS OF SECTION 14A, THE SAME WAS RE- WORKED AT RS. 76 LAKHS BY THE ASSESSEE. THE LEARNE D COMMISSIONER OF INCOME-TAX (APPEALS) HAD ACCEPTED THE ASSESSEES WORKING. IT WAS THE SU BMISSION THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-WORKING OF THE COMPUTATION U/S. 14A OF THE ACT R.W.RULE 8D OF THE I.T RULES 1962. 18. IN REPLY, THE LEARNED AR FOR THE ASSESSEE HAS SUBMITTED THAT HE HAS NO OBJECTION TO THE ISSUE BEING RESTORED TO THE FILE OF THE ASSESSI NG OFFICER FOR RE-ADJUDICATION IN THE LINE WITH THE DIRECTION/DECISION OF THE CO-ORDINATE BENC H OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD VS. DCIT IN ITA NOS. 1331 & 1423 /KOL/2011 & 14 23/KOL/2011 DATED 19-06-2013, 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE COMPUTATION OF THE DISALLOWANCE U/S. 14A R.W.R 8D IS NOT BEFORE US, TH IS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO RE-COMPUTE THE SAME U/S. 14A R .W.R 8D IN THE LINE WITH THE DIRECTION GIVEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF OF REI AGRO LTD VS. DCIT IN ITA NOS. 1331 & 1423 /KOL/2011 & 1423/KOL/2011 DATE D 19-06-2013, WHEREIN THE TRIBUNAL HAS HELD IN PARA 6 TO 8.1 AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE PROVISIONS OF SECTION 14A, MORE SPECIFICALLY SUB-SECTION (2), SHO WS THAT IF THE AO IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, THEN THE AO SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME, WHICH DOES NOT FORM ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 13 PART OF TOTAL INCOME UNDER THE ACT. FOR THIS THE ME THOD IS PRESCRIBED IN RULE 8D. THE PROVISION OF SECTION 14A, SUB-SECTION (3) SPECI FIES THE PROVISION OF 14A(2) WOULD ALSO APPLY WHERE THE ASSESSEE MAKES A CLAIM T HAT THERE IS NO EXPENDITURE INCURRED. THIS IS BECAUSE IF THE ASSESSEE DOES NOT MAKE A DISALLOWANCE UNDER SECTION 14A IN ITS COMPUTATION OF TOTAL INCOME, WHE N FILING THE RETURN, THEN IF SUBSECTION (3) WAS NOT AVAILABLE, THE AO MIGHT NOT BE ABLE TO MAKE A DISALLOWANCE UNDER SECTION 14A. THUS, WHERE THE ASS ESSEE MAKES A CLAIM THAT ONLY A PARTICULAR AMOUNT IS TO BE DISALLOWED UNDER SECTI ON 14A OR WHERE THE ASSESSEE DOES NOT MAKE A DISALLOWANCE UNDER SECTION 14A, IF THE AO PROPOSES TO INVOKE THE SECTION 14A, HE IS TO RECORD A SATISFACTION ON THAT ISSUE. THIS SATISFACTION CANNOT BE A PLAIN SATISFACTION OR A SIMPLE NOTE. IT IS TO BE DONE WITH REGARD TO ACCOUNTS OF THE ASSESSEE. IN THE PRESENT CASE, THERE IS NO SATI SFACTION BY THE AO AND CONSEQUENTLY, IN VIEW OF THE DECISION OF THE COORDI NATE BENCH OF THIS TRIBUNAL IN THE CASE OF BALARAMPUR CHINI MILLS LTD. REFERRED TO SUPRA, NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE. 7. NOW COMING TO THE MERITS OF THE ISSUE. A PERUSAL OF THE PROVISION OF SECTION L4A(L) CLEARLY SHOWS THE WORDINGS, IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. IN THE PR ESENT CASE, THIS INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE AC T, IS THE DIVIDEND INCOME OF RS.1,32,638/-. THEREFORE, IF ANY DISALLOWANCE IS TO BE MADE IN RESPECT OF EXPENDITURE INCURRED, IT SHOULD BE IN RELATION TO T HIS DIVIDEND INCOME OF RS.L,32,638/-. IF AN ASSESSEE HAS INVESTED IN SHARE S, WHICH COULD GET DIVIDEND OR THERE IS INVESTMENT WHICH GENERATES DIVIDEND INCOME OR EXEMPT INCOME AS ALSO INVESTMENT WHICH DOES NOT GENERATE EXEMPT INCOME, I T IS ONLY SUCH INVESTMENTS IN RESPECT OF WHICH THE DIVIDEND INCOME OR EXEMPTED IN COME HAS BEEN EARNED WHICH CAN BE CONSIDERED WHEN COMPUTING THE DISALLOWANCE U NDER SECTION 14A READ WITH RULE 8D. A PERUSAL OF THE PROVISIONS OF RULE 8D ALS O TALKS OF SATISFACTION IN SUB- RULE (1). RULE 8D(2) HAS THREE SUB-PARTS. THE FIRST SUB-PART I.E. (I) DEALS WITH THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO THE INCO ME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THAT ISSUE IS NOT IN DISPUTE HERE AND THEREFORE, WE DO NOT GO INTO IT IN THIS CASE. IN SECOND SUB-PART I.E.(II), IT IS A COMPUTATION PROVIDED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE BY WAY OF INTE REST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULA R INCOME OR RECEIPT. THIS CLEARLY MEANS THAT IF THERE IS ANY INTEREST EXPENDITURE, WH ICH IS DIRECTLY RELATABLE TO ANY PARTICULAR INCOME OR RECEIPT, SUCH INTEREST EXPENDI TURE IS NOT TO BE CONSIDERED UNDER RULE 8D(2)(II). IN THE ASSESSEES CASE HERE T HE INTEREST HAS BEEN PAID BY THE ASSESSEE ON THE LOANS TAKEN FROM THE BANKS FOR ITS BUSINESS PURPOSE. THERE IS NO ALLEGATION FROM THE BANKS NOR THE AO THAT THE LOAN FUNDS HAVE BEEN DIVERTED FOR MAKING THE INVESTMENT IN SHARES OR FOR NON-BUSINESS PURPOSES. FURTHER RULE 8D(2)(II) CLEARLY IS WORDED IN THE NEGATIVE WITH TH E WORDS NOT DIRECTLY ATTRIBUTABLE. THUS FOR BRINGING ANY INTEREST EXPEN DITURE, CLAIMED BY THE ASSESSEE, UNDER THE AMBIT OF RULE 8D(2)(II) IT WILL HAVE TO B E SHOWN BY THE AO THAT THE SAID INTEREST IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTIC ULAR INCOME OR RECEIPT. WHY WE SAY HERE THAT IT IS TO BE SHOWN BY THE AO IS ON ACC OUNT OF THE WORDS IN RULE 8D(1) BEING WHERE THE ASSESSING OFFICER IS NOT SATISFIED WITH. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 14 (A) (B) IN RELATION TO INCOME , HE SHALL DETERMINE THE AMOU NT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SU B-RULE (2). IN THE ASSESSEES CASE, ADMITTEDLY, THE ASSESSEE HA S SUBSTANTIAL CAPITAL. THE INCREASE IN THE CAPITAL ITSELF IS TO AN EXTENT OF R S.4 CRORES AND IN RESPECT OF RESERVES AND SURPLUS, THE INCREASE IS RS. 112 CRORE S. THE LOANS TAKEN DURING THE YEAR ADMITTEDLY ARE FOR THE LETTERS OF CREDIT AND THE ASSESSEE IS BOUND TO PROVIDE THE BANK STOCK STATEMENT AND OTHER DETAILS TO SHOW THE UTILIZATION OF THE LOANS. NO BANK WOULD PERMIT THE LOAN GIVEN FOR ONE PURPOSE TO BE USED FOR MAKING ANY INVESTMENT IN SHARES. THE LD. CIT(A), IT IS NOTICED THAT AFTER CONSIDERING THESE FACTS THAT THE ASSESSEE HAD NOT USED ANY OF ITS BORROWING S FOR PURCHASING THE SHARES, HAS DELETED THE DISALLOWANCE. ON THIS GROUND ITSELF , THE DELETION AS MADE BY THE ID. CIT(A) IS LIABLE TO BE CONFIRMED AND WE DO SO. 7.1 IN ANY CASE, THE WORKING OF THE DISALLOWANCE UN DER SUB-PART (II) OF SUB- CLAUSE (2) OF RULE 8D AS MADE BY THE AO ALSO SUFFERS FROM A SUBSTANTIAL ERROR IN SO FAR AS IN THE SAID RULE IN REGARD TO THE NUMERATOR B, THE WORDS USED ARE THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE-SHEET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOUS YEAR. HERE THE AO HAS TAKE N INTO CONSIDERATION THE INVESTMENT OF RS.103 CRORES MADE THIS YEAR, WHICH H AS NOT EARNED ANY DIVIDEND OR EXEMPT INCOME. IT IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH THE INCOME HAS BEEN EARNED WHICH IS NOT FALLING WITHIN THE PART OF THE TOTAL INCOME THAT IS TO BE CONSIDERED. THIS IS WHY THE QUESTION OF SATISFACTION IS PROVIDED IN SECTION 14A AND RULE 8D(1), THAT RELATES TO THE ACC OUNTS OF THE ASSESSEE. THUS, IT IS NOT THE TOTAL INVESTMENT AT THE BEGINNING OF THE YE AR AND AT THE END OF THE YEAR, WHICH IS TO BE CONSIDERED BUT IT IS THE AVERAGE OF THE VALUE OF INVESTMENTS WHICH HAS GIVEN RISE TO THE INCOME WHICH DOES NOT FORM PA RT OF THE TOTAL INCOME WHICH IS TO BE CONSIDERED. A QUESTION MAY ARISE AS TO WHY TH E TERM AVERAGE OF THE VALUE OF INVESTMENT IS THEN USED. THE TERM AVERAGE OF THE V ALUE OF INVESTMENT WOULD BE TO TAKE CARE OF CASES WHERE THERE IS THE ISSUE OF DIVI DEND STRIPING. IN ANY CASE, AS WE HAVE ALREADY HELD THAT THE ASSESSEE HAS NOT INCURRE D ANY EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR, WHICH IS NOT DIR ECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME, THE FINDINGS OF THE LD. CIT(A) O N THE ISSUE STAND CONFIRMED AND CONSEQUENTLY THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 8. IN RESPECT OF PROVISIONS OF RULE 8D(2)(III), WHI CH IS THE SUBJECT-MATTER OF THE APPEAL IN THE ASSESSEES HAND, A PERUSAL OF THE SAI D PROVISION SHOWS THAT WHAT IS DISALLOWABLE UNDER RULE 8D(2)(III) IS THE AMOUNT EQ UAL TO /2 PERCENTAGE OF THE AVERAGE VALUE OF INVESTMENT THE INCOME FROM WHICH D OES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME. THUS, UNDER SUB-CLAUSE (III), WHAT IS DISALLOWED IS 1/2 PERCENTAGE OF THE NUMERATOR B IN RULE 8D(2)(II). AG AIN THIS IS TO BE CALCULATED IN THE SAME LINE AS MENTIONED EARLIER IN RESPECT OF NU MERATOR B IN RULE 8D(2)(II) OF THE ACT. 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-MA TTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. THE DISALLOWANCE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 15 UNDER SECTION 14A READ WITH RULE 8D IS TO BE IN REL ATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE D ONE ONLY BY TAKING INTO CONSIDERATION THE INVESTMENT WHICH HAS GIVEN RISE T O THIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. UNDER THE CIRCUMSTAN CES, THE COMPUTATION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2) (III), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE A O FOR RECOMPUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UNDER SE CTION 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. ON THE SAME FINDING THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- WORKING THE DISALLOWANCE U/S. 14A. GROUND NO.1 OF THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE.. 20. IN REGARD TO GROUND NOS.2 TO 8 OF THE REVENUE S APPEAL, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUES WERE IDENTICAL TO THE GR OUND NOS. 3-5 OF ASSESSEES APPEAL IN ITA NO.346/KOL/2012 FOR THE ASSESSMENT YEAR 2008-09 BEI NG AGAINST THE APPLICABILITY OF THE PROVISIONS OF SECTION 115JB OF THE ACT. AS WE HAVE ALREADY HELD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE IN THE CASE OF ASSESSEE BANK, OUR GIVEN FINDINGS IN GROUND NOS. 3 TO 5 OF ASSESSEES APPEAL IN ITA N O. 346/KOL/2012 FOR THE ASSESSMENT YEAR 2008-09 WOULD APPLY TO THESE GROUNDS ALSO. THESE GROUNDS ARE DISMISSED 21. THE ABOVE REVENUES APPEAL IN ITA NO. 605/KOL/ 2012 FOR THE ASSESSMENT YEAR 2008- 09 STANDS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.1092/KOL/2007 A.Y 2001-02 (BY THE ASSESSEE) 22. IN THIS REVENUES APPEAL, THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T .(A WAS WRONG IN NOT ALLOWING BAD DEBT WRITTEN OFF U/S. 36(1)(VII) OF THE LT.ACT AMOUNTING TO RS. 102.37 CRORES BUT INSTEAD HE HAS DIRECTED THE A.O. TO WORK OUT THE DEDUCTION U/S. 36(1)(VIIA) & 36(1)(VII) FOR THE YEAR UNDER CONSIDE RATION AS DONE IN THE ASSESSMENT YEAR 2004-05 WHICH IS COMPLETELY ARBITRA RY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(A) WAS WRONG IN RESTRICTING THE DISALLOWANCE OF NOTIONAL EXPENDITURE RELATED TO EX EMPTED INCOME AMOUNTING TO RS. 3.30 CRORES U/S. 14A AT 5% OF THE TOTAL EXEM PTED INCOME WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I. T.(A) WAS WRONG IN CONFIRMING THE ACTION OF THE A.O. IN NOT ALLOWING THE PROVISION FO R DOUBTFUL INVESTMENT AS PER RBI GUIDELINES AMOUNTING TO RS. 13,74,39,497/- WHIC H IS COMPLETELY ARBITRARY. UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.LT .(A) WAS WRONG IN NOT ALLOWING BAD DEBT REALIZATION IN URBAN AND SEMI-URBAN BRANCH ES U/S. 36(1)(VII) ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 16 AMOUNTING TO RS. 4,61,31,909/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I. T.(A) WAS WRONG IN NOT ALLOWING BAD DEBT REALIZATION IN URBAN AND SEMI-URBAN BRANCH ES AMOUNTING TO RS. 4.61 CRORES ALTHOUGH THESE PROVISIONS HAVE BEEN OFFERED TO TAX IN EARLIER YEARS, THEREFORE, THE ID. C.I.T(A) SHOULD HAVE DEDUCTED TH E BAD DEBT REALIZATION IN THIS YEAR, FROM THE TOTAL INCOME AS COMPUTED. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I .T.(A) WAS WRONG IN CONFIRMING THE ORDER OF THE A.O. IN COMPUTING THE BOOK PROFIT U/S. 11 5JB BY ADDING NOTIONAL EXPENDITURE U/S. 14A WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 7. FOR THAT THE APPELLANT RESERVES THE RIGHT TO AD DUCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE HEARING OF THE APPEAL.. 23. IN REGARD TO GROUND NO.1, IT WAS SUBMITTED BY T HE LEARNED AR FOR THE ASSESSEE THAT THIS ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMMISS IONER OF INCOME-TAX(APPEALS) IN NOT ALLOWING THE BAD DEBTS WRITTEN OFF U/S. 36(1)(VII) OF THE ACT TO THE EXTENT OF RS. 102.37 CRORES. IT WAS THE SUBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE IN ITA NOS. 1497 & 1498/KOL/09 FOR THE ASSESSMENT YEARS 2004-05 & 2006-07 DATED 14-02 -2013. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THIS ISSUE WAS IDENTICAL TO GROUND NO.2 OF ASSESSEES APPEAL IN ITA NO.342/KOL/2012. FOR THE ASSESSMENT YEAR 2008-09. 24. WE HAVE CONSIDERED THE SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS IDENTICAL TO THE GROUND NO.2 OF ASSESSEES APPEAL IN ITA NO..346/KOL /2012, OUR FINDINGS THEREIN WOULD APPLY TO THIS GROUND ALSO. THIS GROUND OF ASSESSEE IS ALL OWED AS ABOVE. 25. IN REGARD TO GROUND NO.2, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT ORIGINALLY THE ASSESSEE DID NOT RECEIVE THE COD PERMISSION BEING A GAINST THE DISALLOWANCE OF THE NOTIONAL EXPENDITURE AT 5% OF THE TOTAL EXEMPTED INCOME. IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSESSEE THAT CODS DIRECTION NOT BEING APPLICABLE , NOW THE ISSUE WAS LIABLE TO BE DECIDED BY THIS TRIBUNAL. IT WAS THE SUBMISSION THAT ONLY 1% OF NOTIONAL EXPENDITURE WAS LIABLE TO BE DISALLOWED, AS THE ASSESSMENT YEAR IN THE APPEAL WA S BEFORE A.Y 2008-09. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSION. AT TH E OUTSET, IT IS NOTICED THAT THE ASSESSEE HAD NOT RECEIVED THE COD PERMISSION IN REGARD TO SAID GROUND. THE ISSUE WHETHER THE ASSESSEE CAN AGITATE AN ISSUE FOR WHI CH THE COD HAD DENIED, THE COD ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 17 PERMISSION HAS ALREADY BEEN ADJUDICATED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. NATIONAL INSURANCE CO. LTD IN ITA NOS. 926/K/07 & 1410 & 1411/K/09 FOR THE ASSESSMENT YEARS 2002 TO 2004-05 VIDE ORDER DAT ED 22-05-2013, WHEREIN THE CO- ORDINATE BENCH OF THIS TRIBUNAL HAS DISCUSSED THE I SSUE AS UNDER:- 7.1 IT WAS THE SUBMISSION BY THE LEARNED AR FOR TH E ASSESSEE THAT IN RESPECT OF GROUND NO.2(I) ORIGINALLY THE COD BEING THE COMMITTEE ON DISPUTE HAD NOT GRANTED THE ASSESSEES PERMISSION T O PROCEED IN THE APPEAL. IT WAS THE SUBMISSION THAT COD PERMISSION HAS BEEN SPECIFICALLY DENIED. IT WAS THE SUBMISSION THAT THE TRIBUNAL HAD DISMISSED THE ASSESSEES APPEAL ON ACCOUNT OF NON-A VAILABILITY OF COD AT THAT TIME. THE SAME HAS BEEN REVIVED AT THIS POINT IN A MISCELLANEOUS APPLICATION. 8. THE LEARNED SR.DR HAS SUBMITTED THAT THERE WAS A DIRECTION ISSUED BY THE GOVERNMENT OF INDIA, CABINET SECRETARIAT I N NO.A- 12034/01/01/2011-/AD.I DATED 4-2-13, WHEREIN IT HAS BEEN SPECIFICALLY MENTIONED VIDE OFFICE MEMORANDUM THAT NO MINISTRY/ DEPARTMENT OR PUBLIC SECTOR UNDERTAKING UNDER ANY OF THEM MAY RE- OPEN THOSE CASES IN WHICH CLEAR DECISIONS HAS BEEN ISSUED BY THE COD PR IOR TO 17-2-11. IT WAS THE SUBMISSION THAT AS THE COD HAD REJECTED THE ASSESSEES REQUEST FOR FILING OF THE APPEAL IN RESPECT OF THE PROVISI ONS FOR UNIDENTIFIED MOTOR THIRD PARTY CLAIM OF RS.20,91,95,745/- ADDED WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF THE ACT, THIS GROUND OF A SSESSEES APPEAL WAS LIABLE TO BE DISMISSED. 9. THE LEARNED AR FOR THE ASSESSEE HAS SUBMITTED TH AT IN VIEW OF THE SAID DIRECTIVES OF THE GOVERNMENT OF INDIA , CABINE T SECRETARIAT, HE HAD NOTHING FURTHER TO SAY. 10. WE HAVE CONSIDERED THE SUBMISSIONS. AS IT IS N OTICED THAT THERE IS SPECIFIC DIRECTION FROM THE GOVT. OF INDIA, CABIN ET SECRETARIAT IN RESPECT OF THE ISSUE, WHERE CLEAR DECISION WAS IS SUED BY THE C.O.D [COMMITTEE ON DISPUTES] AND THE C.O.D HAS SPECIFICA LLY DENIED THE ASSESSEES PERMISSION/REQUEST TO FILE APPEAL ON U NIDENTIFIED MOTOR THIRD PARTY CLAIM. IN VIEW OF THE SAID OFFICE MEMORANDUM ISSUED BY THE GOVERNMENT OF INDIA, CABINET SECRETARIAT DATED 4-2- 13 THIS ISSUE STANDS DISMISSED. RESPECTFULLY FOLLOWING THE SAME, THE GROUND IS DIS MISSED. 27. IN REGARD TO GROUND NO.3, THE LEARNED AR FOR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMMI SSIONER OF INCOME-TAX(APPEALS) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN N OT ALLOWING THE PROVISIONS FOR DOUBTFUL DEBTS AS PER RBI GUIDELINES. IT WAS FAIRLY AGRE ED BY BOTH THE SIDES THAT THE ISSUE COULD BE ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 18 RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR R E-ADJUDICATION AS PER PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AS . APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR WHERE THE ASSESSEE IS ENTITLED TO DEDUCTION AT 5%. THUS, THIS GROUND OF ASSESSEES APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSE IN SO FAR AS IT IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATION. 28. IN REGARD TO GROUND NOS.4 6, IT WAS FAIRLY AGR EED BY BOTH THE SIDES THAT THE COD COMMITTEE ON DISPUTES HAD NOT GRANTED THE ASSESSEE PERMISSION TO PURSUE THE SAID GROUNDS OF THE ASSESSEE . AS WE HAVE ALREADY DISCUSSED T HE IDENTICAL ISSUE IN GROUND NO. 2 OF THIS ASSESSEES APPEAL ITA NO. 1092/KOL/2007 A.Y 2001-0 2 (BY THE ASSESSEE) OUR FINDINGS WOULD APPLY TO THESE GROUNDS ALSO. THUS, THESE GROUNDS A RE ALSO LIABLE TO BE DISMISSED. 29. THE ABOVE ASSESSEES APPEAL IN ITA NO.1092/KOL /2007 FOR THE ASSESSMENT YEAR 2001- 02 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 1178/KOL/2007 A.Y 2003-04 (BY THE ASSESSEE ) 30. IN THIS ASSESSEES APPEAL, THE ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL:- 1.FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T. (A) WAS WRONG IN NOT ALLOWING BAD DEBT WRITTEN OFF UJS. 36(1)(VII) OF TH E LT.ACT, 1961 AMOUNTING TO RS. 202.70 CRORES BUT INSTEAD HE HAS DIRECTED TH E A.O. TO WORK OUT THE DEDUCTION U/S. 36(L)(VII) AND 36(1)(VIIA) FOR THE Y EAR UNDER CONSIDERATION AS DONE IN ASSESSMENT YEAR 2004-05 WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T .(A) SHOULD HAVE ALLOWED RS.202.70 CRORES U/S. 36(1 )(VII) I.E. TOTAL BAD DE BT WRITTEN OFF RS. 224.13 CRORES LESS BAD DEBT RELATING TO RURAL BRANCHES RS. 21.43 CRORES, THEREFORE, THE ORDER OF THE ID. C.I.T.(A) IS COMPLETELY ARBITR ARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T .(A) WAS WRONG IN RESTRICTING THE DISALLOWANCE OF NOTIONAL EXPENDITU RE RELATED TO EXEMPTED INCOME AMOUNTING TO RS. 55,48,000/- U/S. 14A AT 5% OF THE TOTAL EXEMPTED INCOME WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED A ND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T .(A) WAS WRONG IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING EX PENSES FOR INTERNATIONAL DIVISION AMOUNTING TO RS. 1,75,000/- WHICH IS COMPL ETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE ID. C.I.T .(A) WAS WRONG IN CONFIRMING THE ACTION OF THE A.O. IN NOT ALLOWING A MORTIZATION EXPENSES AMOUNTING TO RS.19,00,000/- WHICH IS COMPLETELY ARB ITRARY, UNJUSTIFIED AND ILLEGAL. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 19 6. FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE HEARING OF THE APPEAL. 31. IN REGARD TO GROUND NOS.1 & 2 OF ASSESSEES APP EAL, IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS IDENTICAL TO GROUND NO.2 O F ASSESSEES APPEAL IN ITA NO.346/KOL/2012 FOR THE ASSESSMENT YEAR 2008-09. H OWEVER, THE CLAIM NOW STOOD REDUCED FROM RS. 202.70 CRS TO RS. 80 CRS. IN THE CIRCUMSTA NCES, OUR GIVEN FINDINGS IN REGARD TO GROUND 2 OF ASSESSEES APPEAL IN ITA NO.346/KOL/201 2 FOR THE ASSESSMENT YEAR 2008-09 WOULD APPLY TO THE SAID GROUND ALSO. GROUND NOS. 1 & 2 STANDS ALLOWED 32. IN REGARD TO GROUND NOS. 3 & 4 OF ASSESSEES AP PEAL, IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED THE COD PERMISSION. IN VIEW OF OU R GIVEN FINDINGS GIVEN IN THE CASE OF NATIONAL INSURANCE CO. LTD (SUPRA) IN ITA NOS.926/K /07 & 1410 & 1411/K/09 FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 DATED 22-05-20 13 AND ALSO IN REGARD TO GROUND NO.2 OF ASSESSEES APPEAL IN ITA NO. 1092/K/07 FOR THE A SSESSMENT YEAR 2001-02, THESE GROUNDS ARE DISMISSED. 33. IN REGARD TO GROUND NO.5, IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSESSEE THAT THIS ISSUE WAS AGAINST THE ACTION OF THE LEARNED COMMI SSIONER OF INCOME-TAX(APPEALS) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN N OT ALLOWING AMORTIZATION EXPENSES. IT WAS SUBMITTED THAT AMORTIZATION EXPENSES WERE AS PER THE RBI GUIDELINES. IT WAS THE SUBMISSION BY THE LEARNED AR FOR THE ASSESSEE THAT THESE EXPENSES ARE LIABLE TO BE ALLOWED. 34. IN REPLY, THE LEARNED SR.DR SUBMITTED THAT THE SAME COULD NOT BE ALLOWED U/S.35D OF THE ACT, AS THE ASSESSEE HAD NOT COMPLIED WITH TH E REQUIREMENTS OF THE PROVISIONS OF SECTION 35D OF THE ACT. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) CLEARLY SHOWS T HAT IN PARA 10.1 OF HIS ORDER HE HAS CATEGORICALLY HELD THAT THE SAID EXPENDITURE WAS N OT ALLOWABLE U/S. 35D OF THE ACT.. THE ASSESSEE HAS NOT BEEN ABLE TO SHOW US AS TO HOW THE ASSESSEES CASE COMPLIES WITH ALL THE CONDITIONS PROVIDED U/S. 35D OF THE ACT.. IN THE CI RCUMSTANCES, THE FINDING OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE STANDS CONFIRMED. THIS ISSUE OF ASSESSEES APPEAL IS DISMISSED. ITA NOS. 346, & 605/K/12 & 1092 & 1178/K/07 PB-B-GM 20 36. THE ABOVE ASSESSEES APPEAL IN ITA NO.1178/KOL /2007 FOR THE ASSESSMENT YEAR 2003- 04 IS PARTLY ALLOWED. 37. IN THE RESULT, THE ABOVE ASSESSEES APPEALS I N ITA NO. 346/KOL/12 & 1178/KOL/07 FOR THE ASSESSMENT YEAR 2008-09 & 2003-04 BOTH ARE PARTLY ALLOWED STATED AS . THE ABOVE REVENUES APPEAL IN ITA NO.605/KOL/12 FOR THE ASSES SMENT YEAR 2008-09 IS ALLOWED FOR STATISTICAL PURPOSE AND . THE ABOVE ASSESSEES APPE AL IN ITA NO. 1092/KOL/07 FOR THE ASSESSMENT YEAR 2001-02 IS PARTLY ALLOWED FOR STATI STICAL PURPOSE AS STATED ABOVE. . 8 4 . 6 . 9 8 THIS ORDER IS PRONOUNCED IN OP EN COURT ON 19-06-2013 SD/- SD/- *PP/SPS 4 0 *--: ;:3< / COPY OF THE ORDER FORWARDED TO: 1. . &) / THE APPELLANT : UNITED BANK OF INDIA 16 OLD COUR T HOUSE ST, KOL-1 2 *+&) / THE RESPONDENT- DCIT/ACIT, CIRCLE 6 P 7 CHOWRI NGHEE SQ, KOL-1. 3 4. . . -4 / THE CIT, -4 ( )/ THE CIT(A) 5 . =-9 *- / DR, KOLKATA BENCH 6 . GUARD FILE . +: *-/ TRUE COPY, 4./ BY ORDER, 8 !' /ASSTT REGISTRAR ( . . . 9.> , ) ( N.S. SAINI, ACCOUNTANT MEMBER) ( '#'$ 1 & , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( ( 1 1 1 1 ) )) ) DATE 19-06-2013