The Bharuch Dist.Central Co.Op.Bank Ltd., Bharuch V. The Income tax Officer,Ward-1, Bharuch

ITA 1252/AHD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2170 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bad and doubtful debts
• Section: 6

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% %% % . .. .&'( &'( &'( &'(, , , , %) * %) * %) * %) * % ' % ' % ' % ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. K. GARODIA, ACCOUNTANT MEMBER) ITA NO.1252/AHD/2012 [ASSTT.YEAR : 2008-2009] THE BHARUCH DIST. CENTRAL CO-OP. BANK LTD. JAVAHAR BHAWAN, OPP: SHALIMAR CINEMA STATION ROAD, BHARUCH. /VS. ITO, WARD-1 BHARUCH. ( (( (,- ,- ,- ,- / APPELLANT) ( (( (./,- ./,- ./,- ./,- / RESPONDENT) 01 2 3 %/ ASSESSEE BY : SHRI S.N. SOPARKAR * 2 3 %/ REVENUE BY : SHRI SUBHASH BAINS, CIT-DR 5 2 16)/ DATE OF HEARING : 24 TH JULY, 2013 7&8 2 16)/ DATE OF PRONOUNCEMENT : 26-07-2013 %9 / O R D E R PER GARODIA, ACCOUNTANT MEMBER: THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, BARODA DATED 27.3.2012 FOR A.Y.2008-2009. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING ACTION OF AO IN DISALLOWING DEDUCTION OF RS.6,00,00,000/-C LAIMED BY THE APPELLANT BANK U/S 36(L) (VIIA) OF THE ACT. LD. CIT (A) OUGHT TO HAVE DELETED DISALLOWANCE MADE BY AO AND O UGHT TO HAVE ALLOWED THE CLAIM OF THE APPELLANT. 2. LD. CIT (A) ERRED IN LAW AND ON THE FACTS IN CONFIR MING ACTION OF AO IN TREATING PROVISION OF RS.1,00,00,000/- MAD E AGAINST STANDARD ASSETS OF THE BANK CREDITED TO PROVISION F OR BAD & DOUBTFUL DEBTS NOT TO BE ELIGIBLE FOR DEDUCTION U/S ITA NO.1252/AHD/2012 -2- 36(1)(VIIA)(A) OF THE ACT. BOTH THE LOWER AUTHORITI ES ERRED IN NOT APPRECIATING THE FACT THAT THE DEDUCTION UNDER S. 36(L)(VIIA) IS A STATUTORY DEDUCTION WITH REFERENCE TO THE AMOUNT PROVIDED AS LAID DOWN IN SAID SECTION. THE C ONDITIONS OF S. 36(L)(VIIA) HAVING BEEN FULFILLED, THE ENTIRE DEDUCTION CLAIMED OUGHT TO HAVE BEEN ALLOWED. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS.5,000,000/- OF PROVIS ION MADE FOR BAD AND DOUBTFUL DEBTS HOLDING THE APPELLA NT NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIIA) OF THE ACT. LD. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT BY TRANSFER RING EXCESS BALANCE IN 'OVERDUE INTEREST RESERVE A/C' TO RESERV E FOR BAD AND DOUBTFUL DEBTS A/C THERE WAS NO CLAIM OF DOUBLE DEDUCTION MADE BY THE APPELLANT. THE DEDUCTION UNDE R S. 36(LXVIIA) BE HELD TO BE ALLOWABLE IN VIEW OF CONDI TIONS OF S. 36(1) (VIIA) BEING FULFILLED. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT FOR CLAIMING DEDUCTION U/S 36(1)(VIIA) OF THE ACT T HE APPELLANT OUGHT TO MAKE PROVISION OUT OF INCOME OF THE CURREN T YEAR ONLY. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIA TE PROVISIONS OF LAW IN ITS PROPER PERSPECTIVE AS WELL RATIO OF THE JUDGMENT RELIED UPON BY THE APPELLANT IN RURAL ELECTRIFICATION CORPORATION LTD. RENDERED BY AAR IN AAA NO. 759 OF 2007.. 3. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY THE LEARNED CIT(A) IN PARA 3 & 4 OF HIS ORDER, WHICH ARE REPROD UCED BELOW FOR THE SAKE OF READY REFERENCE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE APPELLANT IS A CO-OPERATIVE BANK. THE RETURN OF INCOME WAS FILED ON 30.9.2008 DECLARING TOTAL INCOME AT RS.3,55,790/-. THE REGUL AR ASSESSMENT WAS FINALIZED ON 31.12.2010 AND THE INCOME WAS DETE RMINED AT RS.6,03,55,790/- WHEREIN CERTAIN ADDITIONS WERE MAD E. 4. THE FIRST GROUND OF APPEAL IS DIRECTED AGAINST T HE DISALLOWANCE OF RS.6,00,00,000/- UNDER CLAUSE (VISA) OF SUB-SECT ION(1) OF SECTION 36 OF THE I.T.ACT,1961. THE APPELLANT HAD MADE A PR OVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.7,34,77,495/- DU RING THE YEAR, HOWEVER, IT HAD CLAIMED DEDUCTION OF RS.7,21,42,428 /- ONLY UNDER SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUB-SECTION(1) O F SECTION 36 OF THE ITA NO.1252/AHD/2012 -3- I.T.ACT,1961 BECAUSE THAT WAS THE AMOUNT OF PROFIT AVAILABLE BEFORE CLAIMING THE DEDUCTION.. BIFURCATION OF AMOUNT OF R S.7,34,77,495/- WAS AS UNDER: RS.1,00,00,000/- PROVIDED FROM P & L A/C AND CREDITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS A/C. RS.1,00,00,000/- PROVIDED FROM P & L A/C AND CREDITED TO PROVISION FOR BAD DEBTS TOWARDS STANDARD ASSETS A/C. RS.5,00,00,000/- TRANSFERRED FROM EXCESS BALANCE IN OVERDUE INTEREST RESERVE A/C AND CREDITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS A/C. RS.34,77,495/- APPROPRIATED FROM NET PROFIT @ 15% THEREOF AS PER BY-LAWS RS.7,34,77,495/- TOTAL AMOUNT PROVIDED AND/OR CREDITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS THE AO DISALLOWED DEDUCTION UNDER SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUB-SECTION(1) OF SECTION 36 IN RESPECT OF THE P ROVISION OF RS.1,00,00,000/- WHICH WAS CREDITED TO PROVISION FO R BAD DEBTS TOWARDS STANDARD ASSETS A/C. AND IN RESPECT OF PROV ISION OF RS.5,00,00,000/- TRANSFERRED FROM EXCESS BALANCE IN OVERDUE INTEREST RESERVE A/C AND DEBITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS A/C. IN RESPECT OF DISALLOWANCE RS.1,00,00,00 0/- THE AO HELD THAT THIS AMOUNT WAS NOT ELIGIBLE FOR DEDUCTION UND ER SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUB-SECTION(1) OF SECTION 3 6 BECAUSE IT WAS NOT A PROVISION FOR BAD AND DOUBTFUL DEBTS RATHER I T WAS A PROVISION AGAINST STANDARD ASSETS AND THE STATE AND CENTRAL CO- OP. BANKS GUIDELINES ON PRUDENTIAL NORMS SAY THAT ' PROVISION MADE ON STANDARD ASSETS MAY NOT BE RECKONED AS EROS ION IN VALUE OF ASSETS'. IN RESPECT OF DISALLOWANCE RS.5,00,00,0 00/- THE AO HELD THAT THIS AMOUNT WAS NOT ELIGIBLE FOR DEDUCTION UND ER SUB CLAUSE (A) OF CLAUSE (VIIA) OF SUBSECTION(1) OF SECTION 36 BECAUSE IT AMOUNTED TO ALLOWING DEDUCTION IN RESPECT OF THIS A MOUNT TWICE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A), BUT WITHOUT SUCCESS, AND NOW TH E ASSESSEE IS IN ITA NO.1252/AHD/2012 -4- FURTHER APPEAL BEFORE US. AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT THIS ISSUE IS NOW S QUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONB LE APEX COURT RENDERED IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V . COMMISSIONER OF INCOME-TAX, 343 ITR 270 (SC). HE ALSO PLACED RELIA NCE ON THE VARIOUS OTHER JUDICIAL PRONOUNCEMENTS: I) BANK OF TOKYO LTD. VS. JCIT, 36 SOT 8 (DEL) II) ACIT VS. ALFA LAMINATION, ITA NO.2234/AHD/2010 DTD. 11/02/2011; III) THE JAMNAGAR DIST. CO-OPERATIVE BANK LTD. VS. ACIT, ITA NO.7/RJT/2012 AND 481/RJT/2011 DTD.1/8/2012; IV) ____ 78 ITD 103; V) RURAL ELECTRIFICATION CORPORATION LTD., IN RE (AAR ), 312 ITR 122 (AAR) AS AGAINST THIS, THE LEARNED DR OF THE REVENUE SUPP ORTED THE ORDER OF THE LEARNED CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE RELEVANT PROVISIONS, FOR THE ISSUE IN DISPUTE, IN THE PRESEN T CASE ARE THE PROVISIONS OF SECTION 36(1)(VIIA), WHICH ARE REPRODUCED BELOW: 36(1) ...... ....... (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOU BTFUL 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-SCHED ULED BANK 3OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICU LTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK, AN AMOUNT [NOT EXCEEDING SE VEN AND ONE-HALF PER CENT. OF THE TOTAL INCOME (COMPUTE D BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND AN AMOUNT NOT EXCEEDING TEN PER CENT. OF THE AG GREGATE ITA NO.1252/AHD/2012 -5- AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER: PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED B ANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFI ED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS AS SETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF, FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT. OF THE AMOUN T OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR : PROVIDED FURTHER THAT FOR THE RELEVANT ASSESSMENT Y EARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 A ND ENDING BEFORE THE 1ST DAY OF APRIL, 2005, THE PROVI SIONS OF THE FIRST PROVISO SHALL HAVE EFFECT AS IF FOR THE W ORDS 'FIVE PER CENT.', THE WORDS 'TEN PER CENT.' HAD BEEN SUBSTITU TED : PROVIDED ALSO THAT A SCHEDULED BANK OR A NON-SCHED ULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS O PTION, BE ALLOWED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPECIFIED IN THE FOREGOING PROVISIONS, FOR AN AMOUNT NOT EXCE EDING THE INCOME DERIVED FROM REDEMPTION OF SECURITIES IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT : PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED U NDER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN THE RETURN OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' : [EXPLANATION.- FOR THE PURPOSES OF THIS SUB-CLAUSE, 'RELEVANT ASSESSMENT YEARS' MEANS THE FIVE CONSECUTIVE ASSESS MENT YEARS 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 DED UCTION UNDER THIS CLAUSE AND CHAPTER VI-A) ; (C) A PUBLIC FINANCIAL INSTITUTION OR A STATE FIN ANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, AN AM OUNT NOT ITA NO.1252/AHD/2012 -6- EXCEEDING FIVE PER CENT. OF THE TOTAL INCOME (COMPU TED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) : PROVIDED THAT A PUBLIC FINANCIAL INSTITUTION OR A S TATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTM ENT CORPORATION REFERRED TO IN THIS SUB-CLAUSE SHALL, A T ITS OPTION, BE ALLOWED IN ANY OF THE TWO CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 A ND 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 T HIS BEHALF, OF AN AMOUNT NOT EXCEEDING TEN PER CENT. OF THE AMO UNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF SUCH I NSTITUTION OR CORPORATION, AS THE CASE MAY BE, ON THE LAST DAY OF THE PREVIOUS YEAR : EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE,- (I) 'NON-SCHEDULED BANK' MEANS A BANKING COMPANY AS DEFINED IN CLAUSE (C) OF SECTION 5 OF THE BANKING R EGULATION ACT, 1949 (10 OF 1949), WHICH IS NOT A SCHEDULED BA NK ; (IA) 'RURAL BRANCH' MEANS A BRANCH OF A SCHEDULED BANK [OR A NON-SCHEDULED BANK] SITUATED IN A PLACE WHICH HAS A POPULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR ; (II) 'SCHEDULED BANK' MEANS THE STATE BANK OF INDIA CONSTITUTED UNDER THE STATE BANK OF INDIA ACT, 1955 (23 OF 1955), A SUBSIDIARY BANK AS DEFINED IN THE STATE BA NK OF INDIA (SUBSIDIARY BANKS) ACT, 1959 (38 OF 1959), A CORRESPONDING NEW BANK CONSTITUTED UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1970 (5 OF 1970), OR UNDER SECTI ON 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1980 (40 OF 1980), OR ANY OTHER BANK BEING A BANK INCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934) ; ITA NO.1252/AHD/2012 -7- (III) 'PUBLIC FINANCIAL INSTITUTION' SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 4A OF THE COMPANIES ACT, 1956 (1 OF 1956) ; (IV) 'STATE FINANCIAL CORPORATION' MEANS A FINANCI AL CORPORATION ESTABLISHED UNDER SECTION 3 OR SECTION 3A OR AN INSTITUTION NOTIFIED UNDER SECTION 46 OF THE STATE FINANCIAL CORPORATIONS ACT, 1951 (63 OF 1951) ; (V) 'STATE INDUSTRIAL INVESTMENT CORPORATION' MEANS A GOVERNMENT COMPANY WITHIN THE MEANING OF SECTION 61 7 OF THE COMPANIES ACT, 1956 (1 OF 1956), ENGAGED IN THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR INDUSTR IAL PROJECTS AND ELIGIBLE FOR DEDUCTION UNDER CLAUSE (V III) OF THIS SUB-SECTION ; 4(VI) 'CO-OPERATIVE BANK', 'PRIMARY AGRICULTURAL CR EDIT SOCIETY' AND 'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' SHALL HAVE THE MEANINGS RESPECTIV ELY ASSIGNED TO THEM IN THE EXPLANATION TO SUB-SECTION (4) OF SECTION 80P ; 6. WE ALSO FIND THAT AS PER PROVISO TO SECTION 36(1 )(VII), THE PROVISION FOR BAD AND DOUBTFUL DEBTS, WHICH IS ELIGIBLE FOR D EDUCTION UNDER SECTION 36(1)(VIIA), HAS TO BE CONSIDERED FOR ALLOWING DEDU CTION UNDER SECTION 36(1)(VII), AND ACTUAL WRITE OFF OF BAD DEBTS IS AL LOWABLE AS DEDUCTION UNDER SECTION 36(1)(VII), ONLY TO THE EXTENT OF THE AMOUNT OF SUCH WRITE OFF, BEING IN EXCESS OF THE CREDIT BALANCE IN THE P ROVISION FOR BAD AND DOUBTFUL DEBTS MADE UNDER THAT CLAUSE I.E. CLAUSE ( VIIA) OF SECTION 36(1) OF THE ACT. IN THE LIGHT OF THESE PROVISIONS, BEING T HE PROVISO TO SECTION 36(1)(VII), WE HAVE TO CONSIDER AND DECIDE THE CLAI M OF THE ASSESSEE IN THE PRESENT CASE. A FINDING IS GIVEN BY THE LEARNED CI T(A) AT PAGE NO.6 OF HIS ORDER THAT FOR THE AMOUNT OF PROVISION OF RS.1 CROR E MADE BY THE ASSESSEE AGAINST THE STANDARD ASSETS OF THE BANK, THE AMOUNT IS CREDITED TO THE RESERVE FOR BAD AND DOUBTFUL DEBTS TOWARDS STANDARD ASSETS, AND NOT IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT. HE H AS GIVEN A FINDING THAT ITA NO.1252/AHD/2012 -8- DEDUCTION UNDER CLAUSE (VIIA) OF SUBSECTION (1) OF SECTION 36 CAN BE ALLOWED ONLY IN RESPECT OF THOSE PROVISIONS, WHICH ARE MADE FOR PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT CREATED BY THE A SSESSEE, AND SINCE, THE ASSESSEE HAS NOT CREDITED ANY AMOUNT TO THIS ACCOUN T, BUT HAS CREDITED THE AMOUNT IN QUESTION TO RESERVE FOR BAD AND DOUBTFUL DEBTS TOWARDS STANDARD ASSETS, DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE UNDER SECTION 36(1)(VIIA) OF THE ACT IN RESPECT OF THIS AMOUNT OF RS.1 CRORE. REGARDING THIS DECISION OF THE LEARNED CIT(A), THIS WAS THE A RGUMENT OF THE LEARNED AR OF THE ASSESSEE THAT MERE NOMENCLATURE OF BOOK E NTRY CANNOT DETERMINE THE ALLOWABILITY OF DEDUCTION. WE DO NOT FIND ANY FORCE IN THIS CONTENTION OF THE LEARNED AR OF THE ASSESSEE, BECAU SE AS PER THE PROVISION OF SECTION 36(1)(VIIA) REPRODUCED ABOVE, THE DEDUCT ION IS ALLOWABLE IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, WH EREAS IN THE PRESENT CASE, THE ASSESSEE HAS MADE RESERVE FOR BAD AND DOU BTFUL DEBTS TOWARDS STANDARD ASSETS, AND THEREFORE, THE SAME CANNOT BE SAID TO BE AKIN TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS, AND THEREFORE , IN OUR CONSIDERED OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEARNED CIT(A) REGARDING THIS ISSUE. 7. NOW, WE CONSIDER AND DECIDE THE SECOND ASPECT OF THE MATTER, I.E. REGARDING CLAIM OF DEDUCTION BY THE ASSESSEE IN RES PECT OF RS.5 CRORES TRANSFERRED FROM EXCESS BALANCE IN OVERDUE INTEREST RESERVE ACCOUNT AND CREDITED TO RESERVE FOR BAD AND DOUBTFUL DEBTS ACCO UNT. BEFORE PROCEEDING FURTHER, REGARDING SECOND ASPECT, WE WOU LD LIKE TO OBSERVE THAT FROM THESE FACTS, IT IS CLEAR THAT THE ASSESSE E IS ALSO MAINTAINING AN ACCOUNT UNDER THE HEAD RESERVE FOR BAD AND DOUBTFU L DEBTS, BUT THE ACCOUNT IN QUESTION REFERRED TO FOR THE FIRST ASPEC T OF RS.1 CRORE WAS NOT CREDITED TO THAT ACCOUNT, BUT WAS CREDITED TO RESER VE FOR BAD AND DOUBTFUL DEBTS TOWARDS STANDARD ASSETS ACCOUNTS, AND THEREFO RE, IT IS NOT A CASE OF ITA NO.1252/AHD/2012 -9- GIVING WRONG NOMENCLATURE TO A PARTICULAR ACCOUNT, BUT THIS IS A CASE OF CREATING A SEPARATE RESERVE OTHER THAN PROVISION FO R BAD AND DOUBTFUL DEBTS. FOR THESE REASONS ALSO, THE FIRST ASPECT OF THE MATTER DESERVES TO BE DECIDED AGAINST THE ASSESSEE. 8. REGARDING SECOND ASPECT OF THE MATTER, THE OBJEC TION OF THE LEARNED CIT(A) IS THIS THAT TRANSFERRING THE AMOUNT FROM ON E RESERVE TO ANOTHER RESERVE IS SIMPLY RENAMING OF AN EXISTING RESERVE A ND IT DOES NOT AMOUNT TO MAKING A PROVISION IN THE ORDINARY SENSE, IN WHI CH THE TERM IS USED IN VARIOUS PROVISIONS OF ACT. THE SECOND OBJECTION OF THE LEARNED CIT(A) IS THAT WHEN THE ASSESSEE HAS TRANSFERRED THE AMOUNT O F RS.5 CRORES FROM OVERDUE INTEREST ACCOUNT TO RESERVE FOR BAD AND DOU BTFUL DEBTS, THE ASSESSEE IS CLAIMING DEDUCTION UNDER CLAUSE (VIIA) OF SUBSECTION (1) OF SECTION 36 FOR THE SECOND TIME IN RESPECT OF THE IN COME WHICH HAVE BEEN GIVEN 100% DEDUCTION UNDER SECTION 80P OF THE ACT I N EARLIER YEAR. THE LEARNED CIT(A) HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ESCORTS LTD. VS. UOI, 199 ITR 43 (SC) IN SUPPORT OF THIS CONTENTION THAT DOUBLE DEDUCTION CA NNOT BE ALLOWED IN RESPECT OF AN INCOME UNLESS THE ACT IS SPECIFICALLY PROVIDING THE SAME. 9. THIS IS AN UNDISPUTED POSITION THAT AS PER THE P ROVISIONS OF SECTION 36(1)(VIIA) AS REPRODUCED ABOVE, DEDUCTION IS ALLOW ABLE IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF SPECIFIED LIMIT. WE ALSO FIND THAT THE AUDITED ACCOUNTS OF THE ASSESSEE (ENGLISH VERSION) IS AVAILABLE AT PAGES 35 TO 55 OF THE PAPER BOOK, AND OUT OF THESE, THE BALANCE SHEET IS AT PAGE NO.36OF THE PAPER BOOK. A S PER THE SAME, THE SHARE CAPITAL IS RS.854.21 LAKHS, AND RESERVE AND O THER FUNDS ARE OF RS.6083.83 LAKHS. NO PROVISION IS APPEARING IN THE SAID BALANCE SHEET, AND THEREFORE, WE EXAMINE THE ANNEXURES ALSO. AS P ER THE ANNEXURE-7, AVAILABLE AT PAGE NO.43 OF THE PAPER BOOK, WE FIND THAT THIS ANNEXURE ITA NO.1252/AHD/2012 -10- INCLUDES OTHER LIABILITIES, AND ONE OF THE ITEMS, I N THIS ANNEXURE AT SR.NO.19 IS PROVISION FOR RENT AND TAXES OF RS.103. 09 LAKHS. IN THAT SAID ANNEXURE, AT SR.NO.14 IS SUBSIDY RESERVE FUND OF R S.97.46 LAKHS. AT. SR.NO.4 IS CONTINGENCY RESERVE AGAINST STANDARD ASS ETS OF RS.156.50 LAKHS OF WHICH OPENING BALANCE WAS RS.56.50 LAKHS, WHICH MEANS, THERE IS AN ADDITION OF RS.100 LAKHS IN THE PRESENT YEAR. THE AO HAS ALREADY ALLOWED DEDUCTION TO THE ASSESSEE TO THE EXTENT OF RS.100 L AKHS. THIS IS ALSO AN ACCEPTED POSITION OF THE FACT THAT THE PROVISION AN D RESERVES ARE TWO SEPARATE ITEMS. THE PROVISION IS A LIABILITY, WHER EAS THE RESERVE IS ASSESSEES OWN FUND. IN THE INCOME-TAX ACT ALSO, A T SOME PLACES, FOR EXAMPLE, SECTION 32A, IT IS PROVIDED AS PER SUB-SEC TION (4) THAT AN AMOUNT EQUAL TO 75% OF THE INVESTMENT ALLOWANCE IS REQUIRE D TO BE DEBITED TO THE PROFIT & LOSS ACCOUNT AND CREDITED TO RESERVE ACCOU NT FOR INVESTMENT ALLOWANCE RESERVE ACCOUNT. HENCE, IT CANNOT BE SAI D THAT THE TERMS RESERVE AND PROVISION ARE ONE AND THE SAME. TH E LEGISLATURE HAS USED TWO DIFFERENT TERMS AT DIFFERENT PLACES FOR SO ME PURPOSE AND NOT WITHOUT REASON AND PURPOSE, AND THEREFORE, AS PER W HIMS AND FANCIES OF THE ASSESSEE, RESERVE ACCOUNT CANNOT BE CONSIDERED AS PROVISION FOR THE PURPOSE OF ALLOWING DEDUCTION SECTION 36(1)(VIIA). SINCE, THERE IS NO PROVISION CREATED BY THE ASSESSEE ON ACCOUNT OF PRO VISION FOR BAD AND DOUBTFUL DEBTS, THE ASSESSEE DOES NOT DESERVE ANY D EDUCTION UNDER SECTION 36(1)(VIIA) IN ADDITION TO THE AMOUNT OF RS.1 CRORE S ALREADY ALLOWED BY THE AO, BECAUSE, TO THIS EXTENT, I.E. TO THE EXTENT OF RS.1 CRORE, THE ASSESSEE HAS INCLUDED THE AMOUNT IN ANNEXURE 7 I.E. OTHER LIABILITIES AT SR.NO.4 I.E. CONTINGENCY RESERVE AGAINST STANDARD A SSETS. HERE ALSO, ALTHOUGH THE ASSESSEE HAS USED THAT WORD CONTINGEN CY RESERVE, BUT ACTION OF THE ASSESSEE OF INCLUDING THE SAME IN ANN EXURE-7 OF OTHER LIABILITIES SHOWS THAT THIS IS IN FACT A PROVISION, AND THEREFORE, INCLUDED IN LIABILITY, WHEREAS OTHER RESERVES ARE INCLUDED IN A NNEXURE-2 I.E. RESERVES ITA NO.1252/AHD/2012 -11- FUND AND OTHER FUNDS, AND THEREFORE, THOSE RESERVES WHICH ARE INCLUDED IN ANNEXURE-2 CANNOT BE EQUATED WITH PROVISION, WHICH ARE INCLUDED IN ANNEXURE-7 I.E. OTHER LIABILITY. OUR THIS VIEW THA T RESERVE IS PART OF OWN FUNDS AND PROVISION IS PART OF LIABILITY IS ALSO SU PPORTED BY SCHEDULE-VI TO COMPANIES ACT, 1956 WHERE RESERVES ARE ADDED IN NET WORTH BUT PROVISION IS INCLUDED IN LIABILITIES. HENCE, BOTH CANNOT BE EQUATED. CONSIDERING THESE FACTS, WE FEEL THAT THE AO HAS RIGHTLY ALLOWE D DEDUCTION TO THE ASSESSEE AT RS.1 CRORES UNDER SECTION 36(1)(VIIA) O F THE ACT, AND THE ASSESSEE IS NOT ELIGIBLE FOR ANY FURTHER DEDUCTION, IN THE ABSENCE OF ANY EXTRA PROVISION FOR BAD AND DOUBTFUL DEBTS, HAVING BEEN CREATED BY THE ASSESSEE AS PER THE AUDITED ACCOUNTS AVAILABLE IN T HE PAPER BOOK. 10. IN VIEW OF OUR ABOVE DISCUSSION AND FINDINGS TH AT THE ASSESSEE HAS NOT CREATED ANY PROVISION FOR BAD AND DOUBTFUL DEBT S IN EXCESS OF AMOUNT OF RS.1 CRORES, VARIOUS DECISIONS CITED BY THE LEAR NED AR OF THE ASSESSEE ARE OF NO RELEVANCE IN THE PRESENT CASE, AND THEREF ORE, WE DO NOT CONSIDER IT NECESSARY TO DISCUSS ABOUT THOSE JUDGMENTS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( # ## #. .. .% %% % . .. .&'( &'( &'( &'( /A.K. GARODIA) %) * /ACCOUNTANT MEMBER VK* C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD