Industrial Investment Bank of India Ltd., Kolkata V. DCIT, CIR-6, KOLKATA, Kolkata

ITA 1416/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1926 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 20-06-2014
• Court: TRIBUNAL
• Department Lawyers: SANJAY BHATTACHARYAFCA
• Assessee Lawyers: R K KUREEL
• Keywords: Depreciation; Rectification of order; Bad and doubtful debts
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENC H KOLKATA BEFORE SHRI N.V.VASUDEVAN JM, & DR. A.L.SAINI, AM ./ ITA NO.1416/KOL/2014 ( / ASSESSMENT YEAR :2004-2005) INDUSTRIAL INVESTMENT BANK OF INDIA LIMITED, 19, NETAJI SUBHAS ROAD, KOLKATA-700001 VS. DCIT, CIRCLE-6, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700001 ./ ./PAN/GIR NO. : AABCI 0324 D ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SANJAY BHATTACHARYA,FCA /ASSESSEE BY : SHRI R.K.KUREEL, JCIT / DATE OF HEARING : 28/02/2017 /DATE OF PRONOUNCEMENT 05/04/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: ` THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTA INING TO ASSESSMENT YEAR 2004-2005, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKAT A, IN APPEAL NO.343/08-09/CIT(A)-VI/CIR-6/KOL, DATED 29.04.2014, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE AO U/S.143(3) OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 17.11 .2006. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING BANK AND ITS OPERATIONS A RE SOLELY IN THE SEGMENT OF NON-BANKING FINANCIAL INTERMEDIATION SER VICES. THE ASSESSEE BEING A FINANCIAL INSTITUTION, ITS ACTIVITIES ARE S UBJECT TO GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA FOR BANKING COMPANIES. DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WRIT TEN OFF A SUM OF RS.1,42,48,266/- ON ACCOUNT OF DEBTS AS IRRECOVERAB LE. THE ASSESSEE IS ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 2 AN ORGANIZATION TO WHICH THE PROVISIONS OF SECTION 36(1)(VIIA) IS APPLICABLE. IN ASSESSEES CASE AN ORDER U/S.143(3) WAS PASSED O N DATED 17.11.2006. LATER ON, IT WAS FOUND BY THE AO THAT THERE HAD BEE N CERTAIN MISTAKES, WHICH WERE APPARENT FROM THE RECORD AND NEEDS TO BE RECTIFIED. THE ISSUE OF RECTIFICATION WAS ALLOWANCE OF PROVISION OF SECT ION 36(1)(VIIA)(C). WHILE RECTIFYING THE MISTAKE THE ASSESSING OFFICER OBSERV ED AS UNDER: IN THE ASSESSMENT ORDER THE PROVISION HAD BEEN AL LOWED BEFORE WORKING OUT OF TOTAL INCOME AS PER THE ACT. THE SEC TION PROVIDES THAT 5% OF TOTAL INCOME AS WORKED OUT, BEFORE GIVING CR EDIT OF DEDUCTION UNDER CLAUSE 36(1)(VIIA)(C) AND ANY DEDUCTION UNDER CHAPTER-VIA OF THE ACT, IS TO BE ALLOWED AS DEDUCTION. TOTAL INCOM E OF THE ASSESSEE FOR THE YEAR SHOULD HAVE BEEN WORKED OUT AFTER ADJU STMENT OF BROUGHT FORWARD OF LOSS, WHEREAS IN THE ORDER DEDUC TION HAD BEEN ALLOWED BEFORE SUCH ADJUSTMENT. THIS IS A MISTAKE A PPARENT FROM RECORD. IN THE WRITTEN STATEMENT THE AR OPPOSED THE PROPOSED RECTIFICATION, ARGUING THAT TOTAL INCOME FOR THE YE AR IS TO BE TAKEN AS PER SEC.2(45) READ WITH SEC.5 OF THE ACT, WHEREAS I NCOME FROM VARIOUS HEADS OF INCOME OF THE YEAR IS TO BE CLUBBE D AND THERE IS NO SCOPE OF ADJUSTMENT OF BROUGHT FORWARD LOSS OF OTHE R YEARS AS PER THE DEFINITION. THE ASSESSEES AR ARGUMENT IS NOT A CCEPTED. SEC.2(45) PROVIDES THAT TOTAL INCOME MEANS THE TOTA L AMOUNT OF INCOME REFERRED TO IN SEC.5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. CURRENT YEARS INCOME FROM A PARTICULAR S OURCE/HEAD OF INCOME IS FINALLY DETERMINED ONLY AFTER PROPER AGGR EGATION OF INCOME AND SET OFF OF LOSS AS PER CHAPTER-VI OF THE ACT. T HEREFORE, ADJUSTMENT OF BROUGHT FORWARD LOSS PRECEDES THE DET ERMINATION OF TOTAL INCOME. 3. NOT BEING SATISFIED WITH THE ORDER PASSED BY TH E AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO HAS CONFIRME D THE ORDER PASSED BY THE AO OBSERVING THE FOLLOWINGS :- 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE. THE SOLE POINT OF DISPUTE IS AS TO WHETHER FOR COMPUTING DEDUCTION ALLOWABLE U/S 36(1 )(VIIA)(C) OF THE IT.ACT, 1961, TOTAL INCOME S HOULD BE TAKEN PRIOR TO OR AFTER THE ADJUSTMENT OF BROUGHT FORWARD LOSS. IT WOULD BE RELEVANT TO REFER TO PROVISIONS OF THE SAID CLAUSE WHICH STIPULATES THAT IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTF UL DEBT MADE BY PUBLIC FINANCIAL INSTITUTION OR STATE FINANCIAL INS TITUTION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, 'AN AMOUNT NOT E XCEEDING FIVE PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKIN G ANY ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 3 DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A)' SHAL L BE ALLOWED AS DEDUCTION. THUS, THE DEDUCTION ALLOWABLE IS 5% OF T OTAL INCOME COMPUTED BEFORE THE ABOVE DEDUCTION AND DEDUCTIONS UNDER CHAPTER VI-A. THE TERM 'TOTAL INCOME' HAS BEEN DEFI NED UNDER SECTION 2(45) OF THE IT.ACT, 1961 WHICH STATES THAT :- ' 'TOTAL INCOME' MEANS THE TOTAL AMOUNT OF INCOME R EFERRED TO IN SECTION 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. ' SECTION 5, IN TURN, CLARIFIES THAT SCOPE OF TOTAL I NCOME EXTENDS TO ALL THE INCOME ACCRUING, ARISING OR DEEMED TO BE ACCRUE D OR ARISEN OR RECEIVED OR DEEMED TO BE RECEIVED DURING THE YEAR. SINCE SECTION 2(45) OF THE ACT STATES THAT TOTAL INCOME SHOULD BE COMPUTED IN THE MANNER LAID DOWN IN THE ACT, ONE HAS TO FOLLOW THE PROVISIONS OF THE ACT FOR COMPUTATION OF INCOME UNDER VARIOUS HEADS. THE PROVISION REGARDING CARRY FORWARD AND SET OFF OF BUSINESS LOS S IS PRESCRIBED UNDER SECTION 72 OF THE ACT. CHAPTER VI-A, SPECIFYI NG VARIOUS DEDUCTIONS FROM GROSS TOTAL INCOME, CONSISTS OF SEC TION 80A TO 80VV (NOW DELETED). THE CHAPTER VI-A COMES AFTER SE CTION 72 RELATING TO SET OFF OR BROUGHT FORWARD BUSINESS LOS SES. IN OTHER WORDS, TOTAL INCOME IS ARRIVED AT AFTER REDUCING DE DUCTION UNDER CHAPTER VI-A FROM GROSS TOTAL INCOME WHICH IS WORKE D OUT AFTER CONSIDERING SET OFF OF BROUGHT FORWARD BUSINESS LOS SES. THEREFORE, THE TERM 'TOTAL INCOME' REFERS TO INCOME AFTER ALLO WANCE OF BROUGHT FORWARD LOSSES. THE CONTENTION OF THE APPELLANT THA T FOR PURPOSE OF FINDING TRUE SCOPE OF TOTAL INCOME, ONE SHOULD CONS IDER ONLY THE INCOME AND EXPENSES RELATING TO THE CONCERNED YEAR, THEREFORE, DOES NOT APPEAR TO BE CORRECT. ONCE THE TERM 'TOTAL INCOME' HAS BEEN DEFINED UNDER THE LT. ACT, ONE HAS TO TAKE THE MEANING OF THE TERM AS GIVEN IN THE SAID DEFINITION. THE POSITION IS FURTHER CLARIFIED BY THE FACT THAT THE PROVISION OF SECTION 36(1)(VII A)(C) OF THE IT ACT, 1961, REFERENCE IS MADE TO THE TOTAL INCOME COMPUTE D BEFORE MAKING ANY DEDUCTION UNDER THE SAID CLAUSE AND CHAP TER VI-A. IT CLEARLY MEANS THAT OTHER THAN THE AFORESAID DEDUCTI ONS, EFFECT TO ALL THE PROVISIONS OF THE ACT IS TO BE DULY GIVEN. REFE RENCE TO CHAPTER VI-A IS ALSO SIGNIFICANT FOR THE REASON THAT CHAPTE R VIA COMES AFTER SECTION 72 AND DEDUCTION UNDER CHAPTER VIA IS ALLOW ED AFTER SETTING OFF OF BROUGHT FORWARD LOSSES UNDER THE SCHEME OF T HE ACT. THE APPELLANT HAS, WITHOUT CITING ANY AUTHORITY, TRIED TO INTERPRET THE MEANING OF THE TERM 'TOTAL INCOME' AS PER ITS OWN C ONVENIENCE. HOWEVER, IT IS WELL SETTLED THAT ONCE THE MEANING O F THE WORDS USED IN THE STATUTE IS CLEAR AND UNAMBIGUOUS, QUESTION O F MAKING ANY DIFFERENT INTERPRETATION DOES NOT ARISE. THIS HAS B EEN AFFIRMED IN A NUMBER OF DECISIONS SUCH IN THE CASES OF PAUL VIJAY AKUMAR & OTHERS VS. UNION OF INDIA & ANOTHER 151 ITR 48 (KAR ), SHESHAYEE PAPER & BOARDS LTD. VS. DCIT 272 ITR 165 (MAD) ETC. THE APEX COURT HAS ALSO HELD IN ITS DECISION IN THE CASE OF IPCA LABORATORY LTD. VS. DCIT 266 ITR 521 (SC), THAT IF THERE IS NO AMBIGUITY IN THE PROVISIONS OF THE ACT, THE SAME COULD NOT BE INTERP RETED TO CONFER BENEFIT TO THE ASSESSEE. ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 4 6. SO FAR AS THE APPELLANT'S CONTENTION, THAT THE I SSUE IS DEBATABLE IS CONCERNED, I FIND NO FORCE IN THE SUBMISSION MADE I N THAT REGARD EITHER. AS MENTIONED EARLIER, THE PROVISIONS OF THE ACT CLEARLY DEFINE THE TERM 'TOTAL INCOME' AND THEREFORE, IT IS NOT OP EN TO HAVE AN ALTERNATE INTERPRETATION OF THE TERM. AN ISSUE CAN BE CALLED DEBATABLE ONLY IF THERE IS MORE THAN ONE PLAUSIBLE VIEW, TENABLE IN LAW, ON THE POINT. THIS IS NOT THE SITUATION IN THE APPELLANT'S CASE. CONSIDERING THE ABOVE POSITION, THE CONTENTION MADE BY THE APPELLANT CANNOT BE ACCEPTED. 7. IN THE VIEW OF THE ABOVE DISCUSSION, ALL THE GRO UNDS ARE REJECTED. AS A RESULT, THE APPEAL IS DISMISSED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL :- 1. THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) W AS WRONG IN NOT APPRECIATING THE FACT THAT FOR THE PURPOSE OF C OMPUTING THE DEDUCTIBLE PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA)(C ), THE TOTAL INCOME SHOULD BE CONSIDE RED BEFORE SETTING OFF OF BROUGHT FORWARD LOSSES AND THUS HE E RRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN W ITHDRAWING THE DEDUCTION EARLIER ALLOWED THROUGH AN ORDER OF RECTI FICATION U/S 154/143(3). 2. THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO. 1 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) FAI LED TO APPRECIATE THAT THE ISSUE OF CONSIDERATION OF TOTAL INCOME FOR THE PURPOSE OF DEDUCTION U/S 36(1)(VIIA)(C ) BEING DEBATABLE IN NATURE, THE ORDER OF RECTIFICATION PASSED BY THE AS SESSING OFFICER U/S 154/143(3) HAD BEEN BAD IN LAW. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER O R WITHDRAW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE HEARIN G OF THE APPEAL. 5. LD. AR HAS SUBMITTED BEFORE US THAT FOR THE PURP OSE OF COMPUTING THE DEDUCTION U/S.36(1)(VIIA)(C) IN RELATION TO PRO VISION FOR BAD AND DOUBTFUL DEBTS, TOTAL INCOME SHOULD BE CONSIDERED BEFORE SET TING OFF OF BROUGHT FORWARD LOSS. THE LD. CIT(A) HAS ERRED IN CONFIRMIN G THE ACTION OF THE AO IN WITHDRAWING THE DEDUCTION EARLIER ALLOWED THROUG H AN ORDER OF RECTIFICATION U/S.154 OF THE ACT. THE LD. AR SUBMIT TED THAT THE ISSUE UNDER CONSIDERATION IS DEBATABLE IN NATURE, THEREFORE, RE CTIFICATION ORDER PASSED ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 5 U/S.154 DOES NOT HAVE ANY FORCE I.E THE ISSUE UNDER CONSIDERATION OF TOTAL INCOME FOR THE PURPOSE OF DEDUCTION U/S.36(1)(VIIA) (C) OF THE ACT IS DEBATABLE IN NATURE, THEREFORE, RECTIFICATION ORDER PASSED U/S.154 HAD BEEN BAD IN LAW. THE LD. AR FOR THE ASSESSEE HAD VE HEMENTLY SUBMITTED BEFORE US THAT TO DETERMINE THE INCOME THE PROVISIO N FOR BAD DEBTS SHOULD BE ALLOWED FIRST AND THEREAFTER THE CARRY FORWARD L OSS SHOULD BE ADJUSTED. TO SUPPORT HIS PLEA, LD. AR DREW OUR ATTENTION TOWA RDS THE PROVISIONS OF SECTION 2(45) OF THE INCOME TAX ACT, 1961, WHICH RE ADS AS UNDER :- TOTAL INCOME MEANS THE TOTAL AMOUNT OF INCOME REF ERRED IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. LD. AR FOR THE ASSESSEE ALSO DREW OUR ATTENTION TOW ARDS THE PROVISIONS OF SECTION 5-SCOPE OF TOTAL INCOME, WHICH READS AS UND ER: 5. SCOPE OF TOTAL INCOME (1) SUBJECT TO THE PROVISIONS OF THIS ACT, THE TOTA L INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A RESIDENT INCLUDE S ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH- (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDI A IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARI SE TO HIM IN INDIA DURING SUCH YEAR; OR (C) ACCRUES OR ARISES TO HIM OUTSIDE INDIA DURING S UCH YEAR: THEREFORE, AFTER GOING THROUGH SECTION 2(45) ALONG WITH SECTION 5 OF I.T. ACT, ONE CAN DRAW THE CONCLUSION THAT TO DETERMINE THE TOTAL INCOME THE PROVISIONS FOR BAD DEBTS SHOULD BE ALLOWED FIRST AN D THEREAFTER THE CARRY FORWARD LOSSES SHOULD BE ADJUSTED. APART FROM THIS, LD. AR FOR THE ASSESSEE HAS DREW OUR ATTENTION TOWARDS THE PROVISI ONS OF SECTION 36(1)(VIIA)(C) OF THE ACT, WHICH READS AS UNDER :- ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 6 SECTION 36(1)(VIIA)(C) :- (C) A PUBLIC FINANCIAL INSTITUTION OR A STATE FINAN CIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) :] [PROVIDED THAT A PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPOR ATION REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION, BE ALLOWED IN ANY OF THE TWO CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 AND ENDING BEFORE THE 1ST DAY OF APR IL, 2005, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FO R ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF, OF AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AMOU NT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF SUCH INSTIT UTION OR CORPORATION, AS THE CASE MAY BE, ON THE LAST DAY OF THE PREVIOUS YEAR.] THE LD. AR FOR THE ASSESSEE SUBMITTED THAT AS PER C LAUSE ( C) OF SECTION 36(1)(VIIA) OF THE ACT, THE FINANCIAL INSTITUTION M AY MAKE A PROVISION FOR DOUBTFUL DEBTS NOT EXCEEDING 5% OF THE TOTAL INCOME . THE LD AR SUBMITTED BEFORE US THAT TO DETERMINE TOTAL INCOME, THE PROVISION FOR BAD DEBTS SHOULD BE ALLOWED FIRST AND THEN AFTER THE CARRIED FORWARD (CF) LOSSES SHOULD BE ADJUSTED. THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED THAT SUB-PROVISO OF CLAUSE ( C) OF SECTION 36(1)(VIIA) O F THE ACT, GIVES AN OPTION TO THE ASSESSEE THAT ASSESSEE MAY CLAIM IN TWO CONS ECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2005, DEDUCTION IN RES PECT 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 T HE GUIDELINES ISSUED BY THE RBI I.E. THE ASSESSEE MAY CLAIM 10% OF THE AMO UNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT AS PROVISION FOR DOUB TFUL DEBTS. THE LD. AR ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 7 HAS REQUESTED THE BENCH THAT THE ASSESSEE HAS EXPRE SSED HIS DESIRE TO COMPUTE AND CLAIM THE PROVISION FOR DOUBTFUL DEBTS AS PER PROVISO OF CLAUSE (C ) OF SECTION 36(1)(VIIA) OF THE ACT, WHIC H ENTITLES THE ASSESSEE TO CLAIM THE DEDUCTION @10% IN RESPECT OF PROVISION FO R DOUBTFUL DEBTS, AND, THEREFORE, THE ASSESSEE CAN LAWFULLY CLAIM IT. BUT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION OF PROVISION FOR DOUBTFUL DEB TS @10% IN ITS RETURN OF INCOME FILED BY IT, THEREFORE, THE AO COULD NOT ALL OW THE DEDUCTION @10%. THE LD. AR FURTHER POINTED OUT THAT ASSESSEES APPE AL UNDER CONSIDERATION IS FOR ASSESSMENT YEAR 2004-05 AND, T HEREFORE, HE IS ELIGIBLE TO CLAIM THE BENEFIT OF THE SAID PROVISO OF CLAUSE (C ) OF SECTION 36(1)(VIIA) OF THE ACT. THEREFORE, LD. AR FOR THE ASSESSEE HAS REQUESTED THE BENCH TO CONSIDER THE ADDITIONAL ARGUMENT OF THE ASSESSEE TH AT THE CLAIM DOES FALL UNDER THE PROVISO OF CLAUSE (C ) OF SECTION 36(1)(V IIA) OF THE ACT, WHERE 10% PROVISION IS ALLOWED, IN ANY OF TWO CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 A ND ENDING BEFORE THE 1ST DAY OF APRIL, 2005. THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED BEFORE US THAT MERELY BECAUSE THE ASSESSEE HAS NOT CLAIMED IN ITS RETURN OF INCOME, THE BENEFIT OF 10% OF PROVISION FOR BAD AND DOUBTFUL DEBTS, DOES NOT MEAN THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM UNDER THE ACT. THEREFORE, THE ASSESSEE REQUESTED AN ADDITIONAL GRO UND OF APPEAL TO CONSIDER THE REQUEST OF THE ASSESSEE SYMPATHETICALL Y BECAUSE THE ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF HIGHER DED UCTION @10% AS EXPLAINED ABOVE. THEREFORE, LD. AR FOR THE ASSESSEE REQUESTED THE BENCH TO REMIT THE CASE BACK TO THE FILE OF AO WITH THE DIRECTION THAT AO SHOULD ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 8 ALLOW 10% PROVISION FOR DOUBTFUL DEBTS AS PER THE P ROVISIONS OF THE ACT EXPLAINED ABOVE. 6. LD. DR FOR THE REVENUE HAS PRIMARILY RELIED ON THE FINDINGS OF THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7. IT IS NOT IN DISPUTE BEFORE US THAT THE ASSESSEE IS AN INDUSTRIAL INVESTMENT BANK OF INDIA LTD. IN COMPUTING ITS TO TAL INCOME IT IS ENTITLED TO DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DO UBTFUL DEBTS AT THE RATES SPECIFIED IN SEC.36(1)(VIIA)( C) OF THE INCOM E TAX ACT, 1961 (ACT) I.E., AN AMOUNT NOT EXCEEDING 5% OF THE TOTAL INCOME (COM PUTED BEFORE MAKING ANY DEDUCTION UNDER CLAUSE SEC.36(1)(VIIA)( C) OF THE ACT. IN THE ORDER OF ASSESSMENT U/S.143(3) OF THE ACT DA TED 17.11.2006 FOR AY 04-05, THE ASSESSING OFFICER (AO) COMPUTED DEDUCTIO N U/S.36(1)(VIIA) ( C) OF THE ACT AS FOLLOWS: LOSS AS PER COMPUTATION ANNEXED WITH THE RETURN R S. 89,72,68,736 LESS: DISALLOWANCE AS DISCUSSED:- A. ON ACCOUNT OF BAD DEBTS WRITTEN OFF RS. 1, 42,48,266 B. ON ACCOUNT OF PROVISION ON BAD DEBTS WRITTEN BAC K RS.124,69,89,000 C. U/S.14A AS DISCUSSED RS. 34,33,000 D. ON ACCOUNT OF DEPRECIATION RS. 8,300 RS. 46,74,09,830 LESS: PROVISION ALLOWED U/S.36(1)(VIIA) ( C) -RESTRICTED TO 5% OF TOTAL INCOME RS. 2,33 ,70,492 RS. 42,40,39,338 LESS: BUSINESS LOSS BROUGHT FORWARD RS.42,40, 39,338 TOTAL INCOME NIL THE AO LATER ON NOTICED THAT THE COMPUTATION OF DED UCTION U/S.36(1)(VIIA)(C) OF THE ACT DONE BY HIM IN THE A S AFORESAID IN THE ORDER OF ASSESSMENT DATED 17.11.2006 WAS ERRONEOUS, BECAUSE DEDUCTION TO BE ALLOWED SAID SECTION WAS 5% OF TOTAL INCOME BEFORE MAKING DEDUCTION ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 9 UNDER CLAUSE (C) OF SEC.36(1)(VIIA) OF THE ACT. TH E BROUGHT FORWARD LOSS OF THE ASSESSEE WAS MORE THAN RS.46,74,09,830 AND AS P ER SEC.72 OF THE ACT, THE BROUGHT FORWARD LOSS HAD TO BE SET OFF TO ARRIVE AT THE TOTAL INCOME. IF BROUGHT FORWARD LOSS IS SO SET OFF THAN THE TOTA L INCOME WOULD BE NIL AND CONSEQUENTLY THE DEDUCTION ALLOWABLE U/S.36(1)(VIIA ) (C ) WOULD ALSO BE NIL AND NOT RS.2,33,70,492 AS ALLOWED BY THE AO IN THE ORDER OF ASSESSMENT. THE AO THEREFORE ISSUED A NOTICE U/S.154 OF THE ACT TO RECTIFY THE AFORESAID APPARENT ERROR IN THE ORDER OF ASSESSMENT . THE PLEA OF THE ASSESSEE BEFORE AO AND CIT(A) WAS ( A) THAT TOTAL INCOME AS MENTIONED IN SEC.36(1)(VIIA) (C ) OF THE ACT WAS TO BE CONSTRUED AS REFER TO REAL INCOME OF THE ASSESSEE UNDER VARIOUS HEADS WITHOUT SET OFF OF BROUGHT FORWARD LOSS AND (B) THE ISSUE IN ANY EV ENT WAS DEBATABLE. BOTH THE AO AND THE CIT(A) REJECTED THE SAID CONTEN TION HOLDING THAT THERE WAS NO DEBATABLE ISSUE AND THAT THE EXPRESSION TOT AL INCOME AS DEFINED IN THE ACT MEANS INCOME COMPUTED AFTER SETTING OFF LOSSES AS REQUIRED U/S.72 OF THE ACT. IN THIS APPEAL AGAINST THE ORDER OF THE CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE APART FROM REITERATING SUBMISSIONS MADE BE FORE THE REVENUE AUTHORITIES ALSO SUBMITTED THAT UNDER THE PROVISO T O SEC.36(1)(VIIA) (C) THE ASSESSEE WAS AT ITS OPTION AND IN THE ALTERNATIVE T O THE DEDUCTION MENTIONED IN SEC.36(1)(VIIA)(C ) OF THE ACT ENTITLE D TO IN AY 2003-04 AND 2004-05 A DEDUCTION IN RESPECT OF ANY PROVISION MAD E 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 ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 10 NOT EXCEEDING TEN PER CENT OF THE AMOUNT OF SUCH AS SETS SHOWN IN THE BOOKS OF ACCOUNT OF SUCH INSTITUTION OR CORPORATION , AS THE CASE MAY BE, ON THE LAST DAY OF THE PREVIOUS YEAR. IT WAS HIS P RAYER THAT ALL THE DETAILS TO CLAIM DEDUCTION UNDER THE PROVISO ARE ALREADY AV AILABLE ON RECORD AND THE ORDER OF CIT(A) SHOULD BE SET ASIDE AND THE ISS UE SHOULD BE REMANDED TO THE AO WITH A DIRECTION TO THE ASSESSEE TO FILE THE DETAILS OF THE CLAIMS UNDER THE PROVISO REFERRED TO ABOVE AND THE AO SHOULD BE DIRECTED TO LOOK INTO THE CLAIM OF THE ASSESSEE AND ALLOW THE SAME IN ACCORDANCE WITH LAW. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A) AND OPPOSED THE PRAYER OF THE LEARNED COUNSEL FOR A SSESSEE TO REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION OF THE CLAIM UNDER THE PROVISO TO SEC.36(1)(VIIA)(C ) OF THE ACT. 8. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS. THE RELEVANT STATUTORY PROVISIONS READS AS FOLLOWS: OTHER DEDUCTIONS. 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CL AUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THERE IN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28- ( VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DE BTS MADE BY (A). (B) ( C) A PUBLIC FINANCIAL INSTITUTION OR A STATE FIN ANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, AN AMOUN T NOT EXCEEDING FIVE PER CENT OF THE TOTAL INCOME (COMPUT ED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) : PROVIDED THAT A PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTM ENT CORPORATION REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE TWO CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 AND ENDING BEFORE THE 1S T DAY OF APRIL, 2005, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS D OUBTFUL ASSETS ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 11 OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES IS SUED BY IT IN THIS BEHALF, OF AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF SUCH I NSTITUTION OR CORPORATION, AS THE CASE MAY BE, ON THE LAST DAY OF THE PREVIOUS YEAR. CLAUSE( C) TO SEC.36(1)(VIIIA) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 1991, W.E.F. 1-4-1992 AND THE PROVISO TO CLAUSE ( C ) TO SEC.36(1)(VIIA) WAS INSERTED BY THE FINANCE ACT, 2002, W.E.F. 1-4-2003. 9. WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSE E FOR NON APPLICABILITY OF THE PROVISIONS OF SEC.72 OF THE AC T IN THE CONTEXT OF ALLOWING DEDUCTION U/S.36(1)(VIIA)( C) OF THE ACT D ESERVES TO BE REJECTED. SEC. 4 OF THE ACT CREATES CHARGE OF INCOME-TAX AND IT PROVIDES THAT WHERE ANY CENTRAL ACT ENACTS THAT INCOME TAX SHALL BE CHA RGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH, AND SUBJECT TO THE PROVISIONS (INCLUDING PROVISIONS FOR THE LEVY OF AD DITIONAL INCOME-TAX) OF THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREV IOUS YEAR OF EVERY PERSON. THE CHARGE OF TAX IS THUS ON TOTAL INCOME. SEC. 2 (45) DEFINES TOTAL INCOME TO MEAN TOTAL AMOUNT OF INCOME REFERRED TO I N SEC.5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. CHAPTER-II OF THE ACT, FROM SECTION 4 TO 9 DEAL WITH BASIS OF CHARGE. CHAPTER-III OF THE ACT, DEALS WITH INCOME WHICH DO NOT FORM PART OF TOTAL INCOME AND ARE CONTAINED IN SECT. 10 TO 13-B OF THE ACT. CHAPTER IV DEALS WITH THE COMPUTATION OF T OTAL INCOME. FIRSTLY INCOME IS CATEGORIZED UNDER VARIOUS HEADS OF INCOME . THIS IS LAID DOWN IN SECTION 14 OF THE ACT, WHICH LAYS DOWN THAT SAVE AS OTHERWISE PROVIDED BY THIS ACT, ALL INCOME SHALL, FOR THE PURPOSES OF CHA RGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME, BE CLASSIFIED UNDER TH E FOLLOWING HEADS OF ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 12 INCOME SALARIES, INCOME FROM HOUSE PROPERTY, PROF ITS AND GAINS OF BUSINESS OR PROFESSION, CAPITAL GAINS, INCOME FROM OTHER SOURCES. CHAPTER V THEN BRINGS INCOME OF OTHER PERSONS, WHICH ARE TO BE INCLUDED IN THE TOTAL INCOME OF AN ASSESSEE AND THIS IS CONTAINED I N SECTION 60 TO 65 OF THE ACT. CHAPTER-VI (CONTAINING SEC. 66 TO 80) THEN LAYS DOWN PROVISIONS REGARDING AGGREGATION OF INCOME AND SET OFF OR CARR Y FORWARD OF LOSS. IT IS THUS CLEAR THAT CARRIED FORWARD LOSS HAS TO BE DEDU CTED TO ARRIVE AT THE TOTAL INCOME. SEC.36(1)(VIIA) ( C) OF THE ACT USES THE EXPRESSION TOTAL INCOME AND THEREFORE TOTAL INCOME AS UNDERSTOOD AN D DEFINED IN THE ACT HAS TO BE ADOPTED. WE DO NOT THINK THAT THE ISSUE I S DEBATABLE AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE. AN ISSUE TO BECOME DEBATABLE SHOULD HAVE A POSSIBILITY OF ANOTHER VIEW ON THE PLAIN LANGUAGE OF THE STATUTORY PROVISIONS REFERRED TO ABOVE, WE D O NOT THINK THERE CAN BE ANY DISPUTE OR DEBATE ON THE PROPOSITION THAT EFFEC T TO SEC.72 HAS TO BE GIVEN BEFORE ALLOWING DEDUCTION U/S.36(1)(VIIA) ( C ) OF THE ACT. 10. AS FAR AS THE ALTERNATIVE CONTENTION RAISED BY THE ASSESSEE IS CONCERNED, WE ARE OF THE VIEW THAT THE CLAIM FOR DE DUCTION UNDER THE PROVISIO TO SEC.36(1)(VIIA)( C) OF THE ACT, THOUGH MADE FOR THE FIRST TIME BEFORE THE TRIBUNAL, DESERVES EXAMINATION. AFTER A LL THE PURPOSE OF TAX PROCEEDINGS IS TO DETERMINE THE CORRECT TAX LIABILI TY IN ACCORDANCE WITH LAW. IF AN OPTION IS AVAILABLE TO AN ASSESSEE TO CLAIM D EDUCTION U/S.36(1)(VIIA)(C) PROVISO OF THE ACT, THEN THAT O PTION WHEN EXERCISED AT ANY STAGE OF THE PROCEEDINGS SHOULD BE EXAMINED AND IF FOUND CORRECT ALLOWED. THE FACT THAT THE ASSESSEE DID NOT MAKE A CLAIM BEFORE THE ITA NO.1416/KOL/2014 INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 13 REVENUE AUTHORITIES CANNOT STAND IN THE WAY. THE T AX LIABILITY OF A TAXPAYER HAS TO BE DETERMINED IN ACCORDANCE WITH LAW AND CAN NOT ARISE BY REASON OF DEFAULT. WE THEREFORE SET ASIDE THE ORDER OF TH E CIT(A) AND REMAND THE ISSUE TO THE AO. THE ASSESSEE WILL PUT FORTH ITS C LAIM FOR DEDUCTION IN THE ALTERNATIVE UNDER THE PROVISO TO SEC.36(1)(VIIA) ( C) OF THE ACT AND THE AO WILL CONSIDER THE SAME IN ACCORDANCE WITH LAW. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05/04 /2017. SD/ - (N.V.VASUDEVAN) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 05/04/2017 & ()* /PRAKASH MISHRA ,SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) % & , / ITAT, KOLKATA 1. / THE APPELLANT- INDUSTRIAL INVESTMENT BANK OF INDIA LTD. 2. / THE RESPONDENT.-DCIT, CIR-6, KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//