United Bank of India, Kolkata V. DCIT, Circle - 6, Kolkata, Kolkata

ITA 1497/KOL/2009

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 3006 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 26-08-2009
• Court: TRIBUNAL
• Department Lawyers: A K MOHAPATRA LD
• Assessee Lawyers: SOUMITRA CHOUDHURY LD
• Keywords: Bad and doubtful debts

Judgement Text

, A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A CALCUTTA () BEFORE . . , SHRI P . K. BANSAL., ACCOUNTANT MEMBER !'# /AND $%$& 1(, SHRI GEORGE MATHAN, JUDICIAL MEMBER #) / ITA NOS. 1497 & 1498/KOL/09 *% '+,/ ASSESSMENT YEARS: 2004-05 & 2006-07 UNITED BANK OF INDIA PAN: AACU 5624P DCIT, CIRCLE-6, KOL ((. / APPELLANT ) - ' - - VERSUS -. (0(./ RESPONDENT ) (. *! /FOR THE APPELLANT / SHRI SOUMITRA CHOUDHURY, ADVOCATE, LD.AR 0(. *! / FOR THE RESPONDENT: / SHRI A.K MOHAPATRA, LD. CIT/ SR. DR 1'2 3 4 /DATE OF HEARING : 07-02-2013 5+ 3 4 /DATE OF PRONOUNCEMENT:14 -02-2013 / ORDER 67 / PER BENCH THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAI NST ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS-VI), KOLKATA IN APPEAL NOS. 154 /CIT(A)-VI/06-07/CIR-6/KOL & 640/CIT(A)- VI/08-09/CIR-6/KOL DATED 22-6-09 FOR THE ASSESS MENT YEAR 2004-05 AND 2006-07 RESPECTIVELY. 2. SHRI SOUMITRA CHOUDHURY, ADVOCATE, LEARNED AR REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI A.K MOHAPATRA, LEARNED CIT/ SR. DR REPRESENT ED ON BEHALF OF THE REVENUE. ITA NO. 1497/KOL/09 A.Y 2004-05 (BY THE ASSESSEE) 3. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS OF THE CASE THE ORDER PAS SED BY LD.CIT(APPEAL) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A) WAS WRONG IN NOT ALLOWING BAD DEBTS U/S. 36(1)(VII) AMOUNTING TO RS .77 CRORES WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A ) WAS WRONG IN CONFIRMING THE ORDER OF THE AO WHILE ALLOWING BAD DEBT CLAIM U/S. 36(1)(VII) AMOUNT TO RS. 130 CORRES THEREBY THE CIT (A) WAS WRONG IN DEDUCTING THE PROVISION U/S. 36(1)(VIIA) AT RS. 120 CRORES IN PLACE OF 43.5 CRORES, THEREFORE, THE ORDER OF THE LD. CIT(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 2 4. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A PPEAL) WAS WRONG IN NOT ALLOWING BAD DEBT U/S. 36(1)(VIIA) AMOUNT TO RS. 67.01 CRORES AS PER 1 ST AND 2 ND PROVISO, THEREFORE, THE ORDER OF THE LD. CIT(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A) WAS WRONG IN DITTOING THE ORDER OF THE AO AND NOT ALLOWING DEDUCTION ALLO WABLE AS PER 1 ST AND 2 ND PROVISO TO SECTION 36(1)(VIIA) AMOUNTING TO RS.67 .01 CRORES, THEREFORE, THE ORDER PASSED BY THE LD. CIT(A) IS CO MPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 6. FOR THAT THE APPELLANT RESERVES THE RIGHT TO A DDUCE ANY FURTHER GROUND OR GROUNDS, EVIDENCE OR EVIDENCES ON HEARING OF APP EAL. 4. REGARDING GROUND NO.2, WHICH WAS AGAINST THE ACT ION 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 THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ALLAHABAD BANK VS. DCIT, CIRCLE-6, KOLKATA REPORTE D 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 THE TRIBUNAL IN THE SA ME 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 HONBLE SUPREME COURTS DECISION IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT [2012] 206 TAXMAN 182 / 18 TAXMANN.COM 282 (SC) ALONG WITH SEVERAL CIVIL APPEALS DECIDED BY HONBLE SUPREME COURT BY S WATANTER 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 ASSESSEE. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE CONSIDER IT FIT TO REPRODUCE THE OBS ERVATIONS MADE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YR.2003-04 VIDE ITA NO.24 86/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 LEARNED AR OF THE ASSESSEE (SUPRA). ON CONSIDERATION OF THE PROVISIONS OF SECTION 36(1)(VI IA), AS ALSO SECTION 36(2)(V) AND ALSO CONSIDERING THE PROVISIONS OF SECTION 36(1 )(VII) OF THE ACT, WE FIND SUBSTANCE IN THE SUBMISSIONS OF THE LEARNED AR OF T HE ASSESSEE. HONBLE KERALA HIGH COURT HAS HELD THAT THE SCOPE OF THE PROVISO T O CLAUSE (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 INTENTION OF THE LEGISLATURE IN E NACTING 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 DE BT IS NOT GIVEN TO A SCHEDULED ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 3 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 ENTITLED TO THE DEDUCTION O F THE ENTIRE BAD DEBT RELATING TO ADVANCES MADE BY THE URBAN BRANCHES WRITTEN OFF IN THE BOOKS AND ALSO THE DIFFERENCE BETWEEN THE AMOUNT WRITTEN OFF IN THE BO OKS RELATING TO ADVANCES MADE BY THE RURAL BRANCHES DURING THE PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR AND CREDIT BALANCE IN THE PROVISIONS FOR BAD AND DO UBTFUL 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 FO R 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 TH AT PART OF THE DEBT WITH REFERENCE TO WHICH THE PROVISION IS MADE UNDER CLAU SE (VIIA) , THE PROVISO WILL OPERATE TO LIMIT THE DEDUCTION TO THE EXTENT OF THE DIFFERENCE BETWEEN THAT PART OF DEBT WRITTEN OFF IN THE PREVIOUS YEAR AND THE CREDI T BALANCE IN THE PROVISION FOR THE BAD AND DOUBTFUL DEBTS ACCOUNTS MADE UNDER CLAU SE (VIIA). FURTHER, THE SPECIAL BENCH OF THE ITAT IN THE CASE OF CATHOLIC S YRIAN BANK LTD (SUPRA) HAS HELD THAT THE DEBTS ACTUALLY WRITTEN OFF WHICH DO N OT ARISE OUT OF THE RURAL ADVANCES ARE NOT AFFECTED BY THE PROVISO TO CLAUSE (VII) AND THAT ONLY THOSE BAD DEBT WHICH ARISES OUT OF THE RURAL ADVANCES 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, 1996-97 AND 199 7-98 AND ALSO CONSIDERING THE DETAILS PLACED ON PAGES 26 TO 39 OF THE PAPER B OOK, WE ALLOW THE CLAIM OF THE ASSESSEE BY REVERSING 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 I TSELF BE A SUFFICIENT GROUND FOR ACCEPTING ITS INTERPRETATION. FURTHERMORE, THE PROV ISIONS OF A SECTION HAVE TO BE INTERPRETED ON THEIR PLAIN LANGUAGE AND COULD NOT B E INTERPRETED ON THE BASIS OF APPREHENSION OF THE DEPARTMENT. THIS COURT, IN THE CASE OF VAYA BANK V. COMMISSIONER OF INCOME TAX & ANR. [(2010) 5 SCC 416 ], HELD THAT UNDER THE ACCOUNTING PRACTICE, THE ACCOUNTS OF THE RURAL BRAN CHES HAVE TO TALLY WITH THE ACCOUNTS OF THE HEAD OFFICE. IF THE REPAID AMOUNT I N 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 PR EVENT SUCH MISMATCH AND TO BE IN CONFORMITY WITH THE ACCOUNTING PRACTICE, THE BAN KS SHOULD MAINTAIN SEPARATE ACCOUNTS. OF COURSE, ALL ACCOUNTS WOULD ULTIMATELY GET MERGED ACCOUNT INTO THE ACCOUNT OF THE HEAD OFFICE, WHICH WILL ULTIMATELY R EFLECT INTO ACCOUNT (BALANCE SHEET), THOUGH 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 WHERE IT HAS A DVANCED THE LOAN TO PARTY A. IT CANNOT WRITE OFF SUCH LOAN AGAINST THE ACCOUNT O FB. SIMILARLY, A LOAN ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 4 ADVANCED UNDER THE RURAL SCHEMES CANNOT BE WRITTEN OFF AGAINST AN URBAN OR A COMMERCIAL LOAN BY 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 BETWEEN PR OVISIONS CREATED IN RESPECT OF ADVANCES BY RURAL BRANCHES AND ADVANCES BY OTHER BR ANCHES OF THE BANK. IT ALSO RETURNED A FINDING WHILE PLACING EMPHASIS ON THE PR OVISO TO SECTION 36(1)(VII), READ WITH CLAUSE (V) OF SECTION 36(2) OF THE ACT TH AT THE INTERPRETATION GIVEN BY A DIVISION BENCH OF THAT COURTS IN THE CASE OF SOUTH INDIAN BANK (SUPRA) WAS NOT A CORRECT ENUNCIATION OF LAW, INASMUCH AS THE SAME WO ULD LEAD TO DOUBLE DEDUCTION. IT TOOK THE VIEW THAT IN A CLAIM OF DEDU CTION OF BAD DEBTS WRITTEN OFF IN NON-RURAL/URBAN BRANCHES IN THE PREVIOUS YEAR, BY V IRTUE OF PROVISO TO SECTION 36(1 )(VII), THE BANKS ARE ENTITLED TO CLAIM DEDUCT ION OF SUCH BAD DEBTS ONLY TO THE EXTENT IT EXCEEDS THE PROVISION CREATED FOR BAD OR DOUBTFUL RURAL ADVANCES UNDER CLAUSE (VIIA) OF SECTION 36(1) OF THE ACT. WE ARE U NABLE 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) (VII) AND CLAUSE SECT ION 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 F AIL 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) AND 36(2)(V), THE WORDS USED ARE PROVISION FOR BAD AND DOUBTFUL DEBTS WHILE IN THE MAIN PART OF SECTION 36(1)(VII), THE LEGISLATURE HAS INTENTIONALLY NOT USED SUCH LANGUAG E. THE PROVISO TO SECTION 36(1)(VII) AND SECTIONS 36(1)(VIIA) AND 36(2)(V) HA VE TO BE READ AND CONSTRUED TOGETHER. THEY FORM A COMPLETE SCHEME FOR DEDUCTION S 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) DEALS WITH G ENERAL DEDUCTIONS AVAILABLE TO A BANK AND EVEN NON-BANKING BUSINESSES UPON THEIR S HOWING THAT AN ACCOUNT HAD BECOME BAD AND WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR, SATISFYING THE REQUIREMENTS CONT EMPLATED IN THAT BEHALF UNDER SECTION 36(2). THE PROVISIONS OF SECTION 36(1)(VII) OPERATE IN THEIR OWN FIELD AND ARE NOT RESTRICTED BY THE LIMITATIONS OF SECTION 36 (1)(VIIA) OF THE ACT. IN ADDITION TO THE REASONS AFORE-STATED, WE ALSO APPROVE THE VI EW TAKEN BY THE SPECIAL BENCH OF ITAT AND THE DIVISION BENCH OF THE KERALA HIGH C OURT 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 INDEPENDEN T ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS. THE BAD DEBTS \ WRITTEN OFF IN DEBTS, OTHER THAN THOSE FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROV ISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTION TO THE EXTENT OF D IFFERENCE BETWEEN THE DEBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (V IIA). THE PROVISO TO SECTION 36(1)(VII) WILL RELATE TO CASES COVERED UNDER SECTI ON 36(1)(VIIA) AID HAS TO BE READ WITH SECTION 36(2)(V) OF THE ACT. THUS, THE PR OVISO WOULD NOT PERMIT BENEFIT ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 5 OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO R URAL LOANS WHILE UNDER SECTION 36(1 )(VII), THE ASSESSE WOULD BE ENTITLED TO GENER AL DEDUCTION UPON AN ACCOUNT HAVING BECOME BAD DEBT AND BEING WRITTEN OF AS IRRE COVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. 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 COMPUTATION OF T AXABLE PROFITS, OF THE AMOUNT OF ANY DEBT WHICH IS ESTABLISHED TO HAVE BECOME A BAD DEBT DURING THE PREVIOUS YEAR, SUBJECT TO CERTAIN CONDITIONS. HOWEVER, A MER E PROVISION FOR BAD AND DOUBTFUL DEBT(S) IS NOT ALLOWED AS A DEDUCTION IN T HE COMPUTATION OF TAXABLE PROFITS. IN ORDER TO PROMOTE RURAL BANKING AND IN O RDER TO ASSIST THE SCHEDULED COMMERCIAL BANKS IN MAKING ADEQUATE PROVISIONS FROM THEIR CURRENT PROFITS TO PROVIDE FOR RISKS IN RELATION TO THEIR RURAL ADVANC ES, THE FINANCE ACT, INSERTED CLAUSE (VIIA) IN SUB-SECTION (1) OF SECTION 36 TO P ROVIDE FOR A DEDUCTION, IN THE COMPUTATION OF TAXABLE PROFITS OF ALL SCHEDULED COM MERCIAL BANKS, IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBT(S ) RELATING TO ADVANCES MADE BY THEIR RURAL BRANCHES. THE DEDUCTION IS LIMITED T O A SPECIFIED PERCENTAGE OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES COMPUTED IN THE MANNER PRESCRIBED BY THE IT RULES, 1962. THUS, THE PROVISI ONS OF CLAUSE (VIIA) OF SECTION 36(1) RELATING TO THE DEDUCTION ON ACCOUNT OF THE P ROVISION FOR BAD AND DOUBTFUL DEBT(S) IS DISTINCT AND INDEPENDENT OF THE PROVISIO NS OF SECTION 36(1)(VII) RELATING TO ALLOWANCE OF THE BAD DEBT(S). IN OTHER WORDS, TH E SCHEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF OF 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 CBDT INDICATES THAT NORMALLY A DEDUCTION FOR BAD DEBT(S) CAN BE ALLOWED ONLY IF THE DEBT IS WRITTEN OFF IN T HE BOOKS AS BAD DEBT(S). NO DEDUCTION IS ALLOWABLE IN RESPECT OF A MERE PROVIS ION FOR BAD AND DOUBTFUL DEBT(S). BUT IN THE CASE OF RURAL ADVANCES, A DEDUC TION WOULD BE ALLOWED EVEN IN RESPECT OF A MERE PROVISION WITHOUT INSISTING ON AN ACTUAL WRITE OFF. HOWEVER THIS MAY RESULT IN DOUBLE ALLOWANCE IN THE SENSE THAT IN RESPECT OF SAME RURAL ADVANCE THE BANK MAY GET ALLOWANCE ON THE BASIS OF CLAUSE ( VIIA) AND ALSO ON THE BASIS OF ACTUAL WRITE OFF UNDER CLAUSE (VII) . THIS SITUATIO N IS TAKEN CARE OF BY THE PROVISO TO CLAUSE (VII) WHICH LIMITS THE ALLOWANCE ON THE B ASIS OF THE ACTUAL WRITE OFF TO THE EXCESS, IF ANY, OF THE WRITE OFF OVER THE AMOUN T STANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). HOWEVER, THE R EVENUE DISPUTES THE POSITION THAT THE PROVISO TO CLAUSE (VII) REFERS ONLY TO RUR AL ADVANCES. :IT SAYS THAT THERE ARE NO SUCH WORDS IN THE PROVISO WHICH INDICATES TH AT THE PROVISO APPLY ONLY TO RURAL ADVANCES. WE FIND NO MERIT IN THE OBJECTION R AISED BY THE REVENUE. FIRSTLY, CBDT ITSELF HAS RECOGNIZED THE POSITION THAT A BANK WOULD BE ENTITLED TO BOTH THE DEDUCTION, ONE UNDER CLAUSE (VII) ON THE BASIS OF A CTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF A MERE PRO VISION. FURTHER, TO PREVENT DOUBLE DEDUCTION, THE PROVISO TO CLAUSE (VII) WAS I NSERTED WHICH SAYS THAT IN RESPECT OF BAD DEBT(S) ARISING OUT OF RURAL ADVANCE S, THE DEDUCTION ON ACCOUNT OF ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 6 ACTUAL WRITE OFF WOULD BE LIMITED TO THE EXCESS OF THE AMOUNT WRITTEN OFF OVER THE AMOUNT OF THE PROVISION ALLOWED UNDER CLAUSE (VIIA) . THUS, THE PROVISO 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 TO RURAL ADVANCES. THIS HAS BEEN EXPLAINED BY THE CIRCULARS ISSUED BY CBDT. THUS, THE PROVISO INDICATES THAT IT IS LIMITED IN ITS APPLICATION TO BAD DEBT(S) ARISING OUT OF RURAL ADVANCES OF A BANK. IT FOLLOWS THAT IF THE AMOUNT O F BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE BANK REPRESENTS ONLY DEB T(S) ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT I S NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII) 3 . ACCORDINGLY, THE ABOVE QUESTION IS ANSWERED IN THE AFFIRMATIVE, I.E., IN F AVOUR OF THE ASSESSEE(S) . FOR THE ABOVE REASONS, I AGREE THAT THE APPEALS FILED BY TH E ASSESSEES STAND ALLOWED AND THE APPEALS FILED BY THE REVENUE STAND DISMISSED WI TH 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 CATHOLICS SYRIAN BANK LTD. (SUPRA) WE FIND NO JUSTIFICATION ON THE PART OF REVENUE TO DISALLOW TH E 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 PERTAINING 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 TH IS TRIBUNAL IN THE CASE OF ALLAHABD BANK ( REFER T O SUPRA)., RESPECTFULLY FOLLOWING THE SAID DECISION O F THE CO-ORDINATE BENCH OF THIS TRIBUNAL, THE SAI D GROUND STANDS ALLOWED. 6. GROUND NOS. 3, 4 & 5, WHICH ARE AGAINST THE ACTI ONS OF THE LEARNED CIT(A) IN NOT ALLOWING BAD DEBT CLAIMED U/S. 36(1)(VIIA) OF THE I.T ACT 1 961, IT WAS FAIRLY AGREED BY BOTH THE SIDES THA T THE ISSUES IN THE APPEAL WERE ALSO SQUARELY COVERED BY THE SAID DECISION OF THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF ALLAHABD BANK ( REFER TO S UPRA)., WHEREIN IT HAS BEEN HELD AS FOLLOWS :- . 3. AT THE TIME OF HEARING BEFORE US, BOTH THE PARTI ES FAIRLY CONCEDED THAT THIS ISSUE IS COVERED AGAINST ASSESSEE IN ASSESSEES OWN CASE FOR A.YR. 2003-04 VIDE ITA NO.2486/KOL/2007. THEREFORE WE DISMISS GROUND NOS.1 AND 2 BY RESPECTFULLY FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CA SE DATED 30 TH SEPTEMBER, 2009. THE RELEVANT OBSERVATIONS OF THE LD. TRIBUNAL ARE A S UNDER :- 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND THE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF THE P ARTIES. WE HAVE ALSO CONSIDERED THE PROVISIONS OF SECTION 36(L)(VIIA) OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT THE CLAIM OF 10% OF DOUBTFUL A SSETS AND LOSS AS PROVIDED IN FIRST PROVISO TO SECTION 36(1)(VIIA)(A) OF THE ACT AS AMENDED BY THE FINANCE ACT, 2002 W.E.F. 1.4.2003 AND APPLICABLE TO THE ASSESSM ENT YEAR UNDER CONSIDERATION AS AN ALTERNATE CLAIM AND THE ADDITIO NAL DEDUCTION COULD NOT BE ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 7 ALLOWED IF THE CLAIM OF THE ASSESSEE UNDER CLAUSE ( A) OF SECTION 36(1)(VIIA) HAS BEEN ALLOWED. SINCE THE DEPARTMENT HAS ALLOWED THE DEDUCTION TO THE ASSESSEE U/S.36(1)(VIIA)(A) OF THE ACT, WE HELD THAT THE LEA RNED CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER TO DI SALLOW THE ADDITIONAL CLAIM OF RS. 1,40,30,70,000 OF THE ASSESSEE. HENCE, GROUND N O.1 IS REJECTED. 3.1 SINCE THE FACTS INVOLVED IN THIS CASE ARE SIMI LAR TO THAT OF ONE DECIDED BY THE TRIBUNAL, WE FIND NO REASON TO DEVIATE FROM THE ORDERS OF THE TRIBUNAL TAKEN IN ASSESSEES OWN CASE . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUES IN THE APPEAL ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF ALLAHABAD BANK (REFER TO SUPRA), THE FINDINGS OF THE LEARNE D CIT(A) ON THESE ISSUES STAND SUSTAINED. THESE ISSUES OF THE ASSESSEES APPEAL ARE DISMISSED. 8. THE APPEAL IN ITA NO. 1497/KOL/09 FOR THE A.Y 20 04-05 IS PARTLY ALLOWED. ITA NO. 1498/KOL/09 A.Y 2006-07 (BY THE ASSESSEE) 9. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS OF THE CASE THE ORDER PAS SED BY LD.CIT(APPEAL) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A) WAS WRONG IN DISALLOWING BAD DEBT CLAIM U/S. 36(1)(VII) OF THE I.T ACT AMOUNTING TO RS. 134 CRORES WHICH IS COMPLETELY ARBITRARY, UNJU STIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A ) WAS WRONG BY FOLLOWING THE ORDER OF THE AO BY RESTRICTING THE BAD DEBT C LAIM AT RS. 8,12,77,342/- IN PLACE OF BAD CLAIM BY THE ASSESSEE BANK AT RS.142,27,99, 872/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE THE LD. CIT(A PPEAL) WAS WRONG IN CONFIRMING THE ORDER OF THE AO WHEREIN THE AO HAS C HARGED INTEREST U/S. 234D AMOUNTING TO RS. 1,28,84,583/- WHICH IS C OMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT THE APPELLANT RESERVES THE RIGHT TO AD DUCE ANY FURTHER GROUND OR GROUNDS, EVIDENCE OR EVIDENCES ON HEARING OF APP EAL. 10. IN RESPECT OF GROUND NOS. 2 & 3, WHICH ARE AGAI NST THE ACTIONS OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS CLAIMED U /S. 36(1)(VII) OUR FINDING IN RESPECT OF GROUND NO. 2 OF THE ASSESSEES APPEAL IN ITA NO.1497/KOL/09 FOR THE ASSESSMENT YEAR 2004-05 (BY THE ASSESSEE) WOULD APPLY. HOWEVER, IT IS NOTICED THAT THE AMOUN T OF DEDUCTION CLAIMED OF RS. 134,15,17,530/- WOULD NOT BE FULLY ALLOWABLE AND THE SAME WOULD H AVE BEEN REDUCED BY THE AMOUNT OF DEDUCTION OF BAD DEBT WRITTEN OFF IN RESPECT OF RURAL BRANCHES TO THE EXTENT OF RS. 37, 52,37,535/- AS BAD DEBT WRITTEN OFF IN RESPECT OF RURAL BRANCHES CANNOT BE CLAIMED AS DEDUCTION U/S. 36(1)(VII) IN VIEW OF TH E PROVISO TO SECTION 36(1)(VII) OF THE I.T ACT 1961. ITA NOS. 1497 & 1498/KOL/09-A-PB-GM 8 11. IN RESPECT OF GROUND NO.4, WHICH IS AGAINST TH E LEVY OF INTEREST U/S. 234B, THE SAME IS CONSEQUENTIAL IN NATURE. 12. THE APPEAL IN ITA NO. 1498/KOL/09 FOR THE A.Y 2 006-07 IS PARTLY ALLOWED. 12.1 IN THE RESULT, BOTH THE ASSESSEES APPEALS BE ING ITA NOS. 1497 & 1498/LOL/09 FOR THE ASSESSMENT YEARS 2004-05 & 2006-07 ARE PARTLY ALL OWED AS STATED ABOVE. 8 1 6 1 9 8: THIS ORDER IS PRONOUNCED IN OPEN COURT ON DTT 14. -02-2013 SD/- SD/- *PP/SPS 3 **; <;+= / COPY OF THE ORDER FORWARDED TO: 1. . (. / THE APPELLANT : UNITED BANK OF INDIA 16 OLD COU RT HOUSE ST, KOL-1. 2 0(. / THE RESPONDENT- DCIT,CIR -6, P7 CHOWRINGHEE SQ ., KOL-69. 3 4. . * / THE CIT, * ( )/ THE CIT(A) 5 . '>*9 * / DR, KOLKATA BENCH 6 . GUARD FILE . 0; */ TRUE COPY, 1/ BY ORDER, 8 #$ /ASSTT REGISTRAR ( . . , ) (P. K. BANSAL, ACCOUNTANT MEMBER) ( $%$& 1 ( , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( (4 4 4 4) )) ) DATE 14-02-2013