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

ITA 1893/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8343 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 20-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 22-06-2016
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Keywords: Bad and doubtful debts
• Section: 143(3); 142(1); 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , !' . ! $ , % & ' [ BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO.1893/MDS/2016 & C.O.NO.108/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE I TUTICORIN VS. M/S TAMILNADU MERCANTILE BANK LTD 57, V.E ROAD TUTICORIN 628 002 [PAN AAACT 5558 K] (APPELLANT) ( R ESPONDENT /CROSS OBJECTOR ) ./ I.T.A.NO.1400/MDS/2016 / ASSESSMENT YEAR : 2012-13 M/S TAMILNADU MERCANTILE BANK LTD 57, V.E ROAD TUTICORIN 628 002 VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE I TUTICORIN (APPELLANT) ( R ESPONDENT) DEPARTMENT BY : DR. MILIND MADHUKAR BHUSARI, CIT ASSESSEE BY : NONE / DATE OF HEARING : 20 - 09 - 2016 / DATE OF PRONOUNCEMENT : 07 - 10 - 2016 ITA NO.1400/16 ETC :- 2 -: ( / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE AND THE CROSS OBJECT ION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, MADURAI DATED 30.3.2016 IN I.T.A.NO.14/2015-16 FOR ASSESSMENT YEAR 2012-13 PA SSED U/S 143(3) AND 250 OF THE INCOME-TAX ACT, 1961(IN SHORT THE A CT). AND THE ASSESSEE FILED APPEAL AGAINST THE VERY SAME ORDER OF THE CIT(A). 2. FIRST WE TAKE UP REVENUES APPEAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OF FICER TO DELETE THE ADDITION OF RS.63,78,66,640/- ON ACCOUNT OF PROVISI ON MADE FOR BAD AND DOUBTFUL DEBTS WITH RESPECT TO NON-RURAL BRANCH ES. 3. THE CIT(A) OUGHT TO HAVE SEEN THAT THE DEDUCTION U/S 36(I)(VIIA) R.W.RULE 6ABA RESTRICTS THE DEDUCTION ONLY TO THE R URAL BRANCHES AND HENCE OUGHT TO HAVE SUSTAINED THE ORDER OF THE ASSE SSING OFFICER WHO DISALLOWED THE CLAIM MADE FOR NON-RURAL BRANCHE S. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN BUSINESS OF BANKING SERVICES AND FILED THE RETURN O F INCOME ELECTRONICALLY ON 30.11.2012 WITH TOTAL INCOME OF ` 371,87,60,339/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS AND ITA NO.1400/16 ETC :- 3 -: NOTICE U/S 143(21) WAS ISSUED ON 24.9.2013. IN CO MPLIANCE, THE ASSESSEES REPRESENTATIVE APPEARED FROM TIME TO TIM E AND CERTAIN DETAILS WERE CALLED FOR BY THE ASSESSING OFFICER U /S 142(1) OF THE ACT. THE ASSESSING OFFICER, DURING THE COURSE OF SCRUTIN Y PROCEEDINGS FOUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 36(1) (VII)(A) OF THE ACT AMOUNTING TO ` 67,94,22,950/- TOWARDS BAD AND DOUBTFUL DEBTS AND ASSESSEE WAS CALLED TO SUBMIT THE BIFURCATIONS. T HE ASSESSEE HAS EXPLAINED THAT THE BANK WHICH HAS RURAL BRANCHES TH E DEDUCTION U/S 36(1)(VII)(A) IS ALLOWABLE IN RESPECT OF RURAL DEBT S SINCE THE CALCULATION IS PRIMARILY BASED ON RURAL ADVANCES. BUT THE ASS ESSEE IS NOT HAVING ANY RURAL BRANCHES THE DEDUCTION IS CLAIMED IN RESP ECT OF NON-RURAL DEBTS. AS PER THE PROVISIONS OF SEC. 36(1)(VIIA), THE BANK NOT HAVING RURAL BRANCH SHOULD ADJUST THE WRITE OFF OF NON-RUR AL DEBTS AGAINST THE PROVISION ALLOWED U/S 36(1)(VIIA) AND THE BANK STAT ED THAT THE HON'BLE SUPREME COURT HAS CONSIDERED THE DEDUCTION U/S 36( 1)(VIIA) IN THE CASE OF CATHOLIC SYRIAN BANK LTD IN CIVIL APPEAL N O.1143/2011 DATED 17.2.2012 AND THE DECISION OF THE SUPREME COURT CAN NOT BE RELIED UPON IN RESPECT OF ALLOWABILITY OF DEDUCTION TO THE ASSESSEE U/S 36(1)(VIIA). THE ASSESSING OFFICER DID NOT FIND TH E CONTENTIONS OF THE ASSESSEE ACCEPTABLE. HE REFERRED TO THE CIRCULAR A ND LEGISLATIVE INTENTION OF THE RELEVANT PROVISIONS AND AMENDMENT TO SEC. 36 OF THE ACT AND FOUND THAT DEDUCTION ON ACCOUNT OF PROVISIO N FOR BAD AND ITA NO.1400/16 ETC :- 4 -: DOUBTFUL DEBTS U/S 36(1)(VIIA) IS DISTINCT AND IND EPENDENT OF THE PROVISIONS OF SEC. 36(1)(VII) RELATING TO ALLOWANCE OF BAD DEBTS. THE LEGISLATIVE INTENT WAS TO ENCOURAGE RURAL ADVANCES AND THE MAKING OF PROVISIONS FOR BAD DEBTS IN RELATION TO SUCH RURAL BRANCHES. MERE PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT ALLOWAB LE. BUT IN THE CASE OF RURAL ADVANCE, THE SAME IN TERMS OF SECTION 36(1 )(VIIA)(A) MAY BE ALLOWABLE WITHOUT INSISTING ON AN ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNT. CONSIDERING THESE FACTS AND JUDICIAL DECI SIONS, THE ASSESSING OFFICER WAS OF THE OPINION THAT DEDUCTION U/S 36(1 )(VIIA) IS PROVISION ALLOWABLE RELATING TO ONLY RURAL ADVANCES BY RURAL BRANCHES AND RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF M/S CATHOLIC SYRIAN BANK LTD (SUPRA). HE OBSERVED THAT THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT, 1961 FOR THE RURAL ADVANCES AND TO BE ALLOWED U/S 36(1)(VIIA) OF THE ACT WITHIN THE PRESCRIBED LIMITS . SINCE THE ASSESSEE- BANK HAS MADE A PROVISION FOR RURAL ADVANCES OF ` 4,15,56,310/- OUT OF THE TOTAL PROVISION OF ` 67,94,22,950/-, THE DIFFERENCE IS CLAIMED AS EXCESS DEDUCTION. ACCORDINGLY, THE ASSESSING OFFIC ER DISALLOWED ` 63,78,66,640/- AND PASSED ORDER U/S 143(3) DATED 3 0.3.2015. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL WITH THE C IT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR OF THE ASSES SEE ARGUED THE GROUNDS AND EMPHASIZED THAT DEDUCTION U/S 36(VII)( A) HAS TO BE ITA NO.1400/16 ETC :- 5 -: ALLOWED TO THE ASSESSEE THOUGH THERE ARE NO RURAL BRANCHES. THE ASSESSING OFFICER RELYING ON THE ORDER OF THE SUPR EME COURT IN THE CASE OF CATHOLIC SYRIAN BANK 18 TAXMANN.COM 282, AL LOWED DEDUCTION ONLY TO THE EXTENT OF ` 4,15,56,310/- IN RESPECT OF RURAL BRANCHES ADVANCES. AND FURTHER SUBMITTED THAT IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2011-12 IN I.T.A.NO.0029/2014-15 DA TED 23.9.2015, THE CIT(A) HAS ALLOWED DEDUCTION. WHERE THE DEPARTM ENT HAS NOT MADE ANY REFERENCE APPLICATION TO THE KARNATAKA HIG H COURT ON THE DISPUTED ISSUE U/S 36(1)(VII)(A) IN THE CASE OF M/ S VIJAYA BANK AGAINST THE DECISION OF THE BANGALORE ITAT IN I.T.A.NO. 578 /BANG/2012 DATED 27.2.2015 FOR ASSESSMENT YEAR 2008-09. CONSIDERING THE FACTS OF EARLIER ASSESSMENT YEAR IN ASSESSEES OWN CASE, DE DUCTION WAS ALLOWED BY THE CIT(A) BY DIRECTING THE ASSESSING O FFICER TO DELETE THE ADDITION. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE H AS ASSAILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. DR NARRATED THE FACTS AND LEGISLATIVE INTENT AND PROVISIONS OF SEC. 36(1)(VII)(A) AND ALSO THE BASIC DEDUCTION TO BE ALLOWED IN RESPECT O F PROVISION MADE FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCHES , AND ALSO SUBMITTED THAT THE CIT(A) HAS ERRED IN DIRECTING TH E ASSESSING OFFICER TO DELETE THE ADDITION IN RESPECT OF NON-RURAL BRAN CHES WHEREAS THE ITA NO.1400/16 ETC :- 6 -: DEDUCTION HAS TO BE RESTRICTED ONLY TO THE RURAL BR ANCHES ADVANCES IN VIEW OF SEC. 36(1)(VIIA) R.W. RULE 6ABA . HE FURTH ER SUBMITTED THAT THE HON'BLE SUPREME COURT HAS ALREADY CONSIDERED THESE FACTS IN THE CASE OF CATHOLIC SYRIAN BANK LTD (SUPRA) AND PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(A). 6. NONE ATTENDED ON BEHALF OF THE ASSESSEE . WE, THER EFORE, PROCEEDED TO DECIDE THE APPEAL AFTER CONSIDERING TH E SUBMISSIONS OF THE LD. DR AND THE MATERIAL ON RECORD. 7. WE HEARD THE SUBMISSIONS OF THE LD. DR, MATERIAL PL ACED ON RECORD AND THE JUDICIAL DECISIONS. THE CRUX OF THE ISSUE ARGUED BY THE LD. DR IS THAT DEDUCTION SEC. 36(1)(VII(A) HAS TO B E RESTRICTED ONLY WITH RESPECT TO THE RURAL BRANCHES AND NOT TO OTHERS WHE REAS THE ASSESSEE- BANK HAS MADE A PROVISION TOWARDS RURAL BRANCHES TO THE EXTENT OF ` 4,15,56,310/- WHEREAS THE HIGHER DEDUCTION WAS CLAI MED ` 67,94,22,950/- IN RESPECT OF NON-RURAL BRANCHES. T HE LEGISLATIVE INTENT IS TO PROVIDE THIS BENEFIT TO THE RURAL BRANCHES IR RESPECTIVE OF ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNT. WE FIND THAT TH E SIMILAR ISSUE WAS CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 IN I.T.A.NO. 2 297/MDS/2015, DATED 20.7.2016 WHEREIN IT WAS HELD AS UNDER: ITA NO.1400/16 ETC :- 7 -: 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND CONSIDERED THE WRITTEN SUBMIS SIONS FILED BY THE ASSESSEE. THE ASSESSEE IS A SCHEDULED BANK AS PER THE SECOND SCHEDULE OF SCHEDULED BANKS OF RESERVE BANK OF INDIA ACT, 1934. AS PER RBI GUIDELI NES, THE ASSESSEE MADE PROVISIONS FOR BAD AND DOUBTFUL D EBTS IN THE BOOKS OF ACCOUNTS AND CLAIMED DEDUCTION UNDE R SECTION 36(1)(VIIA) OF THE ACT BY CONSIDERING THE T OTAL PROVISION MADE IN THE BOOKS AND WITHOUT BIFURCATING THE SAME INTO RURAL AND NON-RURAL BRANCHES. BY FOLLOWIN G THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT 343 ITR 270, THE ASSESS ING OFFICER HAS HELD THAT THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS ALLOWABLE RELATING ONLY T O RURAL ADVANCES. ACCORDINGLY, THE PROVISION MADE FOR BAD A ND DOUBTFUL DEBTS FOR RURAL BRANCHES AMOUNT TO .46,72,089/- OUT OF THE TOTAL PROVISION OF .37,96,12,893/- FOR THE YEAR ENDED 31.03.2011 ALONE IS ELIGIBLE FOR DEDUCTION UN DER SECTION 36(1)(VIIA) OF THE ACT AND THE EXCESS CLAIM MADE FOR .37,49,40,804/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AFTER CONSIDERING THE WRITTEN SUBMISS IONS OF THE ASSESSEE, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF .37,49,40,804/- BY OBSERVING AS UNDER: 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND PERUSED THE ASSESSMENT ORDER AND THE DECISION OF THE APEX COURT IN THE CASE OF M/S. CATHOLIC SYRIAN BANK (CITED ABOVE). SECTION 36(1)(VIIA) READS AS UNDER:- 'SECTION 36 - OTHER DEDUCTIONS THE SECTION READS AS UNDER .- OTHER DEDUCTIONS.- (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPEC T OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 - VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY - (A) A SCHEDULED BANK NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY ITA NO.1400/16 ETC :- 8 -: AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. ' A PLAIN AND SIMPLE READING OF THE ABOVE SECTION SHO WS THAT THE DEDUCTION IS IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS BUT THE QUANTUM OF DEDUCTION IS DETERMINED WITH REFERENCE TO 7.5% OF THE TOTAL INCO ME AND AN AMOUNT NOT EXCEEDING 10% OF AGGREGATE OF AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. FROM THE ABOVE , IT IS CLEAR THAT THE DEDUCTION IS NOT RESTRICTED TO PR OVISION FOR BAD AND DOUBTFUL DEBT IN RESPECT OF RURAL BRANCHES ONLY. THE ASSESSING OFFICER HAS READ A PORTION OF THE JUD GMENT OF THE HON'BLE SUPREME COURT DIVESTING IT FROM THE CONTEXT IN WHICH SUCH LANGUAGE WAS USED AND WRONGLY HELD TH AT THE DEDUCTION IS AVAILABLE ONLY IN RESPECT OF PROVI SION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL BRANCHES . IT IS SEEN THAT THE ASSESSING OFFICER HAS MISUNDERSTOOD T HE DECISION OF THE HON'BLE SUPREME COURT AND HELD THAT DEDUCTION U/S.36(1 )(VIIA) IS ALLOWABLE ONLY TOWARD S PROVISION FOR BAD AND DOUBTFUL DEBT IN RESPECT OF R URAL BRANCHES ONLY. A READING OF THE DECISION OF THE APE X COURT SHOWS THAT IN THAT CASE THE BANK MADE A CLAIM TOWAR DS PROVISION OF RS.15,01,29,990/- FOR BAD AND DOUBTFUL DEBTS U/S.36(1)(VIIA) AND FURTHER CLAIMED RS.12,65,95,770 /- AS DEDUCTION ON ACCOUNT OF BAD DEBTS U/S.36(1)(VII) WH ICH WAS NOT ALLOWED AS IT DID NOT EXCEED THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS PER PROVISO TO SEC.36(1)(VII) OF THE ACT. ACCORDINGLY, THE ISSUE DECIDED BY THE APEX COU RT WAS NOT THE SAME AS IN THE CASE OF THE APPELLANT. IN TH E CASE OF THE APPELLANT, THE ISSUE IS WHETHER THE PROVISION F OR BAD AND DOUBTFUL DEBTS IS TO BE ALLOWED IN RESPECT OF A LL BRANCHES INCLUDING NON-RURAL BRANCHES OR ONLY IN RE SPECT OF RURAL BRANCHES. ACCORDINGLY, THE ISSUE INVOLVED IN THIS APPEAL IS TOTALLY DIFFERENT AND THE ASSESSING OFFIC ER WRONGLY APPLIED THE DECISION OF THE APEX COURT TO T HE FACTS OF THIS CASE. FURTHER AS RIGHTLY CONTENDED BY THE REPRESENTATIVE, THE HON'BLE BANGALORE TRIBUNAL 'C' BENCH ITA NO.1400/16 ETC :- 9 -: IN ITA NO.578/BANG/2012 AND ITA NO.653/BANG/ 2012 F OR THE ASST. YEAR 2008-09 BY ORDER DATED 27.02.2015 DE CIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AFTER DULY CON SIDERING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK. IN THE ABOVE CASE, THE CIT(A) ALLOWED DEDUCTION U/S.36(1)(VIIA) AT RS.1,92,57,72, 764/- WHICH IS THE OUTER LIMIT PRESCRIBED IN SEC.36(1)(VI IA) EVEN THOUGH THE PROVISION MADE BY THE ASSESSEE WAS ONLY RS.1,00,55,67,213/- WHICH INCLUDED THE PROVISION FO R BAD AND DOUBTFUL DEBTS RELATING TO RURAL BRANCHES ONLY AT RS.7,45,51,455/-. THE HON'BLE TRIBUNAL HELD THAT TH E APPELLANT WAS ENTITLED TO DEDUCTION U/S.36(1)(VIIA) AT RS. 100,55,67,213/- WHICH REPRESENTS THE PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN THE BOOKS OF ACCOUNTS AN D NOT THE PROVISION RELATING TO RURAL BRANCHES ONLY WHICH WAS RS.7,45,51,455/-. ACTUALLY, IN THE ABOVE CASE, THE APPELLANT MADE A PLEA BEFORE THE HON'BLE TRIBUNAL TO ALLOW 7. 5% OF THE TOTAL INCOME AND 10% OF THE AGGREGATE ADVANCES OF THE RURAL BRANCHES, WHICH WAS MORE THAN THE PROVISION M ADE BY THE ASSESSEE BUT THE HON'BLE TRIBUNAL DECLINED T O ALLOW THE SAME. ACCORDINGLY, I FIND THAT THE HON'BLE BANG ALORE TRIBUNAL HAS CONSIDERED THE EXACT ISSUE INVOLVED IN THIS APPEAL (VIZ) WHETHER THE DEDUCTION U/S_36(1)(VIIA) SHOULD BE ALLOWED IN RESPECT OF PROVISION FOR BAD AND DOUB TFUL DEBTS IN RESPECT OF ALL THE BRANCHES OR ONLY FOR RU RAL BRANCHES AND DECIDED THAT IT SHOULD BE BASED ON THE PROVISION IN RESPECT OF ALL THE BRANCHES. AS ALREAD Y STATED, WHILE COMING TO THE ABOVE CONCLUSION, THE HON'BLE TRIBUNAL HAS ELABORATELY DISCUSSED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN B ANK WHICH IS RELIED ON BY THE ASSESSING OFFICER IN THE IMPUGNED ORDER. FOLLOWING THE DECISION OF THE HON'B LE BANGALORE TRIBUNAL, I FIND THAT THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION U/S.36(1 )(VIIA) ONLY IN RESPECT OF PROVISION MADE FOR BAD AND DOUBT FUL DEBTS IN RESPECT OF RURAL BRANCHES ONLY AND I, THER EFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.37,49,40,804/-. THIS GROUND IS ALLOWED. 6. IN THIS CASE, THE ISSUE RAISED BEFORE US RELATE S TO WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT IN RESPE CT OF ALL BRANCHES INCLUDING NON-RURAL BRANCHES OR ONLY IN RE SPECT OF RURAL BRANCHES. VIDE ITS LETTER DATED 29.03.2013, THE ASS ESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PRO VISION FOR BAD ITA NO.1400/16 ETC :- 10 -: AND DOUBTFUL DEBTS FOR RURAL BRANCHES WAS .46,72,089/- OUT OF THE TOTAL PROVISION OF .37,96,12,893/- MADE BY THE ASSESSEE FOR THE YEAR ENDED 31.03.2011 UNDER SECTION 36(1)(VIIA) OF THE ACT. THUS, THE ASSESSING OFFICER RESTRICTED THE CLAIM OF DEDUCTION FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHES TO THE EX TENT OF .46,72,089/- BY FOLLOWING THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V . CIT (SUPRA) AND MADE ADDITION OF .37,49,40,804/- AS CLAIMED BY THE ASSESSEE, WHICH IS NOT PERTAINING TO RURAL BRANCHES . THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE ABOVE ADDITION ON TWO COUNTS VIZ., (I) THE RATIO LAID DOW N BY THE HONBLE SUPREME IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT( SUPRA) WAS NOT THE SAME AS IN THE CASE OF THE ASSESSEE AND (II ) THE RATIO LAID DOWN BY THE BANGALORE BENCHES OF THE TRIBUNAL IN TH E CASE OF JCIT V. VIJAYA BANK (SUPRA) IS SQUARELY APPLIES TO THE FACTS OF THE ASSESSEES CASE. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF JCIT V. VIJAYA BANK, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 15. WE HAVE CONSIDERED THE SUBMISSIONS AND ARE OF THE VIEW THAT THE SAME CANNOT BE ACCEPTED. THE CREATION OF A SPECIAL RESERVE U/S.32A OR SEC.36(1)(VIII) OF THE A CT CANNOT BE EQUATED WITH CREATION OF PBDD U/S.36(1)(VIIA) OF THE ACT. CREATION OF PROVISION U/S.36(1)(VIIA) OF THE A CT IS GOVERNED BY CERTAIN RULES LIKE RULE 6ABA OF THE RUL ES IN RESPECT OF RURAL ADVANCES. IT CANNOT BE CREATED AT THE BANKS WHIMS AND FANCY. MOREOVER THE ASSESSEE IS NO T MAKING A CLAIM FOR CREATION OF PBDD IN THE BOOKS OF ACCOUNTS OF PY RELEVANT TO AY 08-09. THE EXCESS RES ERVE CREATED IN THE SUBSEQUENT YEAR CANNOT BE EQUATED TO THE PBDD CREATED IN THE BOOKS FOR THE PRESENT AY. THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE DO NOT LAY DOWN A PROPOSITION THAT EXCESS PROVISION CREATED IN THE SUBSEQUENT YEAR CAN SUPPLE MENT THE INADEQUATE CREATED IN AN EARLIER YEAR. THE DECI SIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE LAY DOWN PROPOSITION THAT THE ASSESSEE SHOULD BE GIVEN LIBERTY TO CREATE A RESERVE IN THE BOOKS OF ACCOUNTS OF THE RELEVANT AY. FOR THE REASONS GIVEN ABOVE, WE REJECT THE SECO ND ALTERNATE SUBMISSION MADE BY THE LEARNED COUNSEL FO R THE ASSESSEE. THUS THE ASSESSEE WILL BE ENTITLED TO DED UCTION U/S.36(1)(VIIA) OF THE ACT OF RS.100,55,67,213/- ON LY. GROUND NO.2 OF THE REVENUE IS ALLOWED TO THIS EXTEN T. ITA NO.1400/16 ETC :- 11 -: 7. WITH REGARD TO THE PROVISIONS FOR BAD AND DOUBT FUL DEBTS, THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT DO ES NOT SPEAK ANYTHING ABOUT NON-RURAL BRANCHES. BY AND LARGE, TH E INTENTION OF LEGISLATURE FOR INSERTION OF CLAUSE (VIIA) TO SECTI ON 36(1) OF THE ACT WAS TO ENCOURAGE RURAL ADVANCES AND TO PROVIDE FOR DEDUCTION IN THE COMPUTATION OF THE TAXABLE PROFITS OF ALL SCHEDULED COMMERCIAL BANKS IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCE S MADE BY THEIR RURAL BRANCHES. THEREFORE, THE PROVISO IS LIM ITED IN ITS APPLICATION TO BAD DEBTS ARISING OUT OF RURAL ADVAN CES OF A BANK AND NOT FOR NON-RURAL ADVANCES. OVER AND ABOVE THE STATUTE, SINCE THE PROVISIONS OF SECTIONS 36(1)(VII) AND (VI IA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPE RATE IN THEIR RESPECTIVE FIELDS, THE DECISION IN THE CASE OF VIJA YA BANK V. CIT (SUPRA) DID NOT CLARIFY AS TO HOW THE ASSESSEE IS E LIGIBLE TO CLAIM DEDUCTION OF THE AMOUNT WHICH INCLUDES BOTH THE PRO VISIONS FOR BAD AND DOUBTFUL DEBTS OF RURAL AND NON-RURAL ADVAN CES. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E ABOVE DECISION RELIED ON BY THE LD. CIT(A) CANNOT BE ACCE PTED. 8. FURTHER, THE CONCURRENT FINDINGS OF THE HONBLE CHIEF JUSTICE OF INDIA IN THE CASE OF CATHOLIC SYRIAN BAN K V. CIT (SUPRA) ARE REPRODUCED AS UNDER: PER S. H. KAPADIA C. J. I. (CONCURRING) : THE PROVISIONS OF CLAUSE (VIIA) OF SECTION 36(1) RELATI NG TO THE DEDUCTION ON ACCOUNT OF THE PROVISION FOR BAD AND DOUBTFUL DEBIT(S) ARE DISTINCT AND INDEPENDENT OF T HE PROVISIONS OF SECTION 36(1)(VII) RELATING TO ALLOWA NCE OF THE BAD DEBT(S), IN OTHER WORDS, SCHEDULED COMMERCI AL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF OF THE IRRECOVERABLE DEBITS) UNDER SECTION 36(1)(VI I) IN ADDITION TO THE BENEFIT OF DEDUCTION FOR THE PROVIS ION MADE FOR BAD AND DOUBTFUL DEBT(S) UNDER SECTION 36(1)(VI IA). NORMALLY, A DEDUCTION FOR BAD DEBIT(S) CAN BE ALLOW ED ONLY IF THE DEBT IS WRITTEN OFF IN THE BOOKS AS BAD DEBT(S), BUT IN THE CASE OF RURAL ADVANCES, A DEDUCTION WOUL D 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 THE SAME RURAL ADVANCE THE BANK MAY GET ALLOWANCE ON TH E BASIS OF CLAUSE (VIIA) AND ALSO ON THE BASIS OF ACT UAL WRITE OFF UNDER CLAUSE (VII). THIS SITUATION IS TAKEN CAR E OF BY THE PROVISO TO CLAUSE (VII) WHICH LIMITS THE ALLOWANCE ON THE BASIS OF THE ACTUAL WRITE OFF TO THE EXCESS, IF ANY , OF THE ITA NO.1400/16 ETC :- 12 -: WRITE OFF OVER THE AMOUNT STANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). THE CBDT ITSEL F HAS RECOGNIZED THE POSITION THAT A BANK WOULD BE ENTITL ED TO BOTH THE DEDUCTIONS, ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUS E (VIIA) IN RESPECT OF A MERE PROVISION. IT WOULD BE MEANING LESS TO INVOKE THE PROVISO WHERE THERE IS NO THREAT OF DOUB LE DEDUCTION. IN CASE OF RURAL ADVANCE, WHICH ARE COVE RED BY THE PROVISIONS OF CLAUSE (VIIA), THERE WOULD BE NO SUCH DOUBLE DEDUCTION. THE PROVISO LIMITS ITS APPLICATIO N TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. THIS HAS BEEN EXPLA INED BY CIRCULARS ISSUED BY THE CBDT. THUS, THE PROVISO LIMITED IN ITS APPLICATION TO BAD DEBIT(S) ARISING OUT OF RURAL ADVANCES OF A BANK. IT FOLLOWS THAT IF THE AMOUNT OF BAD DEBIT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNT OF THE BANK REPRESENTS ONLY DEBT(S) ARISING OUT OF URBAN ADVANC ES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED , CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII). 9. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V . CIT (SUPRA), WE ARE OF THE OPINION THAT THE ASSESSEE CA NNOT CLAIM DEDUCTION OF BAD AND DOUBTFUL DEBTS OF NON-RURAL BR ANCHES UNDER SECTION 36(1)(VIIA) OF THE ACT. THUS, WE REVERSE TH E FINDINGS OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF TH E ASSESSING OFFICER. ACCORDINGLY, THE GROUND RAISED BY THE REVE NUE IS ALLOWED. 8. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL FOR ASSESSMENT YEAR 2011-12, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS GROUND AND RESTORE THE ORDER OF THE ASSESSING OFFIC ER. 9. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED. ITA NO.1400/16 ETC :- 13 -: 10. THE ASSESSEE HAS FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF THE CIT(A). SINCE THE REVENUES APPEAL ST ANDS ALLOWED THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND HENCE, D ISMISSED. 11. NOW COMING TO ASSESSEES APPEAL I.T.A.NO.1400/MDS/ 2016, IT WAS NOTICED THAT THE APPEAL WAS EARLIER POSTED F OR HEARING ON 3.8.2016 AND AT THE REQUEST OF THE LD. AR FOR THE ASSESSEE, THE HEARING WAS ADJOURNED TO 20.9.2016 FOR WHICH NOTICE OF HEARING WAS ISSUED BY RPAD AND DULY SERVED ON THE ASSESSEE AS IS EVIDENT FROM THE POSTAL ACKNOWLEDGEMENT PLACED ON RECORD. DES PITE RECEIPT OF NOTICE, AT THE TIME OF HEARING, NONE APPEARED ON B EHALF OF THE ASSESSEE. FROM THE CONDUCT OF THE ASSESSEE IT APPEA RS THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING THE APPEAL B EFORE THE TRIBUNAL. IN THESE CIRCUMSTANCES, AS HELD BY I.T.A.T., DELHI BENCH IN THE CASE OF CIT VS. MULTIPLAN INDIA (P) LIMITED 38 ITD 320 THAT THERE MAY BE VARIOUS REASONS FOR THE ASSESSEE TO REMAIN ABSENT A T THE TIME OF HEARING AND ONE OF THE REASONS MIGHT BE ABSENCE TO PROSECUTE THE APPEAL AND ALSO FOLLOWING DECISION OF THE CO-ORDINA TE BENCH OF THE TRIBUNAL IN THE CASE OF HELIOS AND MATHESON INFORMATION TECHNOLOGY LIMITED VS ITO IN ITA NO.134/MDS/2011, DATED 05.07. 2011, WE HEREBY DISMISS THE APPEAL IN LIMINE. HOWEVER, WE MAKE IT CLEAR THAT THE ASSESSEE IS AT LIBERTY TO FILE A PETITION TO RECALL THIS ORDER PROVIDED ITA NO.1400/16 ETC :- 14 -: CONVINCING/SUFFICIENT CAUSE BE EXPLAINED FOR NON-AP PEARANCE ON THE SAID DATE OF HEARING. 12. TO SUMMARIZE, THE APPEAL OF THE REVENUE IS ALLOWED WHEREAS THE APPEAL AND CROSS OBJECTION OF THE ASSESSEE AR E DISMISSED. ORDER PRONOUNCED ON FRIDAY, 7 TH OCTOBER, 2016, AT CHENNAI. SD/- SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER ( . ! $ ) (G. PAVAN KUMAR) % / JUDICIAL MEMBER / CHENNAI / DATED: 7 TH OCTOBER, 2016 RD ! ' #$ %$ / COPY TO: 1 . &' / APPELLANT 4. ( / CIT 2. ')&' / RESPONDENT 5. $*+ ' , / DR 3. ( () / CIT(A) 6. +/ 0 / GF