ACIT, Meerut V. M/s. Sarva UP Gramin Bank, Meerut

ITA 1937/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1164 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Bad and doubtful debts; Revised return; Set aside
• Section: 80C; 143(3); 260A; 80P; 64; 113; 43; 73; 72; 13; 37; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER & DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1937/DEL./2016 ASSTT. YEAR: 2012-13 ACIT CIRCLE 2 MEERUT VS SARVA UP GRAMIN BANK C-39/5, JAGRITI VIHAR, MEERUT. (APPELLANT) (RESPONDENT) PAN NO. AACAS9891G REVENUE BY : MS. ASHIMA NEB, SR. D R MS. NIDHI SRIVASTAVA, CIT DR ASSESSEE BY : SH. VIVEK GUPTA, CA ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(APPEALS), MEERUT D ATED 06.01.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER IN THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW AND FACT IN DELETING THE ADDITION OF RS. 11,02,79,355/- MADE BY THE ASSESSING OFFICER DUE TO DISALLOWANCE OF EXCESS DATE OF HEARING 03 .12.2019 DATE OF PRONOUNCEMENT 18 .12.2019 ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 2 CLAIM MADE BY THE ASSESSEE, IN RESPECT OF PROVISION OF BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE I. T. ACT, 1961, IGNORING THE FACT THAT THE SAID AMOUNT WAS NOT REFLECTED IN SCHEDULE 9 OF THE BALANCE SHEE T OF THE RELEVANT PERIOD AND WAS THUS NOT PART OF THE PROVISION FOR BAD AND DOUBTFUL DEBT FOR THE RELEVAN T PERIOD. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND FACT IN DELETIN G THE ADDITION OF RS. 3,70,00,000/- MADE BY THE ASSESSING OFFICER, IGNORING THE FACT THAT THE SAID AMOUNT HAS BEEN SHOWN AS PROVISION MADE FOR BAD AND DOUBTFUL DEBTS, DURING THE RELEVANT PREVIOUS YEAR, OVER AND ABOVE THE PRUDENTIAL NORMS SUGGESTED BY THE RBI. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND OR DELETE ANY GROUND(S) OF APPEAL. 3. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 36(1)(VII A) OF THE INCOME TAX ACT, 1961 OF RS. 16,06,72,355/-. TH E ASSESSING OFFICER DISALLOWED THIS AMOUNT ON THE GRO UNDS THAT NO PROVISION MADE UNDER THE HEAD PROVISION FOR BAD AND DOUBTFUL DEBTS FOR THE YEAR UNDER CONSIDERATION. IT IS HELD BY THE ASSESSING OFFICER THAT THE NET BALANCE OF OT HER ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 3 PROVISIONS HAVE ACTUALLY DECREASED IN RESPECT OF LA ST YEAR BALANCE AND SINCE IT SHOWS OVERALL DECREASE IN PROV ISIONS, THE SAME NEEDS TO BE DISALLOWED. 4. WITH REGARD TO THE DISALLOWANCE THE ASSESSEE SUB MITTED AS UNDER: 1. THE BANK IS GOVERNED BY THE BANKING REGULATION ACT, 1949. THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT OF THE BANK IS REQUIRED TO BE DRAWN UP IN FORMS A AND B RESPECTIVELY PRESCRIBED UNDER THIRD SCHEDULE TO THE BANKING REGULATION ACT, 1949. BANK HAS DULY MADE ITS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IN THE SAID FORM NO. A AND B WHICH CAN BE VERIFIED BY YOU FROM THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ALREADY FILED WITH YOU FOR THE AY 2012-13. IN THE SAID FORM NO. A AND B READ WITH SCHEDULE THERETO, THERE IS NO HEAD OF ACCOUNT WITH NAME OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND THE SAID PROVISIONS ARE BEING MADE IN THE BANKING INDUSTRY UNDER THE HEAD PROVISIONS AND CONTINGENCIES GIVEN THE AFORESAID FORM B AND THE SAME HAS BEEN DULY CERTIFIED BY THE STATUTORY AUDITOR OF THE BANK. PROFIT AND LOSS ACCOUNT AS REQUIRED TO BE FILED UP IN INCOME TAX RETURN IS NOTHING BUT THE COPY OF PROFIT AND LOSS ACCOUNT MADE BY THE BANK IN WHICH PROVISION FOR BAD AND DOUBTFUL DEBTS ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 4 HAVE BEEN MADE UNDER THE HEAD PROVISIONS AND CONTINGENCIES. FOR THIS REASON, THE AMOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- WAS DULY FILED UP IN COLUMN NO. 39 OTHER PROVISIONS AS PER AFORESAID PRESCRIBED FORM NO. B FOR PROFIT AND LOSS ACCOUNT APPLICABLE TO BANKING INDUSTRY. IN ANY CASE, IT IS A SETTLED LAW THAT WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISIONS OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. FURTHER IT I S ALSO A SETTLED LAW THAT ACCOUNTING PRACTICES CANNOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. THIS HAS BEEN SO HELD BY VARIOUS COURTS. INSTANCES ARE AS UNDER: A. KEDARNATH JUTE MFG. CO. LTD. VS. CIT (1971) 82 ITR 363 (SC) B. SUTLEJ COTTON MILLS LTD. VS. CIT (1979) 116 ITR 1 (SC) C. STATE BANK OF INDIA VS. CIT (1986) 157 ITR 67 (SC) D. TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR 172 (SC) ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 5 E. CIT VS. VALIKUNDAM RUBBER CO. LTD. (2000) 241 ITR 50 (KER.) 2. IN COLUMN NO. 6 OF PART OI OF ITR, WE HAVE DISALLOWED THE AMOUNT OF PROVISION OF BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- AS THE PROVISI ON FOR BAD AND DOUBTFUL DEBTS IS NOT ALLOWABLE IN GENE RAL AS PER PROVISIONS OF INCOME TAX ACT. HOWEVER, THE BANKING INDUSTRY HAS BEEN GIVEN A SPECIFIC DEDUCTIO N U/S 36(1) (VIIA) OF THE IT ACT, 1961 IN THIS REGARD AND ACCORDINGLY, THE SAME HAS BEEN CLAIMED IN COLUMN NO. 30 OF SCHEDULE BP OF ITR. DETAILED SUBMISSION FOR DEDUCTION U/S 36(1)(VIIA) HAS ALREAD Y BEEN FILED WITH YOU ON 23.12.2014. 3. &5. AS STATED ABOVE THAT THE BANK MADE THE TOTAL PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- DURING THE YEAR. OUT OF THIS, RS. 1102.81 LAKHS W>AS REDUCED FROM THE ADVANCES AND BALANCE OJ N RS. 503.91 LAKHS WAS SHOWN IN SCHEDULE 5 -OTHER PROVISIONS IN THE AUDITED ACCOUNTS AS PER BANKING REGULATION ACT. IN OTHER WORDS, THE OUTSTANDING AMOUNT OF ADVANCES AS ON 31.03.2012 SHOWN IN SCHEDULE 9 OF BALANCE SHEET IS NET OF PROVISION FOR BAD AND DOUBTFUL DEBTS AS ON 31.03.2012 AND REMAINING ACCUMULATED AMOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS AS ON 31.03.2012 HAS BEEN SHOWN IN SCHEDULE 5 -OTHER PROVISIONS. BESIDES THE ABOVE, THERE CAN BE REDUCTION IN THE AMOUNT OF ACCUMULATED PROVISIONS FOR BAD & DOUBTFUL ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 6 DEBTS AS COMPARED TO LAST YEAR DUE TO RECOVERY IN ACCOUNTS, WRITE OFF AND UP GRADATION OF ACCOUNTS ET C. AS SUCH, THE INCREMENTAL PROVISION FOR BAD AND DOUBTFUL DEBTS DURING THE YEAR CANNOT BE WORKED OUT ON COMPARISON OF SCHEDULE 5-OTHER PROVISIONS WITH THE LAST YEAR IN ISOLATION. INSTEAD SCHEDULE 5- OTH ER PROVISIONS AS WELL AS PROVISION FOR BAD & DOUBTFUL DEBTS REDUCED FROM THE ADVANCES HAVE TO BE COMPARED WITH LAST YEAR. THE SAME ARE DEPICTED BELOW FOR THE SAKE OF CONVENIENCE: RS. IN LAKHS PARTICULARS ACCUMULATED PROVISIONS FOR DOUBTFUL DEBTS AS ON 31/03/2011 WRITTEN OFF/WRITE BACK OF PROVISION DURING THE YEAR ON WRITE OFF PROVISION OUTSTANDING AFTER WRITE OFF/WRITE BACK ACCUMULATED PROVISIONS FOR DOUBTFUL DEBTS AS ON 31/03/2012 PROVISION FOR BAD & DOUBTFUL DEBTS DURING THE YEAR 1 2 3=(1-2) 4 5=(4-3) PROVISION FOR BAD & DOUBTFUL NETTED WITH GROSS ADVANCES AND NET ADVANCES SHOWN IN SCHEDULE-9 OF AUDITED ACCOUNTS 1481.11 106.28 1374.83 2477.64 1102.81 PROVISION FOR BAD & DOUBTFUL DEBTS SHOWN UNDER SCHEDULE 5 OF AUDITED ACCOUNTS 3451.91 210.36 3241.55 3745.47 503.91 ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 7 TOTAL 4933.02 316.64 6223.11 1606.72 COPY OF LEDGER ACCOUNT OF EXP. PROVISION FOR NPA FOR THE YEAR ENDED ON 31/03/2012 AND SUNDRY PROVISION NPA (ACCUMULATED) AS ON 31/03/2012 IS ENCLOSED. IN VIEW OF THE ABOVE, THE AMOUNT OF PROVISION FOR BA D AND DOUBTFUL DEBTS MADE DURING THE YEAR CANNOT BE FIND OU T BY SIMPLY COMPARING THE ACCUMULATED AMOUNT OF SCHEDULE 5- OTHER PROVISIONS WITH THE LAST YEAR. HOWEVER, THE ONE H AS TO LOOK THE PROFIT AND LOSS ACCOUNT OF THE BANK TO FIND OUT THE INCREMENTAL AMOUNT OF PROVISION FOR BAD AND DOUBT FUL DEBTS MADE DURING THE YEAR AS IT WILL ALWAYS REFLECT IN THE PROFIT AND LOSS ACCOUNT. THE SAID PROVISIONS FOR BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- MADE DURING THE YEAR HAS BEEN SHOWN UNDER THE HEAD PROVISIONS AND CONTINGENCIES IN THE PROFIT & LOSS ACCOUNT. THE REASONS FOR CREATION OF PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- UNDER THE HEAD PROVISION AND CONTINGENCIES HAVE ALREADY BEEN SPELT OUT IN PARA 1 ABOVE. IN ADDITION TO ABOVE, THE HEAD OTHER PROVISION OF SCHEDULE -5 IN THE BALANCE SHEET DEALS WITH THE OTHER OUTSTANDING PROVISIONS INCLUDING THE PROVISION FOR BAD A ND DOUBTFUL DEBTS. THE DETAILS OF OTHER PROVISION OF SCHEDULE 5 FOR THE FINANCIAL YEAR 2010-11 AND 2011-12 IS ENCLOSED. THE NOTE REFEREED FROM SCHEDULE 17, SPELT OUT THE DETAILS OF FURTHER PROVISION MADE BY THE BANK IN ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 8 ADDITION TO MINIMUM PROVISION REQUIRED TO BE MADE IN TERMS OF RBI GUIDELINES. IT IS TO BE NOTED THAT IT IS A SETTLED POSITION THAT RBI GUIDELINES ARE IRRELEVANT FO R THE PURPOSE OF INCOME TAX COMPUTATION UNDER INCOME TAX. THE BANK HAS MADE THE TOTAL PROVISION OF BAD AND DOUBTFUL DEBTS OF RS. 16,06,72,355/- DURING THE YEAR WHICH INCLUDES THE PROVISION OF RS. 3,70,00,000/- AS GIVEN IN THE SAID NOTE. FURTHER, THE PROVISION FOR BAD AND DOUBTFU L DEBTS HAS ALSO BEEN REDUCED BY THE AMOUNT OF WRITE OFF OR RURAL ADVANCES BY RS. 210.36 LACS AS THIS WRITE OFF HAS BEEN MADE OUT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED EARLIER AND ACCORDINGLY, NO SEPARATE CLAIM OF WR ITE OFF BAD DEBTS OF RS. 210.36 LACS HAS BEEN MADE IN THE COMPUTATION OF INCOME. IN VIEW OF THE ABOVE AND CONSIDERING THE MERIT OF TH E CASE AND PROVISION OF THE LAW, DEDUCTION CLAIMED U/S 36(1)(VIIA) CANNOT BE DISALLOWED AND THE SAME HAS BEEN CORRECTLY CLAIMED BY THE BANK. IT IS ALSO RELEVANT TO ST ATE THAT THIS ISSUE WAS ALSO EXAMINED IN DETAIL DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF EARLIER YEARS AND THERE HAS BEEN NO DISALLOWANCE ON THIS ISSUE IN ANY OF T HE EARLIER ASSESSMENT YEARS. 5. THE ASSESSING OFFICER DISALLOWED THE PBDD (PROVI SION FOR BAD & DOUBTFUL DEBTS) ON THE GROUNDS THAT THE A SSESSEE HAS FAILED TO FILL THE CORRECT AND TRUE FIGURES OF PBDD WHICH ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 9 WAS NOT DONE BY THE ASSESSEE. THE MATTER WAS TAKEN UP TO APPEAL BY THE ASSESSEE BEFORE THE LD. CIT(A). 6. BEFORE THE LD. CIT(A), THE ASSESSEE HAS REITERAT ED THE SUBMISSIONS TAKEN UP BEFORE THE ASSESSING OFFICER. THE SUBMISSIONS OF THE ASSESSEE ARE AS UNDER: S ECTION 36 (1) (VIIA) INTER-ALIA PROVIDES AS UNDER : THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHA LL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN , IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 : (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUBT FUL DEBTS MADE BY- (A) A SCHEDULED BANK [NOT BE I NG A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON- SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CRED I T SOC I ETY 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 VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE R URAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. BASED ON THE ABOVE, DEDUCTION UNDER SECTION 36(1)(VIIA) IS ALLOWABLE LOWER OF THE FOLLOWING : A . AMOUNT OF ANY PROVISION FOR BAD & DOUBTFUL DEBTS . B . SUM OF 7 . 5% OF TOTAL INCOME (BEFORE MAKING ANY D E DUCTION ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 10 UNDER THIS SECTION AND UNDER CHAPTER VIA) AND 10% OF AGGREGATE AVERAGE ADVANC E S MADE BY THE RURAL BRANCHES OF THE BANK . DUR I NG THE YEAR , BANK DEBITED THE AMOUNT OF RS . 16 . 07 CRORES TOWARDS PROVISION FOR BAD & DOUBTFUL DEBTS I N ITS BOOKS WHICH IS EVIDENT FROM THE SCHEDULE-16 OF OPERATING EXPENSES ATTACHED TO AUDITED PROF I T & LOSS ACCOUNT FOR THE FY 2011-12 . WHERE IT HAS BEEN CATEGORICALLY MENTIONED AS LOAN LOSS PROVISION WHICH IS A PROV I SION FOR BAD & DOUBTFUL DEBTS . FOR ASSESSMENT YEAR 2012-13 , THE AGGREGATE AVERAGE ADVANCES QUALIFIED FOR THE DEDUCTION UNDER SEC . 36 (1) (VIIA) WERE COMPUTED I N THE MANNER PRESCRIBED BY RULE 6ABA AS UNDER : THE AMOUNT OF ADVANCES , MADE BY EACH RURAL BRANCH , AS OUTSTANDING AT THE END OF THE LAST DAY OF THE MONTH OF THE ASSESSMENT YEAR 2012-13 , IS AGGREGATED SEPARATELY . THE SUM SO ARR I VED AT IN THE CASE OF EACH SUCH BRANCH IS DIVIDED BY THE NUMBER OF MONTHS , FOR WH I CH THE OUTSTANDING ADVANCES HAVE BEEN TAKEN INTO ACCOUNT . THE AGGREGATE OF THE SUMS SO ARRIVED AT IN RESPECT OF E ACH OF THE RURAL BRANCHES IS THE AGGREGATE AVERAGE ADVANCES MAD E BY THE RURAL BRANCHES OF THE BANK WHICH WORK OUT TO RS . 1116 . 57 CRORES AND 10% OF THE SAME WORKS OUT TO RS . 111 . 66 CRORES . 7.5% OF TAXABLE INCOME BEFORE DEDUCT I ON U/S 36(1) (VIIA) COMES TO RS . 3 . 10 CRORES . SINCE THE PROVISION FOR BAD & DOUBTFUL DEBTS IS OF RS. 1 6.07 CRORES WHICH IS MUCH LESS THAN THE AFORESAID AGGREGATE AMOU NT OF RS . 114.76 CRORES (RS. 111 . 66 CRORES + RS . 3 . 10 CRORES) , THE BANK HAS CLAIMED THE DEDUCTION UNDER SECTION 36(1 )( VIIA) OF RS . 16.07 CRORES . ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 11 IT IS TO BE NOTED THAT LD AO HAS DULY ACCEPTED THE CALCU LATION OF 10% OF AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCH ES OF RS. 111.66 CRORES AS WELL AS 7.5 OF TOTAL INCOME OF RS. 3 . 10 AGGREGATING TO RS . 114.76 CRORES WHICH IS THE ELIGIBLE AMOUNT FOR DEDUCTION U/S 36(1) (VIIA). AS SUCH ONLY LIMITED DISPUTE HAS BEEN RAISED BY THE LD AO WITH RESPECT TO PROVISION OF RS . 16.07 CRORES MADE BY THE BANK FOR BAD & DOUBTFUL DEBTS AND DULY D EBITED TO ITS AUDITED PROFIT & LOSS ACCOUNT FOR THE AY 2012-13 . THE LD AO W I THOUT CONS I DERING THE AUDITED PROFIT & LOSS ACCOUNT WH I CH IS A DIRECT DOCUMENT FOR ESTABLISHING THE CREATION OF PROVISION FOR DOUBTFUL DEBTS DUR I NG THE YEAR, HAS GONE WITH COMPARISON OF PROVISION FOR BAD & DOUBTFUL DEBTS ACCOUNT AS ON 31/03/2011 AND 31/03/2012 IN ISOLATION AND WITHOUT F ULLY APPRECIATING THE FACT THAT FOR COMPAR I NG SUCH ACCUMULATED ACCOUNT , ONE HAS TO ALSO LOOK INTO REVERSAL IN THIS ACCOUNT DURING THE YEAR ON ACCOUNT OF WRITE OFF BAD DEBTS WHICH HAS BEE N OF RS. 316 . 64 LACS DURING THE YEAR . FURTHER , LD AO ALSO OVERL O OKED THE FACT ON RECORD THAT AT THE TIME OF PREPARATION OF BAL ANCE SHEET , THE ADVANCES ARE SHOWN/PRESENTED NET OF CERTAIN PROVISION FOR BAD DOUBTFUL DEBTS (NPAS) AS PER RBI GUIDELINES IN AUD ITED ACCOUNTS THOUGH THE SEPARATE ACCOUNT OF PROVI S ION FOR BAD & DOUBTFUL DEBTS (SUNDRY PROVISION-NPA) IS BEING MAINTAI NED IN THE BOOKS . DETAIL OF COMPUTATION OF ADVANCES SHOWN IN AUDITED ACCOUNTS AS ON 31/03/2012 ARE AS UNDER : ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 12 AMOUNT AMOUNT PARTICULARS (IN (000) (IN (000) GROSS ADVANCES AS PER CONSOLIDATED WEEKLY 17537654 LESS: (I) PROVIS I ON FOR NPA 247764 (II) DERECOGN I ZED INTEREST ON NPA 61251 . .. . ', . . (III) FESTIVAL ADVANCES 13710 322725 ADVANCES AS PER SCHEDULE 9 OF BALANCE SHEET 17214929 A COMPLETE JOURNEY OF ACCUMULATED ACCOUNT OF PROVIS ION FOR BAD & DOUBTFUL DEBTS AS ON 31/03/2012 ALONG WIT H LEDGER ACCOUNT OF EXP. PROVISION FOR NPA FOR THE YE AR ENDED ON 31/03/2012 AND SUNDRY PROVISION NPA- ACCUMULATED AS ON 31/03/2012 WERE FILED WITH LD AO VIDE ITS SUBMISSION DATED 11/02/2015. A RELEVANT EX TRACT FROM SUCH SUBMISSION DATED 11/02/2015 IS REPRODUCED BELOW: RSINLAKH PARTICULARS ACCUMULATED WRITTEN PROVISION ACCUMULATE PROVISION PROVISIONS OFF/ WRITE OUTSTANDIN PROVISION FOR BAD & DOUBTFUL BACK OF AFTER WRITE DOUBTFUL DOUBTFUL AS ON PROVISION OFF/WRITE ASON DEBTS 31/03/2011 DURING THE BACK 31/03/2012 DURING YEAR ON YEAR WRITE OFF 1 2 3=(1-2) 4 5=(4-3) PROVISION FOR BAD & NETTED WITH GROSS ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 13 NET ADVANCES SHOWN IN 9 OF AUDITED BALANCE SHEET. 1481.11 106.28 1374.83 2477.64 1102.81 PROVISION FOR BAD & DEBTS SHOWN UNDER OF AUDITED ACCOUNTS 3451.91 210.36 3241.55 3745 .47 503.91 TOTAL 4933.02 316.64 6223.11 1606.72 HOWEVER, THE LD AO HAS TOTALLY OVERLOOKED THE FACTS AND FIGURES AVAILABLE ON RECORD INCLUDING THE LEDGE R ACCOUNT OF EXP. PROVISION FOR NPA FOR THE YEAR ENDE D ON 31/03/2012 AND SUNDRY PROVISION NPA (ACCUMULATED) AS ON 31/03/2012 FILED WITH HIM AND GONE WITH HIS OWN CALCULATIONS OF SIMPLY DOING THE COMPARISON OF DETAILS FILED WITH HIM OF 'OTHER PROVISIONS' DISCLOSED IN SCHEDULE-5 (OTHER LIABILIT IES & PROVISIONS) TO AUDITED ACCOUNTS AS ON 31/03/2011 AN D 31/03/2012 IN ISOLATION WHICH IS TOTALLY INCORRECT AS DETAILED ABOVE. FURTHER, IT HAS BEEN ONE ITEM OF COMPLETE JOURNEY OF ACCUMULATED ACCOUNT OF PROVISIO N FOR BAD & DOUBTFUL DEBTS AS ON 31/03/2012 FILED WITH HIM VIDE ITS SUBMISSION DATED 11/02/2015 & SHOWN ABOVE AND OTHER ITEM VISION FOR BAD & DOUBTFUL DEBTS NETTED WITH GROSS ADVANCES) OF SAME SUBMISSION (I.E. PROVISION FOR BAD & DOUBTFUL DEBTS NETTED WITH GROSS ADVANCES) OF SAME SUBMISSION DATED 11/02/2015 WAS TOTALLY IGNORED BY HIM. MOREOVER, WHEN THE LD AO, IN PREFERENCE TO ACCEPT T HE AMOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS MADE DURING THE YEAR AND DULY REFLECTED IN AUDITED P& L ACCOUNT, DECIDED TO GO WITH THE COMPARISON OF ACCUMULATED ACCOUNT OF PROVISION FOR BAD & DOUBTFUL AS ON 31/03/2011 AND 31/03/2012 TO WORK OUT THE INCREMENTAL PROVISION FOR BAD & DOUBTFUL DEBTS DURING THE YEAR, SHOULD HAVE CONSIDERED COMPLETE JOURNEY OF SUCH ACCUMULATED ACCOUNT AS WELL AS ITS PRESENTATION IN AUDITED BALANCE SHEET WHICH LD AO FAILED TO DO SO. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 14 UNDER THESE CIRCUMSTANCES, THE LD AO HAS MADE HIS OWN PICK AND CHOOSE WORKINGS SUITED TO HIM WITH PRECONCEIVED MIND TO MAKE THE DISALLOWANCE U/S 36(1 ) (VIIA) IRRESPECTIVE OF FACTS AND FIGURES AVAILABLE ON RECORD. THUS, THE ACTION OF LD. AO IN MAKING DISALLOWANCE IS DEVOID OF THE MERIT OF THE CASE AND IS AGAINST THE PROVISIONS OF THE LAW. IT WAS ALSO SUBMITTED BEFORE THE LD AO THAT THE DEDUCTION U/S 36(1) (VIIA) DID NOT AFFECT IN ANY MANNER WITH THE FACT THAT CERTAIN PROVISIONS FOR BA D & DOUBTFUL DEBTS HAVE BEEN NETTED WITH THE ADVANCES SHOWN UNDER ASSETS AND THE REMAINING PROVISION HAS BEEN SHOWN UNDER THE HEAD PROVISION FOR BAD & DOUBTFUL DEBTS UNDER LIABILITY SIDE AS LONG AS THE BANK HAS DEBITED THE TOTAL PROVISION FOR BAD & DOUBTFUL DEBTS OF RS. 16,06,72,355 MADE DURIN G THE YEAR IN PROFIT & LOSS ACCOUNT WHICH IS THE ONLY CONDITION TO BE SATISFIED AS PER SECTION 36(1)(VIIA ) AS WELL AS IN TERMS OF JUDGMENT OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF STATE BANK OF PATIA LA AS CITED BY THE LD. AO IN HIS ORDER. IT HAS ALSO BEEN STATED BY THE LD AO THAT THE BANK HAS FIRST ADDED THE AMOUNT OF PROVISION FROM NPAS IN IT S COMPUTATION AND THEN CLAIMED THE DEDUCTION UNDER SECTION 36(1)(VIIA) SEPARATELY IN COMPUTATION WHERE AS THE SAME TREATMENT HAS NOT BEEN FOLLOWED IN THE CAS E OF DEDUCTION U/S 36(1)(VIII) CLAIMED BY THE BANK. I N THIS CONNECTION, IT IS SUBMITTED NPAS PROVISIONS ARE NOT ALLOWABLE IN GENERAL UNDER INCOM E TAX ACT. HOWEVER, A SPECIFIC DEDUCTION AS DETAILED ABOVE HAS BEEN GIVEN TO BANKING INDUSTRY UNDER SECTION 36(1)(VIIA) IN RESPECT OF RURAL ADVANCES AN D 7.5 OF TAXABLE INCOME. IT IS NOT OUT OF PLACE TO MENTION THAT IN CASE NPA PROVISIONS ARE MORE AS COMPARED TO ELIGIBLE AMOUNT UNDER SECTION 36(1)(VIIA), IN THAT CASE. THE DEDUCT ION UNDER SECTION 36(1)(VIIA) IS LIMITED TO ELIGIBLE AM OUNT UNDER SECTION 36(1)(VIIA) AND EXCESS AMOUNT OF NPA PROVISION IS NOT ALLOWED AT ALL. FOR THIS, REASON, THE ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 15 BANK CONSISTENTLY FOLLOWS THE TREATMENT OF FIRST ADDING THE NPA PROVISIONS IN COMPUTATION OF INCOME THEN CLAIMING THE DEDUCTION U/S 36(1)(VIIA) AFTER SATISFYING THE CONDITIONS UNDER SECTION 36(1)(VIIA).THIS TREATMENT HAS BEEN CONSISTENTLY ACCEPTED BY THE INCOME TAX DEPARTMENT IN SCRUTINY ASSESSMENT OF EARLIER YEARS AS WELL. IN THE CASE OF DEDUCTION U/S 36(1 )(VIII), THE QUES TION OF FIRST ADDING THE AMOUNT IN COMPUTATION OF INCOME THEN CLAIMING SEPARATELY DOES NOT ARISE AT ALL AS F OR DEDUCTION U/S 36(1)(VIII), THE LEGISLATURE TALKS AB OUT CREATION OF RESERVE WHICH IS A BELOW LINE ITEM AND IS APPROPRIATION OF PROFITS. THEREFORE, THE SAME CANNO T BE EQUATED WITH DEDUCTION U/S 36(1)(VIIA) WHERE PROVISION HAS TO BE CREATED WHICH IS A CHARGE ON PROFITS. IN ANY CASE, IT IS A SETTLED LAW THAT WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR N OT WILL DEPEND ON THE PROVISIONS OF LAW RELATING THERE TO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE O F HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OF ENTR IES IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE I N THE MATTER. FURTHER, IT IS ALSO A SETTLED LAW THAT ACCOUNTING PRACTICES CANNOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. THIS HAS BEEN SO HELD BY VARIO US COURTS. INSTANCES ARE AS UNDER: I) KEDARNATH JUTE MFG. CO LTD VS . CIT.(1971) 82 ITR 363(SC) II) STATE BANK OF INDIA VS. CIT(1986) 1571TR 67 (SC)- PARA 11 HOWEVER , THE LD AO DID NOT DEAL WITH THE AFORESAID CASE LAWS IN H I S ASSESSMENT O R DER WHICH IMP L IES THAT HE HAS BEEN IN AGREEMENT WITH OUR AFORESA I D CONTENTION AND CITED CASE LAWS . UNDER THESE CIRCUMSTANCES , HE I S NOT J UST I FIED I N MAKING THE D I SALLOWANCE O N T H I S GROUND A L ONE . LD AO HAS A L SO N OT F U LLY U N DERSTOOD T HE SCHEME OF THE ACT W I TH R ESPECT TO I NTRO DU CT I O N OF TH E PROV I S I ON O F SECTION 36 (1) ( VI I A ) WH I CH IS A SPECIFIC I NCENT I VE GIVEN TO BAK I NG I NDUST R Y BY LEG I SLAT UR E I N HIS OWN WISDOM TO PROMOTE RURAL BANK I NG AND ASSIST THE BANKS I N MAKING . ADEQUATE ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 16 PROV I SIO N S F R OM THE I R CU R RENT PROFITS TO PROVIDE FOR RISKS I N RELATION TO THE IR R U R AL ADVANCES . IT IS A SETTLED LAW THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES F OR PROMOTING GROWTH AND DEVELOPMENT SHOU L D BE CONSTRUED LIBERALLY . FURTHER A PURPOSIVE INTERPRETATION SHOULD BE GIVEN TO THE PROVISIONS OF THE ACT WHILE CONSIDERING A CLAIM FOR EXEMPTION FROM TAX. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS IN THIS REGARD: I) BROACH DISTRICT CO-OPERATIVE COTTON SALES, GINNING & PRESSING SOCIETY LTD. VS. CIT (1989) 177 I TR 418 (SC)- PARA 3. II) SANJEEV LAL . V. CIT (2014) 105 DTR 305/365 ITR 389/225 TAXMAN 239(SC)-PARA 22. T HE AFORESAID SECT I O N W A S I NTRODUC ED T O PROMOTE RU RA L BANK I NG AND ASSIST T H E BANKS IN MAKING ADE QU ATE P R O VISI O N S FR O M T HE IR CURREN T P R OFITS TO PROV I DE F OR R I SKS IN R ELATION T O T HE IR R UR A L ADVANCES . THIS CLEARLY SHOWS THAT LEGISLATURE I N HIS OWN WISDOM HAS ALSO REALIZED THAT THERE IS A MUCH R ISK INVOLVED IN GRANTING THE RURAL ADVANCES AS COMPARED TO NON RURAL ADVANCES AND FOR THIS REASON THE L EGISLATURE HAS GIVEN SPECIFIC INCENTIVE FOR RURAL ADVANCES U/S 36(1)(VII A). CONSIDERING THE FACT THAT THERE I S MUCH RISK INVOLVED IN GRANTING RURAL ADVANCES , THE BANK HAS MADE ADDITIONAL PROVISION OF RS . 3,70 , 00,000/- DURING THE YEAR TOWARDS RURAL ADVANCES WHICH IS WITHIN THE VERY PURPOSE OF OBJECT SOUGHT TO BE ACHIEVED BY THE LEGISLATURE BY INSERTI NG THE SECTION 36(1) (VIIA) IN THE STATUTE . AS S U C H , BANK I S EL I GIBLE FOR DEDUCTION ULS 36 ( 1 ) ( V I IA ) FOR SAID PROVISION OF RS . 3 , 70 , OO , OO O I - A L SO AS THE TOTA L P R OV I S I ON OF RS. 16 , 06 , 72 , 355 (I NCLUD I NG T H E P R OVIS I ON OF RS . 3 , 70 , 00 , 00 01 - ) MADE BY THE BANK AND DEBITED TO I TS PROF IT & L OSS ACCOUNT IS MUCH LOWER AS COMPARED TO THE TOTAL ELIGIBLE AMOUNT OF DEDUCTION U/S 36(1)(VIIA) OF RS. 114.76 CRORES AS DETAILED ABOVE. TO APPRECIATE THE PROVISIONS OF SECTION 36(1)(VIIA) ,ONE NEEDS TO LOOK INTO THE HISTORY OF SEC.36(1 )(VIIA) AS IT EXISTS IN THE PRESENT FORM. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 17 STAGE-I: SEC. 36(1)(VIIA) WAS INSERTED BY THE FINANCE ACT, 1 979 W.E.F. 1ST APRIL,1980 AND AT THE TIME OF ITS INSERTION, TH IS CLAUSE READ AS UNDER: '(VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOU BTFUL DEBTS MADE BY A SCHEDULED BANK IN RELATION TO THE ADVANCE S MADE BY ITS RURAL BRANCHES, AN AMOUNT NOT EXCEEDING ONE AND A HALF PER CENT OF THE AGGREGATE AVERAGE ADVANCES MAD E BY SUCH BRANCHES, COMPUTED IN THE PRESCRIBED MANNER. EXPLANATION: FOR THE PURPOSES OF THIS CLAUSE,- ('RURAL BRANCH' MEANS A BRANCH OF A 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' HAS THE SAME MEANING AS IN TH E EXPLANATION AT THE END OF CL. (B) OF SUB-SECTION (2 ) OF SECTION 11, BUT DOES NOT INCLUDE A CO-OPERATIVE BANK.' THIS CLAUSE, AS EXPLAINED IN PARA 13 OF THE CBDT CI RCULAR NO. 258, DT. 14TH JUNE, 1979, WAS INSERTED TO PROMOTE R URAL BANKING AND TO ASSIST THE SCHEDULED COMMERCIAL BANK S IN MAKING ADEQUATE PROVISIONS IN RELATION TO THEIR RURAL ADVA NCES. THE CIRCULAR READS THUS:- 'DEDUCTION IN RESPECT OF PROVISIONS MADE FOR BAD AN D DOUBTFUL DEBTS RELATING TO RURAL BRANCHES OF SCHEDU LED COMMERCIAL BANKS - SEC. 36(1 )(VIIA) UNDER S. 36(1 )(VIIA) OF THE IT ACT, A TAXPAYER CAR RYING ON BUSINESS OR PROFESSION IS ENTITLED TO A DEDUCTION, IN THE COMPUTATION OF THE TAXABLE PROFITS, OF THE AMOUNT O F ANY DEBT WHICH IS ESTABLISHED TO HAVE BECOME BAD DURING THE PREVIOUS YEAR, SUBJECT TO CERTAIN CONDITIONS. HOWEVER, A MER E PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT ALLOWED AS A DEDUCTION IN THECOMPUTATION OF THE TAXABLE PROFITS. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 18 IN ORDER TO PROMOTE RURAL BANKING AND ASSIST THE SC HEDULED COMMERCIAL BANKS IN MAKING ADEQUATE PROVISIONS FROM THEIR CURRENT PROFITS TO PROVIDE FOR RISKS IN RELATION TO THEIR RURAL ADVANCES, THE FINANCE ACT HAS INSERTED A NEW CL. (V IIA) IN SUB-SO (1) OF S. 36 OF THE IT ACT TO PROVIDE FOR A DEDUCTION, THE COMPUTATION OF THE TAXABLE PROFITS OF ALL SCHED ULED COMMERCIAL BANKS, IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCES MADE BY THE RURAL BRANCHES. THE DEDUCTION WILL BE LIMITED TO 1- 1/2 PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES COMPUTED IN THE MANNER TO BE PRESCRIBED BY RULES IN THE IT RULES, 1962. FOR THIS PURPOSE, A 'RURAL B RANCH' MEANS A BRANCH OF A SCHEDULED BANK SITUATED IN A PL ACE WITH A POPULATION NOT EXCEEDING 10,000 ACCORDING TO THE LAST PRECEDING CENSUS OF WH I CH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FI R ST DAY OF THE PREVIOUS YEAR . THE EXPRESS I ON ' SCHEDULED BANK' HAS THE SAME MEANING AS IN THE EXPLANATION BELOW S . 11 ( 2)(B) OF THE IT ACT BUT DOES NOT INCLUDE A COOPERATIVE BANK. THE EXPRESSION 'SCHEDULED BANK ' WOULD , THEREFORE , COVER THE STATE BANK OF INDIA CONSTITUTED UNDER THE STATE BANK OF INDIA ACT , 1955 , ANY SUBSIDIARY BANK OF THE STATE BANK OF INDIA AS DEF I NED IN THE STATE BANK OF INDIA ( SUBSID I ARY BANKS) ACT , 1959 , A NATIONALIZED BANK AS SPECIFIED I N S . 3 OF THE BANK I NG COMPANIES ( ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT , 1970 OR ANY OTHER BANK INCLUDED I N THE SECOND SCHEDULE TO THE RESERVE BANK OF IND I A ACT , 1934 . IT MAY BE MENTIONED THAT A L L CO-OPERATIVE BANKS HAVE BEEN EXCLUDED FROM THE PURV IEW OF THIS PROVISION IN VIEW OF THE POSITION THAT UNDER S . 80P ( 2)(A)( I) OF THE IT ACT , THE PROFITS AND GAINS OF A CO-OPERATIVE SOCIETY ENGAGED I N THE BUSINESS OF BANKING OR PROVID I NG CREDIT FACILITIES TO ITS MEMBERS ARE COMPLETELY EXEMPT FROM INCOME - TAX . IT MAY BE RELEVANT TO MENTION THAT THE PROVIS I ONS OF NEW CL . (VIIA) OF S . 36(1) RELATING TO THE DEDUCTION ON ACCOUNT OF PROVISIONS FOR BAD AND DOUBTFUL DEBTS IS DISTINCT AND I NDEPENDENT OF THE PROVISIONS OF S . 36(1 )(VII) RELAT I NG TO ALLOWANCE OF THE BAD DEBTS . IN OTHER WORDS , THE SCHEDULED COMMERC I AL BANKS WOULD CONT I NUE TO GE T THE FU L L BENEFIT OF THE WRITE OFF OF THE IRRECOVERABLE DEBTS UNDER S . 36( 1 ) ( VII) I N ADDITION TO THE BENEFIT OF DEDUCTION OF THE PROVISION FOR BAD AND DOUBTFUL DE BTS UNDER S . 36(1)(VIIA ) . ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 19 THIS PROVISION W I LL TAKE EFFECT FROM 1 ST APR I L , 1980 AND WILL ACCORDINGLY APPLY I N RELATION TO THE ASST . YR . 1980-81 AND SUBSEQUENT YEARS . ' BY SECTION 1 O(A) OF THE FINANCE ACT , 1982 IN THE OPEN I NG PORTION OF THE WORD (SCHEDULED BANK' WAS SUBSTITUTED WITH THE WO RDS ' SCHEDU L ED BANK OR A NON-SCHEDULED BANK . ' FURTHER IN THE EXPLANATION TO THIS CLAUSE , THE EX I ST I NG C L . ( I ) WAS RENUMBERED AS CL . (IA ) AND THE FOLLOWING CLAUSE WAS I NSERTED AS CL( I ) : 'NON-SCHEDULED BANK' MEANS A BANK I NG COMPANY AS DEFINED IN CL . (C) OF SECTION 5 OF THE BANKING REGULATION ACT , 1945 (10 OF 1949 ) WHICH I S NOT A SCHEDU L ED BANK' . AS EXPLA I NED IN PARA 17 OF THE CBDT C I RCULAR NO . 346 , DT . 30TH JUNE , 1982 , THE OBJECT OF THE AMENDMENT WAS TO EXTEND THE BENEFIT OF THE DEDUCTION TO ADVANCES BY RURAL BRANCHES OF NON- SCHEDULED COMMERCIAL BANKS AS WELL. STAGE-II DEDUCTION ENHANCED - AMENDMENT BY THE FINANCE ACT , 1985 FOR THE PORTION BEGINNING WITH THE WORDS ' IN RESPECT OF ANY PROVIS I ON' AND ENDING WITH THE WORDS ' IN THE PRESCR I BED MANNER ', THE FOLLOWING WAS SUBSTITUTED W . E . F . 1 ST AP R IL , 1 985 : IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEB TS MADE BY A SCHEDULED BANK [NOT BEING A BANK APPROVED BY THE CE NTRAL GOVERNMENT FOR THE PURPOSES OF CL. (VIIA) OR A BANK IN CORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON- SCHEDULED BANK, AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UND ER THIS CLAUSE AND CHAPTER VI-A) OR AN AMOUNT NOT EXCEEDING TW O PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RUR AL BRANCHES OF SUCH BANKS, COMPUTED IN THE PRESCRIBED MANNER, WHICHEVER IS HIGHER. PROVISO TO SEC . 36(1 )(VI I ) OF THE ACT , WAS INTRODUCED BY THE FINANCE ACT , 1985 AND IT READS THUS : ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 20 ' PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH C L . (VIIA) APP L IES , THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SH A L L BE L I M I TED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD A ND DOUBTFU L DEBTS ACCOUNT MADE UNDER THAT C L AUSE . ' S I MULTANEOUSLY , SEC . 36(2)(V) WAS I NTRODUCED BY THE F I NANC E ACT , 1985 AND IT READS THUS : 'SEC . 36(2) IN MAKING ANY DEDUCT I ON FOR A BAD DEBT OR PART THEREOF , THE FOLLOWING PROVISIONS SHALL APPLY- ( I) TO (IV ) ( V) WHERE SUCH DEBT OR PART OF DEBT RE L ATES TO ADVANCES MADE BY AN ASSESSEE TO WHICH C L . (VIIA) OF SUB-S O (1 ) APPLIES , NO S U CH DEDUCT I ON SHA LL BE ALLOWED UNLESS THE ASSESSEE HAS DEBITED THE AMOUNT OF SUCH D EBT O R PA RT OF DEBT I N THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUN T MADE U NDER T H A T CLAUSE. ' AS EXPLAINED I N PARA 17 OF T HE CBDT C I R C UL A R NO . 421 , DT . 12TH JUNE , 1985 , THE BENEFIT O F DEDUCTION UNDER THIS CLAUSE WAS ENHANCED HAV I NG RE G ARD TO THE INCREAS I NG SOC I AL COMMITMENTS OF BANKS . ' DEDUC T ION I N RESPECT OF PROVIS I ONS MADE BY BANK I NG COMPAN I ES FOR BAD AND DOUBTFU L DEBTS SEC . 36(1 ) ( V II ) OF T HE IT ACT PROVIDES FOR A DEDUCT I ON IN TH E COMPUTATION OF TAXABLE PROFITS OF THE AMOUNT OF ANY D EBT O R PART THEREOF W HI C H I S ESTAB LI S H E D TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR . THIS A L LOWANCE I S SUB J ECT TO THE FULFILMENT OF THE CONDITIONS SPECIFIED I N SUB-S O ( 2 ) OF S . 36. SEC . 36(1 )(VI I A) OF T HE IT ACT PROV I DES FO R A DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEB T S MADE BY A SCHEDULED BANK OR A NON-SCHEDULED BANK I N RELATION TO ADVANCES MADE BY I TS RURA L BRANC H ES , O F ANY AMOUNT NOT EXCEED I NG 11/2 PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES . ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 21 HAV I NG REGA R D TO T H E INCREAS IN G SOCIA L COMMITMENTS OF BANKS , S . 36(1)(VIIA) HAS BEEN AMENDED TO PROVIDE TH AT I N R ESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY A C . / R SCHEDULED BANK [NO T BEING A BANK APPROVED BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF S. 36(1)(VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON-SCH EDULED BANK, AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE TOT AL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THE PROP OSED NEW PROVISION) OR TWO PER CENT OF THE AGGREGATE AVERA GE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANKS, WHICHEVER IS HIGHER, SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING TH E TAXABLE PROFITS. SEC. 36(1)(VII) OF THE ACT HAS ALSO BEEN AMENDED TO PRO VIDE THAT IN THE CASE OF A BANK TO WHICH S. 36(1 )(VIIA) APPLIES, THE AMOUNT OF BAD AND DOUBTFUL DEBTS SHALL BE DEBITED TO THE PRO VISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT AND THAT THE DEDUCTION ADMISSIBLE UNDER S.36(1 )(VII) SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALAN CE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT. SEC. 36(2) HAS BEEN SEC . 36(2) HAS BEEN AMENDED BY INSERTION OF A NEW CL . (V) TO PROVIDE THAT WHERE A DEBT OR A PART OF A DEB T CONSIDERED BAD OR DOUBTFUL RELATES TO ADVANCES MADE BY A BANK TO WHICH S . 36(1 )(VIIA) APPLIES , NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS THE BANK HAS DEBITED THE AMOUNT OF SUCH D EBT OR PART OF DEBT IN THAT PREVIOUS YEAR TO THE PROVISION F OR BAD AND DOUBTFUL DEBT ACCOUNT MADE UNDER CL . (VIIA) OF S . 36(1) . ' STAGE-III: THE IT (AMENDMENT) ACT, 1986 SUBSTITUTED THE PRESENT CL . (VIIA) FOR THE ONE AS SUBSTITUTED BY THE FINANCE ACT , 1985 . THESE PROVISIONS CAME INTO EFFECT FROM 1 . 4 . 1987. SECTION 36 - OTHER DEDUCTIONS THE SECT I ON READS AS UNDER : OTHER DEDUCTIONS . - (1) THE DEDUCT I ONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MA TTERS DEALT WITH THEREIN , I N COMPUTING THE INCOME REFERRED TO IN SECTION 28 ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 22 V I IA) 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 AGRICULTURAL CRED IT SOCIETY OR A PRIMARY CO-OPERATIVE AGR I CULTURAL AND RURA L 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 ADVA NCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER ; PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION, BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RE SPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY T HE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF , FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE AMOUNT O F SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LA ST DAY OF THE PREVIOUS YEAR. P R OVIDED F U RTHE R T HA T F OR T HE RELEVA N T ASSESSMENT YEA R S COMMENCING ON OR AFTE R THE 1S T DAY O F APR IL , 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL , 2005 , THE P R OV I S I ONS OF THE FIRST PROVISO SHAL L HAVE EFFECT AS IF FOR THE WORDS ' FIVE PER CENT . ' , THE WORDS 'TEN PER CENT . ' HAD BEEN SUBSTITUTED. PROVIDED ALSO THAT A SCHEDULED BANK OR A NONSCHEDULED BA NK REFERRED TO IN THIS SUB-CLAUSE SHALL , AT ITS OPTION , BE ALLOWED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPEC I FIED IN THE FOREGOING PROVISIONS , FOR AN AMOUNT NOT EXCEEDING THE INCOME DERIVED FROM REDEMPT I ON OF SECURITIES I N ACCORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVE R NMENT: PROVIDED ALSO THAT NO DEDUCT I ON SHALL BE A L LOWED UNDER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN THE RETURN OF INCOME UNDER THE HEAD 'PROF I TS AND GAINS OF ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 23 BUSINESS OR PROFESSION' . EXPLANATION : FOR THE PURPOSES OF TH I S SUB-CLAUSE , 'RELEVANT ASSESSMENT YEA R S ' MEANS THE FIVE CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL , 2000 AND ENDING BEFORE THE 1 ST DAY OF APRIL , 2005 . (B) A BANK , BE I NG A BANK I NCORPORATED BY OR UNDE R THE LAWS OF A COUNTRY OUTS I DE INDIA , A N AMOUNT NOT EXCEED I NG F I VE PE R CENT OF T H E TOTA L INCOME (COMPUTED BEFORE MAK I NG ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) ; PROVIDED THAT A PUBLIC F I NANC I AL I NST I TUT I ON OR A STATE FINANCIAL CORPORAT I ON OR A STATE INDUSTRIAL I NVESTMENT CORPORATION REFER R ED TO I N T H I S SUB-CLAUSE SHALL , AT I TS OPT I ON , BE AL L OWED I N ANY OF THE TWO CONSECUT I VE ASSESSME NT YEARS COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL , 2003 AND ENDING BEFORE THE 1ST DAY OF AP R I L , 2005 , DEDUCTION I N RESPECT OF ANY PROVISION MADE BY I T FOR ANY ASSETS CLASSIFIED BY THE RESE R VE BANK OF INDIA AS DOUBTFUL ASSETS O R LOSS ASSETS IN ACCORDANCE W I TH THE GUIDE LI NES I SSUED BY IT I N THIS BEHALF , OF AN AMOUNT NOT EXCEEDING TEN PER CENT . OF THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF SUCH INST I TUTION OR CORPORAT I O N , AS THE CASE MAY BE , ON THE L AS T DAY OF THE PREVIOUS YEAR. (C) A PUBL I C FINANCIAL INSTITUTION OR A STATE FINANCIAL CORPORAT I ON OR A STATE I NDUSTRIAL INVESTMENT CORPORATION , AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCT I O N UNDER TH I S CLAUSE AND CHAPTER VI-A) . EXPLANAT I ON: FOR THE PURPOSES OF THI S C L A U SE- (I) ' NON-SCHEDU L ED BANK ' MEANS A BANK I NG COMPANY AS DEFINED IN CLAUSE (C) OF SECTION 5 OF THE BANK I NG REGULAT I ON ACT , 1949 (10 OF 1949) WH I CH IS NOT A SCHEDULED BANK ; ] (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 T THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVI OUS YEAR; (II) 'SCHEDULED BANK' MEANS THE STATE BANK OF INDIA ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 24 CONSTITUTED UNDER THE STATE BANK OF INDIA ACT , 1955 , A SUBSIDIARY BANK AS DEFINED IN THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT , 1959 , A CORRESPONDING NEW BANK CONSTITUTED UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT , 1970 , OR UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1980, O R ANY OTHER BANK BEING A BANK INCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT , 1934 ; III) 'PUBLIC FINANCIAL INSTITUTION' SHALL HAVE THE MEANIN G ASSIGNED TO IT IN SECTION 4A OF THE COMPANIES ACT , 1956 (1 OF 1956) ; IV) 'STATE FINANCIAL CORPORATION' MEANS A FINANCIAL CORPO RATION 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 617 OF THE COMPANIES ACT , 1956 (1 OF 1956) ENGAGED IN THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR INDUSTRIAL PROJECTS AND ELIGIBLE FOR DEDUCTION UNDER CLAUSE (VIII) OF THIS SUB- SECTION ; VI) 'CO-OPERATIVE BANK' , 'PRIMARY AGRICULTURAL CREDIT SOCIETY' AND 'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE EXPLANATION TO SUB-SECTION (4) O F SECTION 80P' THE OBJECT OF THE SUBSTITUTION, AS EXPLAINED IN PAR A 5 OF THE CBDT CIRCULAR NO. 464, DT. 18 TH JULY, 1986, WAS TO GIVE THE SEPARATE DEDUCTION, VIZ., ONE IN RESPECT OF RUR AL ADVANCES AND THE OTHER FOR PROVISION FOR BAD AND DO UBTFUL DEBTS IN GENERAL AND ALSO TO EXTEND THE BENEFIT OF DEDUCTION TO ALL BANKS INCLUDING FOREIGN BANKS. MODIFICATION IN RESPECT OF DEDUCTION ON PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY THE BANKS. UNDER THE EXI STING PROVISIONS OF CL. (VIIA) OF SUB-S. (1) OF S. 36 OF THE I T ACT INSERTED BY THE FINANCE ACT, 1979, PROVISIONS FOR B AD AND ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 25 DOUBTFUL DEBTS MADE BY A SCHEDULED OR A NON SCHEDUL ED INDIAN BANK IS ALLOWED AS DEDUCTION WITHIN PRESCRIB ED LIMITS. THE LIMIT PRESCRIBED IS 10% OF THE TOTAL I NCOME OR 2% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RU RAL BRANCHES OF SUCH BANKS, WHICHEVER IS HIGHER. IT HA D BEEN REPRESENTED TO THE GOVERNMENT THAT THE FOREIGN BANK S WERE NOT ENTITLED TO ANY DEDUCTION UNDER THIS PROVI SION AND TO THAT EXTENT THEY WERE BEING DISCRIMINATED AG AINST. FURTHER, IT WAS FELT THAT THE EXISTING CEILING IN T HIS REGARD I.E. 10% OF THE TOTAL INCOME OR 2% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF INDI A BANKS, WHICHEVER IS HIGHER, SHOULD BE MODIFIED. ACCORDINGLY, BY THE AMENDING ACT, THE DEDUCTION PRESENTLY AVAILABLE UNDER CL. (VIIA) OF SUB-S. (1) OF S. 36 OF THE IT ACT HAS BEEN SPLIT INTO TWO SEPARATE PROVISI ONS. ONE OF THESE LIMITS THE DEDUCTION OF THE BANKS CONC ERNED. IT MAY BE CLARIFIED THAT FOREIGN BANKS DO NOT HAVE RURAL BRANCHES AND THE BANK CONCERNED. IT MAY BE CLARIFI ED THAT FOREIGN BANKS DO NOT HAVE RURAL BRANCHES AND H ENCE THIS AMENDMENT WILL NOT BE RELEVANT IN THE CASE OF THE FOREIGN BANKS. THE OTHER PROVISION SECURES THAT A F URTHER DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE PROVIS ION FOR BAD AND DOUBTFUL DEBTS MADE BY ALL BANKS NOT JUST T HE BANKS INCORPORATED IN INDIA, LIMITED TO 5% OF THE T OTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A). THIS WILL IMPLY THAT ALL SCHEDULED OR NON-SCHEDULED BANKS HAVING RURAL BRANC HES WOULD BE ALLOWED THE DEDUCTION UPTO 2% OF THE AGGRE GATE AVERAGE ADVANCES MADE BY SUCH BRANCHES AND A FURTHE R DEDUCTION UPTO 5% OF THEIR TOTAL INCOME IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS.' TO COMPLETE THE SEQUENCE OF AMENDMENTS, WE MAY ALSO MAKE A REFERENCE TO THE AMENDMENT TO SEC.36(1 )(VII A) OF THE ACT BY THE FINANCE ACT, 2013. BY THE FINANCE AC T, 2013, IN SECTION 36 OF THE INCOME-TAX ACT, IN SUB-S ECTION (1), WITH EFFECT FROM THE 1ST DAY OF APRIL, 2014, IN CLAUSE (VII), THE EXPLANATION WAS N UMBERED AS EXPLANATION 1 THEREOF AND AFTER EXPLANATION1 AS SO NUMBERED, THE FOLLOWING EXPLANATION WAS INSERTED, NAMELY:- ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 26 'EXPLANATION 2.-FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT FOR THE PURPOSES OF THE PROVISO TO C LAUSE (VII) OF THIS SUB-SECTION AND CLAUSE (V) OF SUB-SEC TION (2), THE ACCOUNT REFERRED TO THEREIN SHALL BE ONLY ONE A CCOUNT IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER CLAUSE (VIIA) AND SUCH ACCOUNT SHALL RELATE TO ALL TYPES OF ADVANCES, INCLUDING ADVANCES MADE BY RURAL BRANCHES ;' IT CAN BE SEEN FROM THE HISTORY OF SEC.36(1 )(VIIA) OF THE ACT THAT AT STAGE-I THE DEDUCTION WAS ALLOWED IN RE SPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS (PBOO) MADE BY A SCHEDULED BANK IN RELATION TO THE ADVANCE S MADE BY ITS RURAL BRANCHES. AT THIS STAGE THE PBOO HAD TO BE LINKED TO THE ADVANCES MADE BY BANK'S RURAL BRAN CHES. AT STAGE-II OF SEC.36(1)(VIIA), THE DEDUCTION WHILE COMPUTING THE TAXABLE PROFITS WAS ALLOWED OF AN AMO UNT NOT EXCEEDING TEN PER CENT OF THE TOTAL INCOME (COM PUTED BEFORE MAKING ANY DEDUCTION UNDER THE PROPOSED NEW PROVISION) OR TWO PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANKS, WHICHEVER IS HIGHER. AT THIS STAGE ALSO, THE PBOO H AD TO BE CREATED AND DEBITED TO THE PROFIT AND LOSS ACCOU NT BUT IT WAS NOT REQUIRED TO BE DONE IN RELATION TO ADVAN CES MADE BY BANK'S RURAL BRANCHES AND CAN BE IN RELATIO N TO ANY DEBT. PBOO NEED NOT BE IN RELATION TO RURAL ADV ANCES BUT CAN BE IN RELATION TO ANY ADVANCES BOTH RURAL A ND NON- RURAL ADVANCES. THE TWO PERCENT OF AGGREGATE AVERAG E ADVANCES (AAA) MADE BY RURAL BRANCHES OF SUCH BANKS HAD TO BE COMPUTED AND THE PBOO MADE IN BOOKS HAS T O BE IN RELATION TO RURAL ADVANCES. THE OTHER ELIGIBL E SUM WHICH CAN BE CONSIDERED FOR DEDUCTION U/S.36(1)(VII A) OF THE ACT VIZ., TEN PER CENT OF THE TOTAL INCOME (COM PUTED BEFORE MAKING ANY DEDUCTION UNDER THE PROPOSED NEW PROVISION) DOES NOT REQUIRE COMPUTATION IN RELATION TO RURAL ADVANCES. NEVERTHELESS THE DEBIT OF PBOO TO P ROFIT AND LOSS ACCOUNT IS NECESSARY OF THE HIGHER OF THE TWO SUMS TO CLAIM DEDUCTION U/S.36(1 )(VIIA) OF THE ACT . IF THE CONCERNED BANK DOES NOT HAVE RURAL BRANCHES THEN TH EY COULD NOT CLAIM THE DEDUCTION. THEREFORE, THE DEDU CTION WAS CONFINED ONLY TO BANKS THAT HAD RURAL BRANCHES. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 27 AT STAGE-III OF THE PROVISIONS OF SEC.36(1 )(VIIA) OF THE ACT, THE DEDUCTION ALLOWED EARLIER WAS ENHANCED. TH E ENHANCEMENT OF THE DEDUCTION WAS CONSEQUENT TO REPRESENTATION TO THE GOVERNMENT THAT THE EXISTING CEILING IN THIS REGARD I.E. 10% OF THE TOTAL INCOME OR 2% O F THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF INDIAN BANKS, WHICHEVER IS HIGHER, SHOU LD BE MODIFIED. ACCORDINGLY, BY THE AMENDING ACT, THE DEDUCTION PRESENTLY AVAILABLE UNDER CL. (VIIA) OF S UB-SO (1) OF S.36 OF THE IT ACT HAS BEEN SPLIT INTO TWO SEPAR ATE PROVISIONS. ONE OF THESE LIMITS THE DEDUCTION TO AN AMOUNT NOT EXCEEDING 2% (AS IT EXISTED ORIGINALLY, NOW IT IS 10%) OF THE AGGREGATE AVERAGE ADVANCES MADE BY R URAL BRANCHES OF THE BANKS CONCERNED. THIS WILL IMPLY T HAT ALL SCHEDULED OR NON-SCHEDULED BANKS HAVING RURAL BRANC HES WOULD BE ALLOWED THE DEDUCTION (A) UPTO 2% (NOW 10% ) OF THE AGGREGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES AND (B) A FURTHER DEDUCTION UPTO 7.5% OF T HEIR TOTAL INCOME IN RESPECT OF PROVISION FOR BAD AND DO UBTFUL DEBTS. THE FURTHER DEDUCTION OF 7.5% OF TOTAL INCOM E WAS AVAILABLE TO BANKS WHICH DID NOT HAVE RURAL BRANCHE S. THEREFORE AFTER 1.4.1987, SCHEDULED OR NON-SCHEDULE D BANKS HAVING RURAL BRANCHES WERE ALLOWED DEDUCTION. , (A) UPTO 2% (NOW 10%) OF THE AGGREGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES AND (B) SCHEDULE OR NON- SCHEDULED BANKS WHETHER IT HAD RURAL BRANCHES OR NO T A DEDUCTION UPTO 5% OF THEIR TOTAL INCOME IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. EVEN UNDER TH E NEW PROVISIONS CREATING A PBDD IN THE BOOKS OF ACCOUNTS IS NECESSARY. THIS LIMIT OF 5% WAS INCREASED TO 7.5% I N 2002. THOUGH UNDER STAGE-II AND STAGE-III OF THE PROVISIO NS OF SEC.36(1 )(VIIA) OF THE ACT. PBOO HAS TO BE CREATED BY DEBITING THE PROFIT AND LOSS ACCOUNT OF THE SUM CLA IMED AS DEDUCTION. THE CONDITION THAT THE PROVISION SHOULD BE IN RESPECT OF RURAL ADVANCES IS NOT NECESSARY. AT STAG E-II OF THE PROVISIONS OF SEC.36(1 )(VIIA) OF THE ACT. THIS CONDITION WAS DONE AWAY WITH AND IT WAS ONLY NECESSARY TO CRE ATE PBOO IN THE BOOKS OF ACCOUNTS AND DEBIT TO PROFIT A ND LOSS ACCOUNT. THE QUANTIFICATION OF THE MAXIMUM DEDUCTION ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 28 PERMISSIBLE U/S.36(1)(VIIA) OF THE ACT HAD TO BE DO NE. FIRSTLY IT HAS TO BE ASCERTAINED AS TO WHAT IS 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES. IF THE BANK HAS RURAL BRANCHES, OTHERWISE THAT PART OF THE DEDUCTION U/S.36(1 )(VIIA) OF THE ACT W ILL NOT BE AVAILABLE TO THE BANK. THE SECOND PART OF THE DEDUCTION U/S.36(1 )(VIIA) HAS TO BE ASCERTAINED VI Z. 7.5% SEVEN AND ONE-HALF PER CENT OF THE TOTAL INCOM E (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CL AUSE AND CHAPTER VI-A). THE ABOVE ARE THE PERMISSIBLE UP PER LIMITS OF DEDUCTIONS U/S.36(1)(VIIA) OF THE ACT. TH E ACTUAL PROVISION MADE IN THE BOOKS BY THE ASSESSEE ON ACCO UNT OF PBOO (IRRESPECTIVE OF WHETHER IT IS RURAL OR NON - RURAL) HAS TO BE SEEN. TO THE EXTENT PBOO IS SO CREATED. T HEN SUBJECT TO THE PERMISSIBLE UPPER LIMITS REFERRED TO ABOVE. THE DEDUCTION HAS TO BE ALLOWED TO THE ASSESSEE. TH E QUESTION OF BIFURCATING THE PBOO AS ONE RELATING TO RURAL ADVANCES AND OTHER ADVANCES (NON-RURAL ADVANCES) DOES NOT ARISE FOR CONSIDERATION. TO AVOID POSSIBLE CLAIM FOR DOUBLE DEDUCTION IN RES PECT OF ONE AND THE SAME DEBT FIRST AS PBDD AND THEREAFTER AS BAD DEBTS, THE LEGISLATURE HAS ALREADY PROVIDED IN SEC.36(2)(V) OF THE ACT THAT WHERE SUCH DEBT OR PAR T OF DEBT RELATES TO ADVANCES MADE BY AN ASSESSEE TO WHI CH CL. (VIIA) OF SUB-SO (1) APPLIES, NO SUCH DEDUCTION SHA LL BE ALLOWED UNLESS THE ASSESSEE HAS DEBITED THE AMOUNT OF SUCH DEBT OR PART OF DEBT IN THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U NDER THAT CLAUSE. FURTHER THE PROVISO ALSO LIMITS THE CL AIM FOR DEDUCTION U/S.36(1 )(VII) OF THE ACT TO AN ASSESSEE TO WHICH SEC.36(1 )(VIIA) OF THE ACT APPLIES TO THE AM OUNT BY WHICH SUCH DEBT OR PART THEREOF (WRITTEN OFF AS BAD DEBTS) EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE(VIIA) TO SEC.36(1) OF THE ACT. RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS IN THI S REGARD: I. IN ORDER TO ALLOW ASSESSEES CLAIM UNDER SECTION 36(1)(VIIA), WHAT HAS TO BE SEEN BY AO IS AS TO WHETHER PROVISION FOR BAD AND DOUBTFUL DEBTS (PBDD) IS CREATE D ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 29 IRRESPECTIVE OF WHETHER IT IS IN RESPECT OF RURAL OR N ON-RURAL ADVANCES BY DEBITING PROFIT AND LOSS ACCOUNT AND TO EXTE NT PBDD IS SO CREATED, ASSESSEE IS ENTITLED TO DEDUCTION SUBJECT TO UPPER LIMIT OF DEDUCTION LAID DOWN IN SAID SECTION. DCIT VS. ING VYSA BANK LTD. (2014) 62 SOT 26 (BANGALORE) (REFER PAGE 46-63 OF PB) II. SECTION 36(1)(VIIA) OF THE INCOME TAX ACT, 1961 BAD DEBTS IN CASE OF BANKS (PROVISION MADE FOR BAD & DOUBTFUL DEBTS) ASSESSMENT YEAR 2009-10 ASSESSEE BANK HAD CLAIMED PROVISION FOR NON-PERFORMING ASSETS IN ACCORDANCE WITH S. 36(10(VIIA) AO DISALLOWED SAME ON GROUND THAT ASSESSEE HAD NOT MADE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS AND, THUS, WAS NOT ENTITLED TO DED UCTION U/S 36(1)(VIIA) WHETHER ALTHOUGH ASSESSEE HAD NAMED PROVISION AS PROVISION FOR NPA TO KEEP IT IN LINE WI TH RBI AND BABARD GUIDELINES, BUT IN PITH AND SUBSTANCE PROVISION HAD BEEN CREATED FOR BAD & DOUBTFUL DEBTS AND, THEREFORE, ASSESSEE HAD CLAIMED DEDUCTION IN ACCORDANCE WITH PROVISIONS OF SEC. 36(1)(VIIA) AND WAS ENTITLED TO BENEFIT OF SAME HELD, YES [PARA 6] [IN FAVOUR OF ASSESSEE] TAMILNADU STATE APEX COOPERATIVE BANK LTD. VS. ACIT [2014] 62 SOT 113 (CHENNAI TRIB.) (REFER PAGE 64-67 OF PB) III. SECTION 36(1)(VIIA) OF THE IT ACT, 1961 BAD DEBTS [COOPERATIVE BANK] AY 2008-09 WHETHER, COOPERATI VE BANK IS A NON-SCHEDULED BANK AND, THUS, ENTITLED TO CL AIM BENEFIT OF PROVISIONS OF SEC. 36(10(VIIA)(A)-HELD, YES WHETHER WHERE ASSESSEE, A COOPERATIVE BANK, HAD CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS THOUGH UNDER DIFFERENT NOMENCLATURE, VIZ., RESERVE FOR NPA IN ACCORDANCE WITH RBI DIRECTIONS, THIS WOULD NOT DISENTITLE ASSESSEE FOR CLAIMING DEDUCTION U/S 36(1)(VIIA)(A) HELD, YES [PARAS 7 & 8] [IN FAVOUR OF ASSESSEE] VELLORE DIST. CENTRAL COOPERATIVE BANK LTD. VS. CIT [2013] 36 CCH 597 (CHENNAI TRIB.) (REFER PAGE 68 73 OF PB). IT IS TO BE NOTED THAT BANK IS NOT CLAIMING THE DEDUCT ION U/S 36(1) (VII) SEPARATELY IN RESPECT OF BAD DEBTS AND ADJUSTING THE SUCH BAD DEBTS WITH THE PROVISION CLAIMED U/S 36(1) (VIIA) SO AS TO AVOID THE CLAIM OF DOUBLE ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 30 DEDUCTION IN THIS REGARD. ACCORDINGLY, BANK IS CLAIMING THE DEDUCTION ULS 36(1) (VIIA) AS PER PROVISIONS OF THE LAW. HOWEVER, THE LD AO MISUNDERSTOOD THE PROVISIONS OF THE LAW AND ERRED IN INTERPRETING THE SECTION 36(1) (VIIA ) IN A RESTRICTIVE MANNER. IN VIEW OF THE ABOVE SUBMISSIONS AND PROVISIONS OF THE LAW, THE BANK HAS RIGHTLY CLAIMED THE DEDUCTION OF R S 16,06,72,3551- ULS 36(1) (VIIA). IT IS ALSO RELEVANT T O STATE THAT THERE HAS BEEN NO DISALLOWANCE ON THIS ISSUE DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS OF ANY OF THE EARLIER ASSESSMENT YEAR IN PAST BY THE INCOME TAX DEPARTMENT. COPIES OF SCRUTINY ASSESSMENT ORDER U/S 143(3) FOR AY 2009-10 &2010-11 ARE ENCLOSED AS AN INSTANCE FOR READY REFERENCE, THE SAME IS ALSO ALLOWABLE EVEN ON THE PRINCIPAL OF CONSISTENCY. THEREFORE, IT IS PRAYED THAT THE DISALLOWANCE OF RS.14,72,79,355/- OUT OF RS. 16,06,72,355/- MADE BY T HE LD AO ULS 36(1) (VIIA) NEEDS TO BE DELETED. GROUND NO: 4 WITHOUT PREJUDICE TO GROUND NO 2& 3 ABOVE, EVEN FOR THE SAKE OF ARGUMENT IT IS ASSUMED BUT NOT ADMITTED THAT TH E PROVISION TO THE EXTENT OF RS, 14,72,79,355/- OUT OF RS. 16,06,72,355 WAS NOT MADE FOR BAD & DOUBTFUL DEBTS DURING THE YEAR, IN THAT CASE ALSO, LD AO ERRED IN NOT ALLOWING THE SAID PROVISION MADE DURING THE COURSE OF BUSINESS AND DULY REFLECTED IN THE AUDITED P&L ACCOUNT O F THE BANK WITHOUT ESTABLISHING THAT FOR WHAT OTHER PU RPOSE, THE SAID PROVISION TO THE EXTENT OF RS. 14,72,79,355/- OUT OF RS. 16,06,72,355/- WAS MADE AND WHY THE SAME IS NOT ALLOWABLE UNDER SECTION 37, WHEN HE HAS NOT TREATED TH E SAID PROVISION TO THE EXTENT OF RS. 14,72,79,355/- AS PROVISION FOR BAD AND DOUBTFUL DEBTS. IT IS THEREFORE, PRAYED THAT SAID PROVISION TO THE EXTENT OF RS. 14,72,79,355/- BE ALLOWED UNDER SECTION 37 IF THE SAME IS NOT ALLOWED UNDER SECTION 36(1) (VIIA) OF IT ACT, 1961 . ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 31 7. BEFORE US, DURING THE ARGUMENTS THE LD. CIT DR A RGUED THAT THE ASSESSEES ACCOUNTING SYSTEM IS NOT AS PER THE GUIDELINES GIVEN BY THE RBI. THE LD. DR ARGUED REL YING ON THE JUDGMENT OF HONBLE P&H HIGH COURT IN THE CASE OF STATE BANK OF PATIALA ORDER DATED 24 TH MAY, 2004, 272 ITR 54 THAT SINCE THE ASSESSEE HAS NOT MADE ANY PROVISION FURTH ER PBDD THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER NEE DS TO BE UPHELD. IT WAS ARGUED THAT THE HONBLE COURT HAS A LLOWED PBDD U/S 36(1)(VIIA) ONLY TO THE EXTENT OF THE PROV ISIONS MADE. IT WAS REITERATED THAT SINCE NO PROVISION HA S BEEN MADE THAT ASSESSEE, NO DEDUCTION U/S 36(1)(VIIA) IS ALLOWABLE. THE WRITTEN SUBMISSIONS OF THE LD. DR A RE AS UNDER: 1. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 36(1)(VIIA) OF THE INCOME L AX ACT, 1961 AMOUNTING TO RS. 16,06,72,355/-. THE ADDITION OF RS.11,02,79,355/- MADE BY THE AO DUE TO DISALLOWANCE OF EXCESS CLAIM MADE BY THE ASSESSEE, IN RESPECT OF PROVISIONS OF BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) OF THE I T. ACT, 1961. 2. THE DEDUCTION CLAIMED U/S 36(1)(VIIA) IS TO BE RESTRICTED WITH THE AMOUNT OF PROVISION MADE BY THE ASSESSEE FOR PROVISION FOR BAD AND DOUBTFUL ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 32 DEBT (READ HEREINAFTER PBDD) AS THE DECISION OF HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF STATE BANK OF PATIALA VS. CIT(2005) 272. ITR 54 WHEREIN IT IS HELD THAT MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBT EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION. 3. THE ASSESSEE HAS NOT FURNISHED THE BREAK-UP OF RS. 16,06,72,355/- CLAIMED AS DEDUCTION TOWARDS PBDD U/S 36(1 )(VIIA). OUT OF THESE FIS. 5,03,93,000/- IS THE DIFFERENCE OF CLOSING AND OPENING BALANCES AFTER CONSIDERING WRITTEN OFF DEBT AND PROVISION MADE OVER AND ABOVE RBI PRUDENTIAL NORMS. ASSESSEE HAS TRIED TO EXPLAIN THAT THE SAME IS THE PBDD FOR THE YEAR. 4. FOR THE BALANCE RS. 11,02,79,355/- (RS. 16,06,72,3555 5,03,93,00), THE EXPLANATION GIVEN WAS THAT THE SAME WAS NETTED WITH GROSS AND NET OF ADVANCES. THIS IS NOT ACCEPTABLE AS DEDUCTION U/S 36(1)(VIIA) IS GIVEN FOR PB DD AND NOT FOR ADVANCES. AS SUBMITTED BY THE ASSESSEE THAT THESE ARE REFLECTED IN SCHEDULE-9, BUT NO SUCH DETAILS REFLECTED IN SCHEDULE-9. THE ASSESSEE IS CLEARLY TRYING TO DIVERT FROM THE MAIN ISSUE BY DISTORTING THE FACTS AND MAKING FEEBLE ATTEMPTS TO JUSTIFY THE DEDUCTION OF RS 16,0672,355/-, CLAIMED U/S 36(1)(VIIA). THEREFORE, EX CESS CLAIM IN RESPECT OF PROVISION MADE BY THE ASSESSEE WAS AMOUNTING TO RS. 11,02,79,355/- DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 33 5. OUT OF THE PROVISION OF RS. 5,03,93,000/-(PBDD) MADE FOR THE PREVIOUS YEAR, ART AMOUNT OF RS. 3,70,00,000/ - WAS SHOWN AS PROVISION MADE OVER AND ABOVE THE PBDD REQUIRED TO BE MADE AS PER PRUDENTIAL RBI NORMS. THE ASSESSEE HAS SUBMITTED THAT PROVISION MADE BY THE BANK IN ADDITIO N TO THE MINIMUM PROVISIONS REQUIRED TO BE MADE IN TERMS OF RBI GUIDELINES AND IT IS A SETTLED POSITION THAT RBI GUID ELINES ARE IRRELEVANT FOR THE PURPOSE OF INCOME TAX COMPUTATION U NDER INCOME TAX. THE REPLY FILED BY THE ASSESSEE IS NOT AT ALL ACCEPTABLE AS THE PROVISIONING MADE BY THE BANK, SHOULD BE DERIVED FROM TRUE AND FAIR MECHANISM, WHICH SHOULD HAV E UNIFORMITY IN ALL YEARS. IF THERE IS ANY ALTERATION/CH ANGE IS MADE BY THE BANK, IT SHOULD BE PROPERLY JUSTIFIABLE A ND HAVEJ TRUE AND FAIR GROUNDS FOR THE SAME. THE ASSESSEE HAD MADE NIL. PROVISION FOR PREVIOUS YEAR AGAINST TOTAL MONTHL Y AVERAGE ADVANCE OF RURAL BRANCHES OF THE BANK FOR THE BAD AND DOUBTFUL DEBTS OVER ANA ABOVE THE PBDD REQUIRED TO BE MADE IN ACCORDANCE WITH THE PRUDENTIAL NORMS SUGGESTED BY RBI. 6. NOW DURING THE YEAR, THE ASSESSEE HAS MADE THIS ADDITIONAL PROVISION WITHOUT ANY BASIS OR REQUIREMENT, SAME IS LIABLE TO BE DISALLOWED. EVEN THOUGH, THE PROPER OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO JUSTIFY THE SAME BUT JUST FOR MERE SUBMISSION THAT RBI GUIDELINES ARE IRRELEVANT FOR THE PURPOSE OF INCOME TAX COMPUTATION U NDER INCOME TAX IS NOT SUFFICIENT. THE ASSESSEES CONTENTION CANNOT BE ACCEPTED AS THE BANKS ARE REGULATED BY THE RBI AND IT HAS TO COMPLY WITH THE DIRECTIONS AND GUIDELINES ISSUED ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 34 BY THE RBI. THEREFORE, ASSESSEE CANNOT MODIFY THE REGULATIONS AT ITS OWN CONVENIENCE TO EVADE THE TAX ON HIS OWN REQUIREMENT. THE PBDD DURING THE RELEVANT YEAR ARE NOT ALLOWED WITHOUT ANY PROPER DOCUMENTARY EVIDENCE F OR ITS REQUIREMENT. THEREFORE, THE PROVISION MADE BY THE A SSESSEE FOR RS. 3,70,00,000/- WAS DISALLOWED AND THE DEDUCTION CLAIMED ON THIS PROVISION WAS ALSO LIABLE TO BE DISALLO WED AND, ACCORDINGLY, DEDUCTION U/S 36(1)(VIIA) ON THIS AMOU NT WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. SHE ALSO RELIED ON THE JUDGMENT OF PUNJAB-HARYANA HIGH COURT STATE BANK OF PATIALA VS. COMMISSIONER OF INCOME TAX AN D ON 21 MAY, 2004, 272 ITR 54 P&H. 1. THE ASSESSED HAS FILED THIS APPEAL UNDER SECTION 260A O F THE INCOME-TAX ACT, 1961 (FOR SHORT THE 'ACT'), AGAINST THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, CHANDIGA RH BENCH-A, CHANDIGARH (FOR SHORT 'THE TRIBUNAL'), DATED AUGUST 4, 2003, WHEREBY THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING ITS CLAIM FOR DEDUCTION OF THE PR OVISION FOR BAD DEBTS TO RS. 1,19,36,000 UNDER SECTION 36(L)( VIIA) HAS BEEN UPHELD. 2. THE FACTS OF THE EASE ARE THAT IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1985-86, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 1,94,21,000 UNDER SECTION 36(L)(VIIA) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT IN THE BOOKS OF ACCOUNT PERTAINING TO THE RELEVANT ASSESSMENT YEAR, T HE ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 35 ASSESSEE HAD MADE A PROVISION FOR BAD DEBTS AT RS. 1,19,36,000 ONLY. HE, THEREFORE, RESTRICTED THE ALLOWA NCE TO RS. 1,19,36,000 ONLY AND DISALLOWED THE BALANCE AMOUNT THE DISALLOWANCE WAS UPHELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) (FOR SHORT THE CIT(A)) IN APP EAL VIDE ORDER DATED JULY 20, 1.988. THE ASSESSEE FURTHER PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRI BUNAL HAS ALSO UPHELD THE DISALLOWANCE VIDE THE IMPUGNED ORDE R DATED AUGUST 4, 2003. 3. MR. AKSHAY BHAN, LEARNED COUNSEL FOR THE APPELLANT, SUBMITTED THAT ORIGINALLY THE ASSESSEE HAD FILED IT S RETURN OF INCOME FOR THE ASSESSMENT YEAR 1985-86 ON SEPTEMBER 27, 1995, WHEREIN DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT HAD BEEN CLAIMED AT RS. 1,19,36,000 WHICH WAS ADMISSIBLE UNDER THAT PROVISI ON AS IT! EXISTED AT THE RELEVANT TIME. 4HE DEDUCTION AVAILABLE UNDER THAT SECTION WAS AT 10 PER CENT, OF THE PROFIT OR 1/2 PER CENT, OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES COMPUTED IN THE PRESCRIBED MANNER WHICHEVER WAS HIGHER/ HOWEVER, AN AMENDMENT TO SECTION 36(1) OF THE ACT WAS INTRODUCE D IN PARLIAMENT BY THE FINANCE BILL, 1985, WHEREBY DEDUCTION WAS ENHANCED TO 10 PER CENT, OFTHCJ PROFI T OR 2 PER CENT, OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES! OF THE BANK WHICHEVER WAS HIGHER. THE BILL ATTAINED THE ASSENT OF THE PRESIDE NT ON MAY 24, 1985. THE AMENDED PROVISIONS WERE GIVEN ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 36 EFFECT RETROSPECTIVELY FROM; APRIL 1, 1985. 4. LEARNED COUNSEL POINTED OUT THAT THE PREVIOUS YEAR OF THE ASSESSEE HAD ENDED ON| DECEMBER 31, 1984, AND THE ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS FINALIZED AND AUDITED AND AUDITED WITHIN THREE MONTHS FROM THE END OF THE ACCOUNTING YEAR TO SUBMIT THE SAME TO THE RESERVE BANK OF INDIA. ACCORDINGLY, THE BALANCE-SHEET OF THE ASSESSED WAS FINALISED ON FEBRUARY 14, 1985, IN WHICH PROVISION HAD BEEN MADE ON THE BASIS OF THE UNAMENDED SECTION 36(L)(VRIA) OF THE ACT. HOWEVER, IN VIEW OF T HE AMENDMENT OF SECTION 36( L)(VIIA) OF THE ACT WITH EFF ECT FROM APRIL 1, 1985, IT FILED A REVISED RETURN ON APR IL 24, 1986, ENHANCING THE CLAIM FOR DEDUCTION FROM RS[ 1,19,36,000 TO RS. 1,94,21,000. LEARNED COUNSEL EXPLAINED THAT SINCE THE AMENDMENT IN THIS SECTION HA D BEEN MADE AFTER THE FINALISATION OF THE BALANCE-SHEET FOR THE ASSESSMENT YEAR 1985-86. THE ASSESSEC COULD NOT HAVE POSSIBLY MADE THE HIGHER PROVISION IN THAT BALANCE-SHEET AND ACCORDINGLY IT MADE UP THE SHORTFALL IRJ THE PROVI SION IN THE BALANCE-SHEET OF THE SUBSEQUENT ASSESSMENT YEAR. THUS} ACCORDING TO HIM, THERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQUIREMENT OF LAW AND ACCORDINGLY THE AUTHO RITIES BELOW WERE NOT JUSTIFIED IN RESTRICTING THE CLAIM OF T HE ASSESSEC TO RS. 1,19,36,000 ONLY. 5. SECTION 36( F)(VIIA) OF THE ACT AS APPLICABLE TO THE ASSESSMENT YEAR 1985-86} READS AS UNDER : 'IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEB TS MADE BY A SCHEDULED BAN [NOT BEING A BANK APPROVED ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 37 BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF CLAUSE (VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS O F A COUNTRY OUTSIDE INDIA) OR A NON-SCHEDULED BANK, AN AMOUNT NOT EXCEEDING TEN PER CENT, OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VL-A) ORAN AN AMOUNT NOT EXCEEDING TWO PER CENT, OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK, COMPUTED IN THE PRESCRIBED MANNER, WHICHEVER IS HIGHER. 6. A BARE PERUSAL OF THE ABOVE SHOWS THAT THE DEDUCTION ALLOWABLE UNDER THE ABOVE] PROVISIONS IS IN RESPECT OF THE PROVISION MADE. THEREFORE, MAKING OF A PROVISION FOR} BAD AND DOUBTFUL DEBT EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION. THE TRIBUNAL HAS RIGH TLY POINTED OUT THAT THIS ISSUE STANDS FURTHER CLARIFIED FRO M THE PROVISO TO CLAUSE (VII) OF SECTION 36(1) OF THE ACT, WHI CH) READS AS UNDER : 'PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES, THE AMOUNT) OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN' THE! PROVISION FO R BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE.' 7. THIS ALSO CLEARLY SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS, DEDUCTION IN THE ACCOUNT BOOKS IS NECESSARY FOR CLAIMING DEDUCTION UNDER SECTION 36(1 )(VII A) OF ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 38 THE ACT. THE TRIBUNAL HAS DISTINGUISHED VARIOUS AUTHORIT IES RELIED) UPON BY THE ASSESSEE WHEREIN DEDUCTIONS HAD BEE N ALLOWED UNDER VARIOUS! PROVISIONS WHICH ALSO REQUIRED CR EATION OF RESERVE AFTER THE ASSESSEE HAD CREATED! SUCH RESERVE IN T HE ACCOUNT BOOKS BEFORE THE COMPLETION OF THE ASSESSMENT, IT HAS) BEEN CORRECTLY POINTED OUT THAT IN ALL THOSE CASES , RESERVES/PROVISIONS, HAD BEEN) MADE IN THE BOOKS OF ACCO UNT OF THE SAME ASSESSMENT YEAR AND NOT OF THE SUBSEQUENT ASSESSMENT YEAR. 8. IN THE PRESENT CASE, THE ASSESSEE 'HAS NOT MADE ANY PROVISION IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E., 1985-86, BY MAKING SUPPLEM ENTARY ENTRIES AND BY REVISING ITS BALANCE-SHEET. THE PROVISION HAS BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR . 9. WE ARE, THEREFORE, SATISFIED THAT, THE TRIBUNAL WAS RIGHT IN HOLDING THAT SINCE THE ASSESSEE HAD MADE A PROVISION OF R S. 1,19,36,000 FOR BAD AND DOUBTFUL DEBTS, ITS CLAIM FO R DEDUCTION UNDER SECTION 36(L)(VIIA) OF THE ACT HAD TO BE RESTRICTED TO THAT AMOUNT ONLY. SINCE THE LANGUAGE OF THE STATUTE IS CLEAR AND IS NOT CAPABLE OF ANY OTHER INTERPR ETATION, WE ARE SATISFIED THAT NO SUBSTANTIAL QUESTION OF LAW AR ISES IN THIS APPEAL FOR CONSIDERATION BY THIS COURT. 10. THE APPEAL IS, ACCORDINGLY, DISMISSED. NO COSTS. THUS, THE LD. DR RELIED ON THE ABOVE JUDGMENT AND PL EADED THAT THE ADDITION MAY PLEASE BE CONFIRMED. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 39 8. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE JUDGMENT DATED 21 ST MAY, 2004 PERTAINS TO AY 1985-86. THE BOARD HAS ISSUE D DIRECTIONS VERIFYING THE BENEFIT OF DEDUCTION ALLOWABL E TO BANKS VIDE CBDT CIRCULAR 421 DT. 12.06.1985 WHICH HAS BEEN MENTIO NED ABOVE. AFTER CONSIDERING THE FACTS AND THE ENTIRE SUBMISSIONS OF BOTH THE PARTIES, WE FIND THAT (II) U/S 119, THE CBDT IS ENTITL ED TO ISSUE CIRCULARS TO EXPLAIN OR TONE DOWN THE RIGOURS OF LAW AND TO EN SURE FAIR ENFORCEMENT OF ITS PROVISIONS. THESE CIRCULARS HAVE THE FOR CE OF LAW AND ARE BINDING ON THE INCOME TAX AUTHORITIES, THOUGH THE Y CANNOT BE ENFORCED ADVERSELY AGAINST THE ASSESSEE. NORMALLY, THESE CIRCULARS CANNOT BE IGNORED. A CIRCULAR MAY NOT OVERRIDE OR DET RACT FROM THE PROVISIONS OF THE ACT BUT IT CAN SEEK TO MITIGATE THE RI GOUR OF A PARTICULAR PROVISION FOR THE BENEFIT OF THE ASSESSEE IN CERTAIN SPECIFIED CIRCUMSTANCES. SO LONG AS THE CIRCULAR IS IN FORCE, IT AIDS TH E UNIFORM AND PROPER ADMINISTRATION AND APPLICATION OF THE PRO VISIONS OF THE ACT (UCO BANK VS. CIT 237 ITR 889 (SC) FOLLOWED) 9. WE HAVE ALSO GONE THROUGH THE GUIDELINES GIVEN BY THE SUPREME COURT IN THE CASE OF DCIT VS. CATHOLIC SYRIAN BANK 88 I TD 185. IN THAT CASE, THE HONBLE COURT HAD TO CONSIDER WHETHER A BANK W AS ELIGIBLE TO CLAIM A DEDUCTION FOR BAD DEBTS U/S 36(1)(VII) IN RESPE CT OF ITS (RURAL & ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 40 URBAN) ADVANCES AND ALSO CLAIM A PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) IN RESPECT OF ITS RURAL ADVANCES IN VIEW OF THE PROVISO TO S. 36(1)(VII) WHICH PROVIDES THAT ONLY THE EXCESS OVER TH E CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCO UNT MADE U/S 36(1)(VIIA) CAN BE CLAIMED. THE SPECIAL BENCH OF THE TR IBUNAL IN DCIT VS. CATHOLIC SYRIAN BANK 88 ITD 185 HELD THAT AS S. 3 6(1)(VIIA) WAS CONFINED TO RURAL ADVANCES, A CLAIM FOR BAD DEBTS OF URB AN ADVANCES WAS NOT SUBJECT TO THE LIMITATION OF THE PROVISO TO S. 36(1)(VII). HOWEVER, THE FULL BENCH OF THE KERALA HIGH COURT TOOK A CONTRARY VIEW IN CIT VS. SOUTH INDIAN BANK 233 CTR 214 (KER) (FB) AND HELD THAT A BANK WAS ENTITLED TO CLAIM DEDUCTION OF BAD DEBTS U/S 36 (1)(VII) ONLY TO EXTENT IT EXCEEDED THE PROVISION ALLOWED AS DEDUCTI ON UNDER S. 36(1) (VIIA). ON APPEAL TO THE SUPREME COURT, HELD R EVERSING THE FULL BENCH OF THE HIGH COURT: PER COURT: (I) THE CLEAR LEGISLATIVE INTENT OF S. 36(1)(VII) & 36 (1)(VIIA) TOGETHER WITH THE CIRCULARS ISSUED BY THE CBDT DEMONSTRATE THAT T HE DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) IS DISTINCT AND INDEPENDENT OF S. 36(1)(VII) RELATING TO ALLOWANCE OF BAD DEBTS. THE LEGISLATIVE INTENT WAS TO ENCOURAGE RURAL AD VANCES AND THE MAKING OF PROVISIONS FOR BAD DEBTS IN RELATION TO SUCH R URAL BRANCHES. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 41 THE FUNCTIONING OF SUCH BANKS IS SUCH THAT THE RURAL BRANCH ES WERE PRACTICALLY TREATED AS A DISTINCT BUSINESS, THOUGH ULTIMA TELY THESE ADVANCES WOULD FORM PART OF THE BOOKS OF ACCOUNTS OF THE HEAD OFFICE. AN INTERPRETATION WHICH SERVES THE LEGISLATIVE OBJECT AN D INTENT IS TO BE PREFERRED RATHER THAN ONE WHICH SUBVERTS THE SAME. THE DEDUCTION U/S 36(1)(VII) CANNOT BE NEGATED BY READING INTO IT THE LIMITATIONS OF S. 36(1)(VIIA) AS IT WOULD FRUSTRATE THE OBJECT OF GRANT ING SUCH DEDUCTIONS. THE REVENUES ARGUMENT THAT THIS WOULD LEAD TO DOUBLE DEDUCTION IS NOT CORRECT IN VIEW OF THE PROVISO TO S. 36( 1)(VII) WHICH PROVIDES THAT IN RESPECT OF RURAL ADVANCES, THE DEDUCTIO N ON ACCOUNT OF THE ACTUAL WRITE OFF OF BAD DEBTS WOULD BE LIMITED TO EXCESS OF THE AMOUNT WRITTEN OFF OVER THE AMOUNT OF THE PROVISION WHICH HAD ALREADY BEEN ALLOWED U/S 36(1) (VIIA) (SOUTHERN TECHNOLOGIES 3 20 ITR 577 (SC) & VIJAYA BANK 323 ITR 166 (SC) REFERRED) 10. IN THE INSTANT CASE, WE ENDORSE THE DECISION OF LD.CIT(A) WHICH HELD THAT THE ASSESSEE HAS ADMITTED IN ITS SUBMISSIONS AS WELL AS BEFORE AO REGARDING THE ENTI TLEMENT OF DEDUCTION U/S 36(1)(VIIA) OF RS. 114.76 CRORES. THERE IS NO DISPUTE AS TO THE CORRECTNESS OF THE CALCULATION OF THE ENTITLEMENT OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT . IT IS A SETTLED LAW THAT ONLY AGAINST ASCERTAINED LIABILITY DEDUCTION ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 42 CAN BE ALLOWED EXCEPT FOR SPECIFIC PROVISIONS IN AC T WHERE DEDUCTION IS ALLOWED ON PROVISIONS ALSO. THE ACT H AS SPECIFICALLY PROVIDED IN SEC. 36(1)(VIIA) FOR DEDUC TION FOR PROVISION MADE FOR ADVANCES MADE BY THE RURAL BRANC HES OF THE BANK. 11. THE METHOD OF CALCULATING DEDUCTION HAS BEEN DE FINED IN THE ACT. THE BANK IS ENTITLED FOR DEDUCTION FOR 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCH ES PLUS 7.5% OF THE TOTAL INCOME COMPUTED BEFORE THIS DEDUCTION AND AMOUNT DEDUCTIBLE UNDER SEC 80C TO 80 U. IT IS MANDATORY FOR ALL THE BANKS TO FOLLOW THE INCOME RECOGNITION NORMS AND ASSETS CLASSIFICATION NORMS A S PRESCRIBED BY RESERVE BANK OF INDIA. THE ASSESSEE H AS ALSO MADE PROVISION FOR NPAS BY FOLLOWING THE INCOME RECOGNITION NORMS OF RESERVE BANK OF INDIA. THE HON . SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK L TD LAID DOWN THAT THE LEGISLATIVE INTENT WAS TO ENCOURAGE T HE RURAL ADVANCE AND MAKING OF PROVISIONS FOR BAD DEBTS IN R ELATION TO SUCH RURAL ADVANCES AND FOR PROVIDING GREATER DE DUCTIONS. BUT THE DEDUCTION IS ALLOWABLE ONLY ON BEING LEGALL Y ENTITLED ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 43 AND ON MAKING ACTUAL PROVISIONS FOR SUCH DEDUCTION IN THE BOOKS OF ACCOUNT. 12. FROM THE FACTS OF THE CASE AND IN LAW, AFTER TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SY RIAN BANK VS CIT THRISSUR 206 TAXMAN 182(SC) THERE IS NO AMBI GUITY LEFT IN THE INTERPRETATION OF PROVISION OF SEC 36 ( 1) (VIIA). THE APPELLANT IS A REGIONAL RURAL BANK SPONSORED BY PUNJAB NATIONAL BANK. THE ASSESSEE HAS MADE ADVANCES FROM ITS RURAL BRANCHES WHICH ARE NOT QUESTIONED. THE PROVIS IONS OF SEC 36(L)(VIIA) ARE CLEARLY INTERPRETED BY SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 16.07 CRORES AGAINST ITS ENTITLEM ENT OF RS 114.76 CRORES IN THE BOOKS IT HAS MADE PROVISION FO R BAD DEBTS OF RURAL BRANCHES FOR RS 3,70,00,000/- OVER A ND ABOVE THE PROVISION MADE FOR NPAS AS PER RBI NORMS. THIS FACT HAS BEEN STATED IN THE AUDITED BALANCE SHEET OF THE BAN K IN SCHEDULE 17: PRINCIPLE ACCOUNTING POLICIES & NOTES ON ACCOUNT, WHERE POINT 1(IV)(III) WHICH IS REPRODUCED AS UNDER: (III) BANK HAS MADE PROVISION OF RS.3,70,00,000/- (PREVIOUS YEAR- NIL) AGAINST TOTAL MONTHLY AVERAGE ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 44 ADVANCE OF RURAL BRANCHES OF THE BANK FOR THE BAD A ND DOUBTFUL DEBTS, OVER AND ABOVE THE PROVISION FOR BA D & DOUBT DEBTS REQUIRED TO BE MADE IN ACCORDANCE WITH THE PRUDENTIAL NORMS SUGGESTED BY RBI. THE BANK HAS REDUCED RS. 210.36 LACS (PREVIOUS YEAR RS 363.05 LA CS) FOR WRITE OFF OF THE RURAL ADVANCES NOT RECOVERABLE AND ARE BAD AND DOUBTFUL DEBTS FROM THE PROVISION MADE IN EARLIER YEARS AND NET PROVISION FOR RURAL BRANCH ES ADVANCES IS RS 2844.03 LACS (RS 3054.39 LACS - RS. 210.36 LAGS).. INCLUDED IN OTHER PROVISIONS IN SCHE DULE -5 . THE ITAT BANGLORE IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. ING VYSYA BANK LTD (2014) 62 SOT 0026 (BANGLORE) AND ITAT CHENNAI IN THE CASE OF TAMILNADU STATE APEX CO- OPERATIVE BANK LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (2014) 62 SOT 0113 (CHENNAI) (URO) HAS HELD THAT THE ACTUAL PROVISION MADE IN TH E BOOKS BY THE ASSESSEE ON ACCOUNT OF PBDD (IRRESPECTIVE OF WHETHER IT IS RURAL OR NON- RURAL) HAS TO BE SEEN. 13. IN THE PRESENT CASE, THE ASSESSEE HAS ADMITTEDL Y MADE PROVISION FOR NONPERFORMING ASSETS (NPA) IN RESPECT OF ITS URBAN BRANCHES. THE ASSESSEE HAS DEBITED RS.2.52 CR ORES (APPROXIMATELY) (I.E., 7.5% OF THE GROSS TOTAL INCO ME) IN P&L ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 45 A/C CREATING PROVISION FOR NON-PERFORMING ASSETS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 36(L)(VII A) OF THE ACT. THE REVENUE HAS DISPUTED THE DEDUCTION CLAIMED FOR THE REASON, THAT THE ASSESSEE HAS NOT CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS. IN CASE OF BANKING COMPANIES, T HE ACCOUNTS ARE MADE IN ACCORDANCE WITH THE RBI GUIDEL INES AND THE BANKING REGULATION ACT, 1949. ALTHOUGH, THE ASS ESSEE HAS NAMED THE PROVISION AS PROVISION FOR NPA, BUT IN PITH AND SUBSTANCE THE PROVISION HAS BEEN CREATED FOR B AD AND DOUBTFUL DEBTS. THE TAXONOMY OF THE PROVISION HAS BEEN DONE BY THE ASSESSEE TO KEEP IT IN LINE WITH THE RB I AND NABARD GUIDELINES. 14. WE ARE SATISFIED THAT THE ASSESSEE HAS MADE PRO VISION AND CLAIMED DEDUCTION IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 36(L)(VIIA). THE ASSESSEE IS ENTITLED TO TH E BENEFIT OF SAME. 15. SIMILARITY THE HONBLE ITAT CHENNAI IN THE CASE OF V ELLORE D IST . C ENTRAL C O -O PERATIVE B ANK L TD . V S . C OMMISSIONER O F I NCOME T AX - (2013) 145 IDT 0129 (CHENNAI) HAS HELD THAT THE QUESTION WHICH ARISES FOR DETERMI NATION ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 46 BEFORE US IS WHETHER THE ASSESSEE HAS CREATED ANY R ESERVE/ PROVISION FOR BAD AND DOUBTFUL DEBTS? THE AR HAS CO NTENDED THAT THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AN D DOUBTFUL DEBTS UNDER THE NOMENCLATURE RESERVE FOR NPA. THE TERMINOLOGY RESERVE FOR NPA HAS BEEN USED BY THE ASSESSEE IN ACCORDANCE WITH THE RBI DIRECTIONS. AS IS EVIDENT FROM THE ASSESSMENT ORDER, THE ASSESSEE HAS INDEED CREATED RESERVE FOR NPA. FOR CLAIMING BENEFIT UNDER THE P ROVISIONS OF SECTION 36(L)(VIIA)(A) THE CONDITIONS TO BE SATI SFIED IS: THAT PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD HA VE BEEN MADE BY THE BANK ELIGIBLE TO CLAIM SUCH DEDUCTION. CO- OPERATIVE BANKS DO NOT STRICTLY FOLLOW THE PROVISIO NS OF BANKING REGULATION ACT FOR THE PURPOSE OF MAINTAINI NG THEIR BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE A SSESSEE HAS CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS MA Y BE UNDER DIFFERENT NOMENCLATURE. THIS WILL NOT DIS-ENT ITLE THE ASSESSEE FOR CLAIMING DEDUCTION UNDER THE PROVISION S OF SECTION 36(L)(VIIA)(A). THE PURPOSE FOR CREATION OF RESERVE FOR NPA IS SAME I.E., CREATING PROVISION TOWARDS BA D AND DOUBTFUL DEBTS. ITA NO. 1937/DEL/2016 M/S SARVA UP GRAMIN BANK 47 THUS, IN VIEW OF THE FACTS OF THE CASE AND JUDICIAL PRONOUNCEMENTS IN THE ABOVE STATE CASES THE ASSESSE E WILL BE ENTITLED TO DEDUCTION U/S 36(L)(VIIA) TO THE EXT ENT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS OF RS 16,06,72,355/-. THE A.O IS THEREFORE DIRECTED TO AL LOW THE FULL DEDUCTION OF RS 16,06,72,355/- AS CLAIMED BY T HE ASSESSEE IN THE COMPUTATION OF INCOME AND NOT TO RE STRICT IT ON RS 1,33,93,000/. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/12/2019 SD/- SD/- (BHAVNESH SAINI) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18.12.2019 *KAVITA ARORA, SR. PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR