Tamilnadu State Apex Co-operative Bank Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2177/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9631 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R MOHAN
• Assessee Lawyers: R VISWANATHAN
• Keywords: Opportunity of being heard; Question of law; Bad and doubtful debts; Reason to believe
• Section: 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NOS.2177 & 2178/MDS/2014 # % &% / ASSESSMENT YEAR : 2007-2008 & 2008-2009 M/S. TAMILNADU STATE APEX CO-OPERATIVE BANK LTD, NEW NO.4, OLD NO. 233, TNSC BANK BUILDING, NSC BOSE ROAD, CHENNAI 600 001. [PAN AAAAT 4483D] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE IX, CHENNAI ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. R. VISWANATHAN, C.A. +,'( ) * /RESPONDENT BY : SHRI R. MOHAN, CIT, DR ! ) - / DATE OF HEARING : 04-02-2016 ./& ) - / DATE OF PRONOUNCEMENT : 06-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE ASSESSEE A RE DIRECTED AGAINST COMMON ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ITA NO.2177 & 2178/MDS/2014. :- 2 -: VII, CHENNAI DATED 03.6.2014 FOR THE ABOVE ASSESS MENT YEARS PASSED U/S.143(3) R.W.S. 147 AND 250 OF THE INCOME TAX ACT , 1961 (HEREIN AFTER REFERRED TO AS THE ACT). SINCE THE ISSUE IN THESE TWO APPEALS IS COMMON IN NATURE, HENCE THESE APPEALS ARE COMBINED, HEARD TOGETHER, AND DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE UNDER :- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE APPEAL WITHOUT DISTINGUISHING THE RATIOS RELIED BY THE APPELLANT L AID IN THE DECISION OF CATHOLIC SYRIAN BANK VS CIT DECIDED BY SUPREME COURT REPORTED IN 18 TAXMANN.COM 282. 2.1 THE LD CIT(A) OUGHT TO HAVE CONSIDERED SECTION 36(1 )(VII) AND SECTION 36(1 )(VIIA) ARE INDEPENDEN T AND CANNOT BE INTERMINGLED OR READ INTO EACH OTHER. . 2.2 THE LD CIT(A)GROSSLY ERRED IN NOT CONSIDERING THE WORD ' DEDUCTION' APPEARING IN THE SECTION 36(VIIA) IMPLIES THAT AN EXPENDITURE WHICH AN ASSESSEE MAY SUBTRACT FROM GROSS TOTAL INCOME TO DETERMINE TAXABLE INCOME' 2.3 THE LD CIT(A) FAILED TO APPRECIATE AND CONSIDER PROVISION ALREADY MADE BY THE APPELLANT IN THE BOOKS OF ACCOUNT TOWARDS FOR NPA AND BAD DEBT. 2.4 THE LD CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE BASIS OF PROVISION TO BE MADE FOR 36(VIIA) DISCUSSED IN PARA 29 OF THE DECISION OF CATHOLIC SYRIAN BANK VS CIT DECIDED BY SUPREME COURT REPORTED IN 18 TAXMANN.COM 282. 2.5 THE LEARNED CIT(A) FURTHER ERRED IN STATING THE APPELLANT HAD NOT PASSED ANY PROVISION IN THE BOOKS. ITA NO.2177 & 2178/MDS/2014. :- 3 -: 2.6 THE LD CIT(A) OUGHT TO CONSIDERED THAT THE CASE LAW RELIED BY THE LD AO IN STATE BANK OF PATIALA VS CIT REPORTED IN 143 TAXMAN 196 WAS NO LONGER APPLICABLE AFTER THE DECISION OF CATHOLIC SYRIAN BANK VS CIT DECIDED BY SUPREME COURT REPORTED IN 18 TAXMANN.COM 282. 3. SINCE THE ISSUE IS COMMON IN BOTH APPEALS, WE CONSI DER THE FACTS AS NARRATED IN ITA NO.2178/MDS/2014 OF ASSES SMENT YEAR 2008- 09 FOR ADJUDICATION. 4. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS A CO- OPERATIVE BANK AND IS IN THE BUSINESS OF BANKING A ND PROVIDING CREDIT FACILITIES TO ITS MEMBERS FILED RETURN OF INCOME FO R THE ASSESSMENT YEAR 2008-09 ON 29.09.2008 ADMITTING TOTAL INCOME OF >26 ,38,40,723/-. THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND SUBS EQUENTLY, THE ASSESSING OFFICER ON REASON TO BELIEVE THAT THE ASS ESSEE BANK HAS CLAIMED EXCESS DEDUCTION U/S.36(1)(VIIA) OF THE ACT AND ISSUED NOTICE U/S.148 ON 23.03.2011. THE ASSESSEE BANK FILED LE TTER DATED 05.04.2011 TO TREAT THE ORIGINAL RETURN FILED EARL IER AS RETURN IN COMPLIANCE TO NOTICE. FURTHER NOTICE U/S.142(1) OF THE ACT WAS ISSUED AND CASE WAS POSTED FOR HEARING ON VARIOUS DATES. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALONGWITH MANAGER OF THE BANK APPEARED FROM TIME TO TIME AND FILED EXPLANATIONS T HAT IN COMPUTATION OF INCOME ASSESSEE HAS DISALLOWED >35,50,416/- TOWA RDS PROVISION FOR ITA NO.2177 & 2178/MDS/2014. :- 4 -: BAD AND DOUBTFUL DEBTS AND CLAIMED DEDUCTION U/S.36 (1)(VIIA) OF THE ACT BEING 7.5% OF GROSS TOTAL INCOME. THE LD. ASSE SSING OFFICER BASED ON THE SUBMISSIONS ON THE INCOME TAX ADJUSTMENT STA TEMENT, DISALLOWANCE AND COMPLIANCE OF STIPULATED CONDITION S THAT ASSESSEE BANK IS ELIGIBLE FOR ADHOC DEDUCTION IRRESPECTIVE OF AMOUNT OF PROVISION IN PROFIT AND LOSS ACCOUNT AND CALLED FOR PRODUCED BOOKS OF ACCOUNTS, BANK ACCOUNTS STATEMENTS, DETAILS OF SUND RY DEBTORS AND LEDGER ACCOUNTS. THE LD. ASSESSING OFFICER RELIED ON THE DECISION OF PUNJAB AND HARAYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT (2005) 143 TAXMANN 196 . AS PER THE PROVISIONS OF SEC. 36(1)(VIIA) OF THE ACT THE ASSESSEE BANK SHOULD MAK E PROVISION EQUAL TO AMOUNT CLAIMED AS DEDUCTION IN ACCOUNTS FOR CLA IMING DEDUCTION, FURTHER ON PERUSAL OF THE COMPUTATION OF INCOME, TH E BANK HAS NOT PROVIDED PROVISION OF >2.13 CRORES IN THE FINANCIAL ACCOUNTS FOR CLAIMING DEDUCTION. THE LD. ASSESSING OFFICER ON VERIFICATI ON OF BOOKS OF ACCOUNTS AND PROVISIONS OF LAW AND CONCLUDE THAT BA NK HAS DEBITED >95,50,416/- AS PROVISION FOR BAD AND DOUBTFUL DEBT S IN THE BOOKS OF ACCOUNTS BUT AT THE TIME OF FILING OF RETURN OF INC OME MADE AN DISALLOWANCE OF >35,50,416/- SINCE THE BALANCE PROV ISION WAS NOT DISALLOWED, THE ASSESSING OFFICER MADE ADDITION OF >60,00,000/- TO THE RETUNED INCOME ALONGWITH >2,13,92,491/- CLAIMED AS DEDUCTION ITA NO.2177 & 2178/MDS/2014. :- 5 -: U/S.36(1)(VIIA) OF THE ACT ON ADHOC BASIS AT 7.5% OF GROSS TOTAL INCOME AS NO SATISFACTORY EXPLANATIONS WAS FURNIS HED IN HEARING PROCEEDINGS, ASSESSED TOTAL INCOME OF >29,12,33,214 /- AND RAISED DEMAND. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 5. THE LD. AUTHORISED REPRESENTATIVE CONTESTED THE ACT ION OF THE ASSESSING OFFICER IN DENYING THE CLAIM U/S.36(1)(VI IA) OF THE ACT AND IGNORING THE PROVISION OF >95,50,416/- DEBITED IN THE BOOKS OF ACCOUNTS AND ERRED IN NOT ALLOWING CLAIM BASED ON T HE DECISION OF STATE BANK OF PATIALA (SUPRA). THE LD. AUTHORISED REPRESENTATIVE ALSO CHALLENGED THE VALIDALITY OF REASSESSMENT PROCEEDIN GS AND FILED WRITTEN SUBMISSIONS AND SUPPORTED THE CASE WITH JUDICIAL D ECISIONS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ADDITIONAL GROUNDS WERE THE LD. ASSESSING OFFICER ERRED IN NOT ALLOWING DEDUCTION U/S.36(1)(VIIA) OF THE ACT AS PER RETURN OF INCOME AND THE DEDUCTION SHOULD BE ALLOWED BASED ON THE DECISION OF APEX COU RT IN THE CASE OF CATHOLIC SYRIAN BANK VS. CIT 18 TAXMANN.COM 282 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THE REOPE NING OF ASSESSMENT IS VALID AND THE ASSESSEE DEBITED 6,80,5 0,416/- AS PROVISIONS INCLUDING >95,50,416/- TOWARDS PROVISION FOR BAD AND ITA NO.2177 & 2178/MDS/2014. :- 6 -: DOUBTFUL DEBTS. ON PERUSAL OF THE COMPUTATION OF INCOME THE ASSESSEE HAS DISALLOWED ONLY >35,50,416/- AT THE T IME OF FILING RETURN OF INCOME. THE LD. COMMISSIONER OF INCOME TAX (APP EALS) IS OF THE OPINION THAT ASSESSEE MADE PROVISION OF >95,50,416 /- IN THE BOOKS OF ACCOUNTS AND THE ASSESSING OFFICER HAS NOT ALLOWED CLAIM OF BAD AND DOUBTFUL DEBTS TO THE EXTENT OF PROVISION AND DIREC TED THE ASSESSING OFFICER TO ALLOW DEDUCTION OF >95,50,416/- U/SEC. 3 6(1)(VIIA) OF THE ACT. THE LD. ASSESSING OFFICER DISALLOWED >2,13,92,491/- IN THE ASSESSMENT WITH REFERENCE TO THE PROVISIONS AS UNDER:- TO FIND OUT WHETHER THE CLAIMS OF THE ASSESSEE IS CORRECT OR NOT, WE HAVE TO READ THE RELEVANT PROVISIONS OF INCOME TAX ACT WHICH IS REPRODUCED AS UNDER:- OTHER DEDUCTIONS:- 36(1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL 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 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 NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE- HALF PERCENT OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY EDUCATION UNDER THIS CLAUSE AND CHAPTER VIA AND AN AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER: ITA NO.2177 & 2178/MDS/2014. :- 7 -: 5.2 THE FINANCE ACT 2007 EXTENDED THE BENEFIT OF DE DUCTION U/S. 36(1)(VIIA) OF THE ACT TO A CO-OPERATIVE BANK. THE ASSESSEE BEING A CO- OPERATIVE BANK IS THEREFORE ENTITLED FOR THE DEDUCTION U/S 36( L)(VIIA) OF THE ACT. THE DEDUCTIO N IS RESTRICTRED TO 7.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA PRODUCE D HE ASSESSEE MAKES A PROVISION FOR BAD AND DOUBTFUL DEB TS TO THE EXTENT REQUIRED. IN THIS, CASE, THE ASSESSEE IS ELI GIBLE FOR DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TO TAL INCOME ( IN THIS CASE UPTO 7,61,10,421/- ) PROVIDED PROVISION TO THE SAME AMOUNT IS MADE IN THIS ACCOUNTS. IN THE ASSES SEES CASE, PROVISIONS WAS MADE ONLY TO THE EXTENT OF 1,06,63,566/- AND THE SAME WAS ALLOWED. THE ASSESSEES FURTHER CLAIM OF 6,54,46,855/- WAS NEGATIVE BY THE ASSESSING OFFICER . THE ASSESSEE CONTENDED THAT THE PROVISION HAS BEEN DEBI TED IN THE BOOKS OF ACCOUNTS AND HENCE THE SAME IS TO BE ALLOWED AS DEDUCTION AND RELIANCE WAS PLACED ON THE CASE OF SB P VS CIT (2005) 272 ITR 54 (P&H). THE CONTENTION OF THE ASSE SSEE IS FAR FROM TRUTH SINCE, THE ASSESSEE DEBITED RS.1,06,U3,566/- ONLY IN THE INCOME AND EXPENDITURE ALE UNDER THE HEAD 'PROVISIONS AND RESERVES MADE. IT IS N OT KNOWN HOW THE ASSESSEE PLACED RELIANCE ON THE DECISION OF P&H HIGH COURT IN THE C ASE OF SBP VS CIT AND ANOTHER (2005) 272 ITR (54). THE DECISION W AS ACTUALLY AGAINST THE ASSESSEE. IT WAS CLEARLY HELD AS UNDER: MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBT EQU AL TO THE AMOUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAI MING SUCH DEDUCTION.' 'WE ARE, THEREFORE, SATISFIED THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT SINCE THE ASSESSEE MADE A PROVISION OF 1, 19,36,000/- FOR BAD AND DOUBTFUL DEBTS, ITS CLAIM FOR DEDUCTION ULS 36( 1)(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 IN TERPRETATION, WE ARE SATISFIED THAT NO SUBSTANTIAL QUESTION OF LAW A RISES IN THIS APPEAL FOR CONSIDERATION BY THIS COURT. ' THE ASSESSEES RELIANCE ON THE DECISION OF CATHOLI C SYRIAN ITA NO.2177 & 2178/MDS/2014. :- 8 -: BANK VS. CIT 18 TAXMANN.COM 282 IS OF NO HELP AND N OT APPLICABLE TO THE FACT OF THE CASE IN HAND. SIMIA LRY, THE RELIANCE ON THE DECISION OF ITAT MUMABI BENCH L I N THE CASE OF ADIT(IT) VS. CITIBANK NA IN ITA NO.3160/MUM/06, DATED 05.08.2009 IS ALSO NOT HELPFUL TO THE ASSESSEES CA SE. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) RELIED ON THE ORDER OF ASSESSEES OWN CASE IN ITA NO.266/11-2012 DATED 28. 01.2013 FOR THE ASSESSMENT YEAR 2009-2010 DISPOSED OFF THE APPEAL. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE FILED AN APPEAL BEFORE TRIBUNAL. 6. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS OF THE ASSESSMENT PROCEE DINGS AND APPELLATE PROCEEDINGS. THE LD. AUTHORISED REPRESEN TATIVE MAIN CONTENTION AND ARGUMENTS ON THE ALLOWABILITY OF DE DUCTION U/S.36(1)(VIIA) OF THE ACT AND THE GROUNDS WERE TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS DISMISSED THE APPEAL WI THOUT DISTINGUISHING THE RATIO RELIED IN THE CASE OF CATHOLIC SYRIAN BANK (SUPRA ) OBSERVED AT PARA 29 OF THE ORDER AT PAGE 16 OF PA PER BOOK AS UNDER:- 29. IN A RECENT JUDGMENT OF THIS COURT, IN SOUTHE RN TECHNOLOGIES LTD. VS. JT. CIT , COIMBATORE (2010) 2 SCC 548 (AUT HORED BY ONE OF US, KAPAIDA, J AS HE THEN WAS), BOTH SECTION 36 (1)(VII) AND 36(1)(VIIA) WERE DISCUSSED. THEN, THIS COURT WENT O N TO STATE HOW THESE PROVISIONS OPERATE IN THE CASE OF A NON BANKI NG FINANCIAL CORPORATIONS (NBFC) VIS-A-VIS BANK COVERED UNDER SE CTION 36(1)(VIIA). THE COURT HELD AS UNDER:- ITA NO.2177 & 2178/MDS/2014. :- 9 -: '37. TO UNDERSTAND THE ABOVE DICHOTOMY, ONE MUST UNDERSTAND 'HOW TO WRITE OFF. IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE P&L ACCOUNT AND CREDITS THE ASSET ACCOUNT LIKE SUNDRY DEBTOR'S ACCOUNT, IT WOULD CONSTITUTE A WRITE-OFF OF AN ACTUAL DEBT. HOWEVER, IF AN ASSESSEE DEBITS 'PROVISION FOR DOUBTFUL DEBT' TO THE P&L ACCOUNT AND MAKES A CORRESPONDING CREDIT TO THE 'CURRENT LIABILITIES AND PROVISIONS' ON THE LIABILITIES SIDE OF THE BALANCE SHEET, THEN IT WOULD CONSTITUTE A PROVISION FOR DOUBTFUL DEBT. IN THE LATTER CASE, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION AFTER 1-4-1989. ** ** ** 58. SECTION 36(1)(VII) PROVIDES FOR A DEDUCTION IN THE COMPUTATION OF TAXABLE PROFITS FOR THE DEBT ESTABLISHED TO BE A BAD DEBT. SECTION 36(1)(VII- A) PROVIDES FOR A DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY A SCHEDULED BANK OR NON-SCHEDULED BANK IN RELATION TO ADVANCES MADE BY ITS RURAL BRANCHES, OF A SUM NOT EXCEEDING A SPECIFIED PERCENTAGE OF THE AGGREGATE AVERAGE ADVANCES BY SUCH BRANCHES. 59. HAVING REGARD TO THE INCREASING SOCIAL COMMITMENT, SECTION 36(1)(VII-A) HAS BEEN AMENDED TO PROVIDE THAT IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY A SCHEDULED BANK OR A NON- SCHEDULED BANK, AN AMOUNT NOT EXCEEDING A SPECIFIED PER CENT OF THE TOTAL INCOME OR A SPECIFIED PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES, WHICHEVER IS HIGHER, SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE TAXABLE PROFITS. EVEN SECTION 36(1)(VII) HAS BEEN AMENDED TO PROVIDE THAT IN THE CASE OF A BANK TO WHICH SECTION 36(1 )(VII-A) APPLIES, THE AMOUNT OF BAD AND DOUBTFUL DEBT SHALL BE DEBITED TO THE PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT AND THAT THE DEDUCTION SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT. 60. THE POINT TO BE HIGHLIGHTED IS THAT IN CASE OF BANKS, BY WAY OF INCENTIVE, A PROVISION FOR BAD AND DOUBTFUL DEBT IS GIVEN THE BENEFIT OF ITA NO.2177 & 2178/MDS/2014. :- 10 -: DEDUCTION, HOWEVER, SUBJECT TO THE CEILING PRESCRIBED AS STATED ABOVE. LASTLY, THE PROVISION FOR NP A CREATED BY A SCHEDULED BANK IS ADDED BACK AND ONLY THEREAFTER DEDUCTION IS MADE PERMISSIBLE UNDER SECTION 36(1)(VII-A) AS CLAIMED.:' THE DEDUCTION U/SECS. 36(1)(VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND SEPARATELY ALLOWED. THE LD. AUTHORISED REPRESEN TATIVE RELIED ON THE DEFINITION OF DEDUCTION AND PAPER BOOK CONSISTS DETAILS OF PROVISION FOR NONPERFORMING ASSET (NPA) AND BAD DEBTS IN THE BOOKS OF ACCOUNTS. FURTHER ARGUED ON FINANCE BILL 2013 EFFEC TIVE FROM 01.04.2014 AND THE EXPLANATIONS INSERTED CLARIFYIN G THAT PROVISION FOR SEC. 36(1)(VIIA) OF THE ACT NEED NOT BE MADE IN THE BOOKS OF ACCOUNTS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OVERLO OKED THE RATIO LAID DOWN IN THE CASE OF ADIT VS. CITIBANK NA IN ITA NO.3160/MUM/2006, DATED 05.08.2009 AND DECISION OF ORIENTAL BANK OF COMMERCE VS. ACIT IN ITA NO.22/DEL/2011, DATED 1 5.03.2013 AND PRAYED FOR ALLOWING THE DEDUCTION. 7. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND FINDINGS OF THE ASSESSING OFFICER. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE CONTENTION OF T HE LD. AUTHORISED ITA NO.2177 & 2178/MDS/2014. :- 11 -: REPRESENTATIVE THAT THE ASSESSEE IS ELIGIBLE FOR DE DUCTION U/S.36(1)(VIIA) OF THE ACT AS PER RATIO LAID DOWN I N CATHOLIC SYRIAN BANK (SUPRA) AND IN ASSESSEES OWN CASE THE DECISIONS HAS BEEN CONSIDERED. BASICALLY CO-OPERATIVE BANK IS ELIGIBLE FOR DEDUCTION AT 7.5% OF GROSS TOTAL INCOME. THE LD. COUNSEL FILED P APER BOOK AND EXPLAINED APPLICABILITY OF RATIO OF APEX COURT DECI SION AND OTHER DECISIONS OF TRIBUNAL IN THE CASE OF ORIENTAL BANK OF COMMERCE AND CITIBANK NA (SUPRA ) AND ASSESSEES OWN CASE OF ASSESSMENT YEAR 2009- 2010 AND PRODUCED COPY OF COMPUTATION OF INCOME. ON PERUSAL OF THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2008- 09, THE ASSESSEE HAS DISALLOWED PROVISION FOR BAD DEBTS AND DOUBTFUL DEBTS >35,50,416/- AND ALSO CLAIMED DEDUCTION U/S.36(1)(V IIA) BUT BASED ON THE RATIO LAID DOWN IN STATE BANK OF PATIALA (SUPRA ) PROVISION ENTRIES HAS TO BE PASSED IN THE BOOKS OF ACCOUNTS FOR THE C LAIMS. THE LD. AUTHORISED REPRESENTATIVE DEMONSTRATED THE LEGAL AS PECT OF PROVISION FOR BAD DEBTS AND NON PERFORMING ASSETS AND DEDUCT IONS CLAIMED BY THE BANK. CONSIDERING THE ACTIVITIES OF THE BANK AND THE PROVISION OF NPA AND PROVISIONS OF BAD DEBTS, THE JUDICIAL DECI SIONS AND CLAIM U/S.36(1)(VIIA) OF THE ACT AND THE DECISION OF APEX COURT, THE ASSESSEE CLAIM OF BAD DEBTS IN THE BOOKS OF ACCOUNTS AND FI NANCE BILL 2013, WE ARE OF THE OPINION THE MATTER NEEDS TO BE RE-EXAMIN ED IN THE ITA NO.2177 & 2178/MDS/2014. :- 12 -: LIGHT OF THE DECISION OF CATHOLIC SYRIAN BANK (SUPR A) AND SUPPORTING JUDICIAL DECISIONS. SO, WE REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND COM PLIANCE OF THE CONDITIONS STIPULATED U/S.36(1)(VIIA) OF THE ACT B ASED ON THE DECISION OF THE APEX COURT AND ALLOW THE DEDUCTION AFTER PRO VIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HOWEVE R, WE MAKE IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTI ON TOWARDS PROVISION FOR BAD DEBTS >60,00,000/- FOR ASSESSMENT YEAR 2008 -09 AND >1,06,63,566/- FOR ASSESSMENT YEAR 2007-08. THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 9. TO SUM UP, THE APPEALS OF THE ASSESSEE IN ITA NO.2177/MDS/2014, ASSESSMENT YEAR 2007-2008 AND ITA NO.2178/MDS/2014, ASSESSMENT YEAR 2008-2009 ARE PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 6TH DAY OF APRIL, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI 1 / DATED: 06.04.2016 2 ) +#-34 54&- / COPY TO: 1. '( / APPELLANT 3. ! 6- () / CIT(A) 5. 4 9: +#-# / DR 2. +,'( / RESPONDENT 4. ! 6- / CIT 6. :;% < /