IDCOl Kalinga Iron Works Ltd, Keonjhar V. DCIT, Sambalpur

ITA 267/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77555 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: P B MOHANTY
• Keywords: General deduction; Principle of natural justice; Bad and doubtful debts; Corroborative evidences; Prejudicial to interest
• Section: 43B; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI P.K.BANSAL (AM) AND D.T.GARASIA (JM) I.T.A. NO.267 /CTK/2013 ASSESSMENT YEAR: 2007-08 IDCOL KALINGA IRON WORKS LTD., KEONJHAR PA NO.AAACI 9143 D DCIT, CIRCLE 1(1), SAMBALPUR APPELLANT RESPONDENT FOR THE APPELLANT: SHRI P.B.MOHANTY FOR THE RESPONDENT: SHRI N.K. NEB DATE OF HEARING: 22.4.2014 DATE OF PRONOUNCEMENT:27.6 .2014 ORDER PER BENCH: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 8.1.2013 OF LD CIT(A), BERHAMPUR FOR THE ASSESSMENT YEAR 2007-08. 2. GROUND NO.1 IS NOT PRESSED; HENCE, SAME IS DISMISSED AS NOT PRESSED. 3. GROUND NOS.2 TO 4 IS INTERCONNECTED, WHICH ARE AS UNDER: 2. FOR THAT THE LD. ASSESSING OFFICER (AO) HAS DISALLOWED THE 'PROVISION OF EXCISE DUTY ON FINISHED GOODS' TO THE TUNE OF RS. 2, 43,76,929.00 STATING THAT, IT IS NOT AN ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION. HENCE, IT IS NOT AN ALLOWABLE DEDUCTION. THE LD. AO MISCONSTRUED/MIS-APPRECIATED THE FACTS 2 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) AND PASSED AN ORDER WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 3. .FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BERHAMPUR (CIT -(APPEALS)), WHILE CONFIRMING THE ORDER OF LD. AO ON 'PROVISION OF EXCISE DUTY ON FINISHED STOCKS', HAVE DELIBERATELY MISINTERPRETED THE LAW AND INTERPRETED THE PROVISION ENSHRINED UNDER SECTION 37 OF I.T. ACT READ WITH SECTION 43B OF THE I.T. ACT IN A PRO-REVENUE MANNER AND TO THE PREJUDICIAL INTEREST OF THE APPELLANT. 4. FOR THAT THE LD. CIT - (APPEALS) ERRED IN LAW IN HOLDING THAT THE 'PROVISION OF EXCISE DUTY ON FINISHED STOCKS' IS A 'CONTINGENT LIABILITY', WHICH IS NOT BASED ON EITHER MATERIAL SUBSTANCE OR IN CONSONANCE WITH LAW. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY DERIVES INCOME FROM MANUFACTURING AND SALE OF PIG IRON, CI PIPES AND OTHER STEEL MATERIALS. THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED ON 3.11.2007 DISCLOSING TOTAL LOSS OF RS.19,82,07,050/-. DURING THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE A PROVISION FOR EXCISE DUTY AMOUNTING TO RS.2,43,76,929/- AND THE SAME HAS BEEN DEBITED TO THE P & L A/C. ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PROVISIONS FOR EXCISE DUTY RELATES TO THE CLOSING STOCK OF FINISHED GOODS REMAINING AT THE END OF THE FINANCIAL YEAR AND THE SAME HAS BEEN DEBITED IN THE P & L A/C, IT WAS SUBMITTED THAT THE ABOVE PROVISIONS WILL BE ADJUSTED AFTER THE STOCKS ARE ACTUALLY SOLD DURING THE NEXT FINANCIAL YEAR. THE AO WAS OF THE VIEW THAT SUCH PROVISION FOR EXCISE DUTY PAYABLE IS NOT AN ALLOWABLE DEDUCTION AND HENCE HE DISALLOWED THE SAME AND REDUCED THE AMOUNT OF RS.2,43,76,929/- FROM THE NET LOSS. 5. IN THE FIRST APPEAL, LD CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. BEING AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) 6. DURING THE COURSE OF HEARING BEFORE US, LD A.R. SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPANY HAS MADE A PROVISION FOR EXCISE DUTY ON CLOSING STOCK. ASSESSEE COMPANY FOLLOWS MERCANTILE/ACCRUAL BASED ACCOUNTING SYSTEMS AND, ACCORDINGLY, ALL INCOME AND EXPENDITURE IS CHARGED TO PROFIT AND LOSS ACCOUNT ON ACCRUAL BASIS. FROM THE LEDGER ACCOUNT, IT IS SEEN THAT THE ASSESSEE COMPANY HAS CREATED A PROVISION FOR EXCISE DUTY ON CLOSING STOCK IN ACCORDANCE WITH THE GUIDE NOTE ON ACCOUNTING TREATMENT FOR EXCISE DUTY AND IN THE IMMEDIATELY FOLLOWING YEAR, THEY REVERSE THE PROVISION FOR EXCISE DUTY IS NULLIFIED BY REVERSAL OF THE PROVISION FOR EXCISE DUTY. HENCE, THE IMPACT IN THE PROFIT AND LOSS ACCOUNT IS NIL. LD A.R. SUBMITTED THAT EVEN IF THE PROVISIONS OF EXCISE DUTY IS HIT BY THE PROVISION OF SECTION 43B OF THE INCOME TAX ACT, STILL IT WILL NOT HAVE ANY IMPACT BECAUSE ASSESSEE HAS ALREADY DEPOSITED MONEY IN EXCISE DEPARTMENT AN AMOUNT OF RS.16,97,13,164/- BY THE END OF SEPTEMBER, 2007 I.E. LAST MONTH FOR FILING RETURN WITHIN DATE, WHICH IS IN EXCESS OF THE PROVISION FOR EXCISE DUTY. THEREFORE, LD A.R URGED US TO ALLOW THE APPEAL FILED BY THE ASSESSEE. 7. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD RIVAL CONTENTIONS. WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. ON PERUSAL OF PROFIT AND LOSS ACCOUNT, WHICH WAS FURNISHED BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS, IT IS REVEALED THAT RS.2,43,76,929/- HAS BEEN DEBITED UNDER THE HEAD PROVISIONS FOR EXCISE DUTY. ASSESSEE HAS SUBMITTED BEFORE THE AO THAT ASSESSEE HAS MADE PROVISIONS FOR EXCISE DUTY PAYABLE IS MADE ON CLOSING STOCK ON FINISHED GOODS REMAINING AT THE END OF THE FINANCIAL YEAR AND SAME HAS BEEN DEBITED IN PROFIT AND LOSS ACCOUNT. THE ABOVE SAID PROVISIONS WILL BE ADJUSTED AFTER THE STOCKS ARE ACTUALLY SOLD DURING THE NEXT FINANCIAL YEAR. WE FIND THAT ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE SYSTEMS. ASSESSEE CAN MAKE PROVISIONS FOR EXCISE DUTY 4 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) PAYABLE AND DEBIT THE SAME INTO PROFIT AND LOSS ACCOUNT. AS PER SECTION 43B OF THE ACT, THE AMOUNT OF EXCISE DUTY ON VALUE OF CLOSING STOCK SHOULD BE ALLOWED AS DEDUCTION IN ASSESSMENT YEAR RELATING TO PREVIOUS YEAR IN WHICH IT WAS ACTUALLY PAID EVEN THOUGH THE ASSESSMENT OF CLOSING STOCK OF THAT YEAR WOULD BE IN THE SUBSEQUENT ASSESSMENT YEAR. WE FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF LAKHANPAL NATIONAL LTD VS. ITO, 162 ITR 240(GUJ) HAS HELD THAT THE AMOUNT OF CUSTOM DUTY AND EXCISE ON VALUE OF CLOSING STOCK SHOULD BE ALLOWED AS DEDUCTION WHEN ACTUAL PAYMENT IS MADE. WE FIND THAT ASSESSEE HAS GIVEN A WRITTEN STATEMENT, WHEREIN, IT HAS BEEN SUBMITTED BEFORE US THAT IN THE SUBSEQUENT ASSESSMENT YEAR, ASSESSEE HAS ALREADY PAID AMOUNT OF RS.16,97,13,164/- BY THE END OF THE MONTH I.E. SEPTEMBER, 2007 TO THE EXCISE DEPARTMENT. THEREFORE, WE REVERSE THE FINDINGS OF THE CIT(A) AND RESTORE THIS MATTER TO THE FILE OF THE AO TO VERIFY WHETHER THE ASSESSEE HAS ALREADY PAID THIS AMOUNT TO THE EXCISE DEPARTMENT AND IF THE ASSESSEE HAS ALREADY PAID THIS AMOUNT TO THE EXCISE DEPARTMENT, DEDUCTION HAS TO BE ALLOWED AS PER LAW. THE AO IS ACCORDINGLY DIRECTED TO ALLOW THE DEDUCTION AFTER VERIFICATION. GROUND NOS.2 TO 4 IS ALLOWED. 9. GROUND NOS.5 & 6 ARE INTERCONNECTED, WHICH READ AS UNDER: 5. FOR THAT THE AO WITHOUT CITING ANY REASONS HAS ADDED BACK PROVISION FOR DOUBTFUL DEBTS TO THE TUNE OF RS.31,95,074.00. THE AO WITHOUT REFERRING TO THE PROVISIONS OF SECTION 36(L)(VII) OF THE L.T. ACT AND THE RATIO DECIDED BY THE HON'BLE SUPREME COURT WHILE DEALING CASES FALLS UNDER THE HEAD 'PROVISION FOR DOUBTFUL DEBTS', PASSED AN ORDER IN A PRO-REVENUE MANNER AND TO THE PREJUDICIAL INTEREST OF THE APPELLANT. 6. FOR THAT THE LD. CIT - (APPEALS) HAS MIS-APPRECIATED THE PROVISIONS OF OF SECTION 36(1) (VII) OF THE L.T. ACT. FURTHER, THE LD. CIT - (APPEALS) HAS FAILED TO CONSTRUE THE RATIO DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT(2010) 323 ITR 397 (SC) AND VIJAYA BANK VS. CIT (2010) 323 ITR 166 (SC). THE LD. CIT - (APPEALS) HAS CONFIRMED THE ORDER OF LD. AO BASED ON THE WRONG PREMISE. 5 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) 10. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.31,95,074/- IN THE PROFIT AND LOSS ACCOUNT UNDER THE PROVISION FOR BAD AND DOUBTFUL DEBTS. DURING THE COURSE OF HEARING, ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR DEBITING THE PROVISIONS FOR BAD AND DOUBTFUL DEBT WITH DETAIL AND SUPPORTING EVIDENCE. BUT THE ASSESSEE FAILED TO OFFER ANY CONVINCING EXPLANATION, THEREFORE, THE PROVISIONS FOR BAD AND DOUBTFUL DEBT WAS NOT ALLOWED BY THE AO AND IN FIRST APPEAL, THE SAME WAS UPHELD. HENCE, ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 11. LD A.R. SUBMITTED THAT FOR ALLOWING DEDUCTION IN RESPECT OF BAD DEBTS AND CLAIMING DEDUCTION UNDER SECTION 36(1)(VII) R. W. 36(2) OF THE INCOME TAX ACT, THE HONBLE SUPREME COURT IN ITS DECISIONS IN THE CASE OF TRF LTD VS. CIT, 323 ITR 397(SC) AND IN THE CASE OF SOUTHERN TECHNOLOGIES LTD VS. JCIT, 320 ITR 577(SC) HAVE CONSIDERED THE AMENDMENT W.E.F. 1.4.1989 AND AS PER THE SAID AMENDMENT, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN THE JUDGMENT OF TRF LTD (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE ACT, W.E.F. 1.4.1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IN THE CASE OF VIJAYA BANK VS CIT, 323 ITR 166 (SC), THE HONBLE SUPREME COURT HAS HELD THAT AFTER 1.4.1989, A MERE PROVISION FOR BAD DEBT WOULD NOT BE ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII). IF AN ASSESSEE DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE PROFIT AND LOSS 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 PROFIT AND LOSS ACCOUNT AND MAKES A CORRESPONDING CREDIT TO THE CURRENT LIABILITIES AND PROVISIONS ON THE LIABILITIES SIDE OF THE BALANCE SHEET, THEN IT WOULD CONSTITUTE PROVISION FOR DOUBTFUL DEBT AND IN SUCH CASE, THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION AFTER 1.4.1989. IT WAS FURTHER HELD THAT A MERE DEBIT TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A PROVISION FOR A BAD AND DOUBTFUL DEBT, YET THAT WOULD NOT CONSTITUTE 6 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) WRITE OFF. BUT WHERE BESIDES DEBITING THE PROFIT AND LOSS ACCOUNT AND CREATING A PROVISION FOR BAD AND DOUBTFUL DEBT, THE ASSESSEE HAS CORRESPONDINGLY/SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNT BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET AND, CONSEQUENTLY AT THE END OF THE YEAR, THE FIGURE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET IS SHOWN AS NET OF THE PROVISION FOR IMPUGNED BAD DEBT, THE ASSESSEE WILL BE ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT, AS THERE IS AN ACTUAL WRITE OFF BY THE ASSESSEE IN HIS BOOKS. IN THE CASE OF THE ASSESSEE, LD A.R. HAS DRAWN OUR ATTENTION TO PAGE 16 OF PROFIT AND LOSS ACCOUNT. HE HAS SUBMITTED THAT ASSESSEE HAS THE PROVISION IN SCHEDULE-6 OF SUNDRY DEBTORS, WHEREIN, ASSESSEE HAS MADE LESS PROVISION FOR DOUBTFUL DEBTS. THEREFORE, IT IS ACTUALLY WRITE OFF, HENCE IT WILL BE ALLOWED. 12. LD D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE INSTANCE CASE, THE ASSESS COMPANY HAS DEBITED A SUM OF RS. 31,95,074/- IN P&L A/C UNDER THE PROVISION OF BAD AND DOUBTFUL DEBT. THE ASSESSING OFFICER HAS DISALLOWED SUCH PROVISION IS NOT ALLOWABLE DEDUCTION. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE A PROVISION BAD AND DOUBTFUL DEBT AND HAS NOT WRITTEN OFF THE AMOUNT FROM BOOKS. THE ASSESSEE HAS CREATED A PROVISION BY DEBITED IN P&L A/C AND CREATING THE PROVISION THE BAD AND DOUBTFUL DEBT WHICH HAS BEEN TAKEN TO THE LIABILITIES SIDE OF THE BALANCE SHEET THOUGH FOR THE PURPOSE OF PRESENTATION THE SAME HAS BEEN SHOWN AS DEDUCTION FROM THE DEBTOR. BUT THE TOTAL DEBT ON THE ASSETS SIDE OF THE BALANCE SHEET REMAINS THE SAME AND IS NOT ACTUAL WRITTEN OFF OR REDUCE. THE PROVISION FOR BAD AND DOUBTFUL DEBT CONTINUES IN THE BALANCE SHEET ALONG WITH THE CORRESPONDING AMOUNT OF THE DEBTORS. THUS THE PRESENTATION IN THE BALANCE SHEET DOES NOT MAKE ANY MATERIAL DIFFERENCE TO THE POSITION BECAUSE CREDIT BALANCE STAYS IN THE BOOKS AND IS TAKEN TO THE NEXT YEAR. THE COMMISSIONER HAS TAKEN 7 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) OF VIEW THAT AS PER THE DECISION OF TRF LTD., VS. CIT 323 ITR 397 THE ASSESSEE IS AFTER AMENDMENT IN SECTION 36 (1)(VII) W.E.F. 01.04.1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO THE BAD DEBT. IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT IN FACT BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. WE FIND THAT IN THE INSTANT CASE AS PER THE BOOKS OF ACCOUNTS THE ASSESSEE HAS DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT AND CREDITS THE ASSET ACCOUNT LIKE SUNDRY DEBTORS ACCOUNT WHICH DOES NOT CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT. WE FIND THAT MERELY DEBITS AN AMOUNT OF DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT WOULD NOT CONSTITUTE A PROVISION FOR DOUBTFUL DEBT YET IT WOULD NOT CONSTITUTE ACTUAL WRITTEN OFF. THEREFORE, THE DECISION OF SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT 323 ITR 397 WILL NOT HELPFUL TO THE ASSESSEE. IN RESPECT OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF VIJAY BANK VS. CIT 320 ITR 166 (SC) HAS HELD THAT AFTER 01.04.1989 A MERELY PROVISION FOR BAD DEBT WILL NOT ENTITLE FOR DEDUCTION U/S. 36(1)(VII). IF AN ASSESSEE DEBITS PROVISION FOR DOUBTFUL DEBT TO THE PROFIT AND LOSS ACCOUNT AND CREDITS THE ASSET ACCOUNT LIKE SUNDRY DEBTORS ACCOUNT WHICH WOULD CONSTITUTE A WRITE OFF OF AN ACTUAL DEBT TO THE PROFIT AND LOSS ACCOUNTS 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 OF DOUBTFUL DEBT AND IN SUCH CASE THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION AFTER APRIL, 1989. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAS MADE A PROVISION FOR BAD DEBT AND DOUBTFUL DEBT BESIDES DEBITING THE P&L A/C AND WOULD CREATING A PROVISION FOR BAD AND DOUBTFUL DEBT, THE ASSESSEE HAS CORRESPONDINGLY/ SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FOR ACCOUNTS BY REDUCING THE CORRESPONDING THE AMOUNT FROM LOANS AND ADVANCES/ DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET, AND CONSEQUENTLY AT THE END OF THE YEAR. THE FIGURE IN THE LOANS AND ADVANCES OR DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET IS SHOWN AS NET OF THE PROVISION FOR IMPUGNED BAD DEBT, THEREFORE, ASSESSEE IS NOT ENTITLED FOR DEDUCTION OF BAD DEBT. MOREOVER, WE FIND THAT THAT IN THE CASE OF VIJAYA BANK VS. CIT (SUPRA) THE ISSUE RELATING TO THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT DEALING WITH THE DEDUCTION OF BAD DEBT WRITTEN OFF BY THE ASSESSEE 8 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) COVERING THE BANKING AS WELL AS NON-BANKING ASSESSEE. WE FIND THAT THE SECTION 36(1), CLAUSE-(VIIA) OF SUB-SECTION (1) TALKS ABOUT THE PROVISION FOR BAD DEBT AND DOUBTFUL DEBT MADE BY THE SCHEDULE BANK OR NON SCHEDULE BANK OR CO-OPERATIVE BANK. SECTION 36(1)(VIIA) TALKS OF IN RESPECT OF PROVISION FOR BAD DEBT AND DOUBTFUL DEBT BY SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN AGRICULTURAL SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURAL OR RURAL BANK AND AMOUNT OF NOT EXCEEDING 7 AND 1.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING THE DEDUCTION UNDER THE CLAUSE AND CHAPTER-6A AND AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. THEREFORE, THIS SECTION TALKS OF THE DEDUCTION IN RESPECT OF THE BANKING COMPANY, WHO BUSINESS IS FINANCED, THEREFORE, IN THE INSTANT CASE THIS COMPANY IS NOT OF BUSINESS OF BANKING OR FINANCIAL ACTIVITIES, THEREFORE THIS SECTION WILL NOT BE HELPFUL TO THE ASSESSEE. WE FIND THAT THIS WILL NOT BE HELPFUL TO THE ASSESSEE. WE FIND THAT IN THE DECISION OF CATHOLIC SYRIAN BANK LTD. VS. CIT, THRISSUR WHEREIN THE SUPREME COURT HAS EXPLAINED THE ALLOWABLE DEDUCTION UNDER PROVISIONS OF 36(1)(VII) AND 36(1)(VIIA) BY OBSERVING AS UNDER: TO CONCLUDE, THE SUPREME COURT HELD: THE PROVISIONS OF SECTIONS 36(1) (VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS. THE BAD DEBTS WRITTEN OFF IN DEBTS, OTHER THAN THOSE FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA ), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VII), WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTION TO THE EXTENT OF DIFFERENCE BETWEEN THE DEBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA). THE PROVISO TO SECTION 36(1)(VII) WILL RELATE TO CASES COVERED UNDER SECTION 36(1)(VIIA) AND HAS TO BE READ WITH SECTION 36(2)(V) OF THE ACT. THUS, THE PROVISO WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO RURAL LOANS WHILE UNDER SECTION 36(1)(VII), THE ASSESSEE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HAVING BECOME BAD DEBT AND BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THIS, OBVIOUSLY, WOULD BE SUBJECT TO SATISFACTION OF THE REQUIREMENTS CONTEMPLATED UNDER SECTION 36(2). CONSEQUENTLY, WHILE ANSWERING THE QUESTION IN FAVOUR OF THE ASSESSEE, SUPREME COURT ALLOWED THE APPEALS OF THE ASSESSEES AND DISMISSED THE APPEALS PREFERRED BY THE REVENUE. FURTHER, SUPREME COURT DIRECTED THAT ALL MATTERS BE REMANDED 9 ITA NO.267/CTK/2013 (ASST. YEAR.2007-08) TO THE ASSESSING OFFICER FOR COMPUTATION IN ACCORDANCE WITH LAW, IN LIGHT OF THE LAW ENUNCIATED IN THIS JUDGMENT. WE RESPECTFULLY FOLLOWING THE DECISION OF SUPREME COURT WE ARE OF THE VIEW THAT THE FACTS OF THE ASSESSEES CASE ARE SUCH THAT THE DECISION OF VIJAYA BANK VS. CIT (2010) 323 ITR 166(SC) WILL NOT HELPFUL TO THE ASSESSEE. THEREFORE, WE DISMISS THE APPEAL OF THE ASSESSEE. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 15. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK IN THE OPEN COURT ON 27.6. 2014. SD/- SD/- (P.K.BANSAL) (D.T.GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED. 27.6 .2014 PLACE: PANAJI. B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: IDCOL KALINGA IRON WORKS LTD., MATKHAMBEDA, KEONJHAR-758036 2. THE RESPONDENT: DCIT, CIRCLE 1(1), SAMBALPUR 3. THE CIT, SAMBALPUR 4. THE CIT(A), BERHAMPUR 5. DR, CUTTACK BENCH 6. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK