M/s Narmada Malwa Gramin Bank, Indore V. The DCIT 1(1), Indore

ITA 341/IND/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4866 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S DESHPANDE
• Assessee Lawyers: MRIDULA BAJPAI
• Keywords: Bad and doubtful debts; Benefit of exemption
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACCN2847F I.T.A.NO. 341/ IND/201 3 A.Y. : 2009-10 M / S .NARMADA MALWA GRAMIN BANK, INDORE. VS. DCIT, 1(1), INDORE. APPELLANT RESPONDENT DEPARTMENT BY : SHRI S.S.DESHPANDE, C.A. ASSESSEE BY : S MT. MRIDULA BAJPAI, CIT DR DATE OF HEARING : 26 . 0 8 .201 3 DATE OF PRONOUNCEMENT : 30 . 0 8 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 21.02.2013 FOR THE ASSE SSMENT YEAR 2009-10 IN THE MATTER OF ORDER PASSED U/S 143( 3) OF THE INCOME-TAX ACT, 1961, WHEREIN FOLLOWING THREE GROUN DS HAVE BEEN TAKEN BY THE ASSESSEE : -: 2: - 2 1. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE DISALLOWING THE CLAIM U/S 36(1)(VIIA) BEING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. 2. THE DEDUCTION CLAIMED BY THE ASSESSEE AT RS. 32.92 CRS. U/S 36(1)(VIIA) WAS MADE AS PER THE PROVISIONS OF THE ACT AND AS SUCH THE DISALLOWANCE OF SUCH CLAIM WAS ILLEGAL AND BAD IN LAW. 3. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDI TION OF RS. 5,738/- ON ACCOUNT OF DISALLOWANCE U/S 14A OF THE ACT. THE DISALLOWANCE IS ILLEGAL AND MAY PLEASE BE DELETED. 2. AT THE OUT-SET, IT WAS SUB MITTED BY THE LD. AUTHOR IZED REPRESENTATIVE THAT GROUNDS NO.1 & 2 ARE COVERED A GAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 29 TH MARCH, 2012, IN ASSESSEES OWN CASE IN I.T.A.NO. 162/IND/2011 3. FROM THE RECORD, WE FOUND THAT ASSESSEES CLAIM OF DEDUCTION U/S 36(1)(VIIA) WAS DECLINED BY THE LOWER AUTHORITIES, ON THE PLEA THAT THE ASSESSEE HAS NOT CREATED ANY P ROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNTS. SI MILAR ISSUE -: 3: - 3 HAS BEEN CONSIDERED IN DETAIL BY THE TRIBUNAL IN AS SESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEAR 2007-08 V IDE ITS ORDER DATED 29 TH MARCH, 2012, WHEREIN MATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE ASSESSEE IS A SCHEDULED REGIONAL RURAL BANK VIDE ITS RETURN OF INCOME ON 1.11.2007, WHICH WAS REVISED TO LOSS INCOME ON 31.3.2008, WHEREIN CLAIM OF DEDUCTION FOR BAD DEBTS AMOUNTING TO RS. 34.17 CRORES WAS MADE U/S 36(I)(VIIA)(A) OF THE ACT . HOWEVER, THE ASSESSING OFFICER DECLINED TO ACCEPT T HE STATUS OF THE ASSESSEE AS SCHEDULED BANK, ACCORDINGLY, DISALLOWED DEDUCTION OF RS. 37.27 CROR ES CLAIMED U/S 36(I)(VIIA)(A) OF THE ACT. 5. BY THE IMPUGNED ORDER BY CONSIDERING THE DATE OF AMALGAMATION OF ASSESSEE BANK ON 3.4.2006, THE LD. CIT(A) HELD THAT THE ASSESSEE IS A SCHEDULED BA NK FOR THE ASSESSMENT YEAR 2007-08. PRECISE FINDING OF THE CIT(A) WAS AS UNDER :- -: 4: - 4 3.1.1 IT IS NOTED THAT THE GOVERNMENT NOTIFICATION FOR AMALGAMATION OF THE SAID FOUR RRBS WERE DATED 03.04.2006. THROUGH THAT NOTIFICATION, THE CENTRAL GOVERNMENT PROVIDED FOR AMALGAMATION OF THE SAID REGIONAL RURAL BANKS INTO A SINGLE REGIONAL RURAL BANK WITH EFFECT FROM THE DATE OF PUBLICATION OF THAT NOTIFICATION IN THE OFFICIAL GAZETTE. PURSUANT TO THAT NOTIFICATION, THE RBI IN DUE COURSE HAS SIMPLY UPDATED ITS SECOND SCHEDULE BY DELETING THE NAMES OF THE FOUR AMALGAMATED RRBS AND INSERTING IN THEIR PLACES THE NAME OF THE SINGLE REGIONAL RURAL BANK I.E. NARMADA MALWA GRAMIN BANK. IT IS NOT A CASE THAT ALTOGETHER A NEW BANK HAS BEEN LISTED FOR THE FIRST TIME IN THE SECOND SCHEDULE TO ACCORD THE STATUS OF 'SCHEDULED BANK'. THE NEWLY CREATED RRB I.E. ASSESSEE BANK WOULD BE ENTITLED TO ALL THOSE BENEFITS WHICH WERE AVAILABLE TO THE SAID FOUR AMALGAMATED RRBS. AS SUCH IT IS HELD THAT STATUS OF SCHEDULED BANK WOULD BE DEEMED TO HAVE BEEN CONFERRED ONTO THE NEWLY CREATED RRB I.E. THE ASSESSEE BANK IMMEDIATELY AFTER THE AMALGAMATION AS PER THE RBI ACT. THE NOTIFICATION DATED 22.09.2008 OF THE RBI WAS A MERE FORMALITY FOR UPDATION IN ITS RELEVANT SECOND SCHEDULE CONSEQUENT TO THE -: 5: - 5 GOVERNMENT'S NOTIFICATION DATED 03.04.2006 FOR THE AMALGAMATION OF THE FOUR ERSTWHILE CONSTITUENT RRBS. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSING OFFICER HAS WR ONGLY DENIED THE CLAIM OF DEDUCTION BY NOT ACCEPTING THE STATUS OF ASSESSEE AS SCHEDULED BANK. IT HAS BEEN SUBMITTED BEFORE THE LEARNED AO THAT ALL THE FOUR ERSTWHILE RRBS I.E. NIMAR KSHETRIYA GRAMIN BANK, DEWAS-SHAJAPUR KSHETRIYA GRAMIN BANK, SEHORE-RAJGARH KSHETRIYA GRAMIN BANK AND INDORE- UJJAIN KSHETRIYA GRAMIN BANK WERE ENJOYING THE STATUS OF SCHEDULE BANK BEFORE AMALGAMATION. AS PER THE GAZETTE NOTIFICATION NO.F1(4) 2006-RRB OF GOVERNMENT OF INDIA, DATED 03.04.2006 THE AFORESAID ERSTWHILE RRBS WERE AMALGAMATED INTO. A SINGLE REGIONAL RURAL BANK I.E. NARMADA MALWA GRAMIN BANK AND THE SAME STATUS OF SCHEDULE BANK IS CONTINUED FOR THE AMALGAMATED RRB FROM THE DATE OF SUCH AMALGAMATION. THERE IS NO DISPUTE THAT ALL THE FOUR CONSTITUENT RRBS WERE SCHEDULED BANK PRIOR TO AMALGAMATION AS PER RBIS ACT. THEIR NAMES ALSO FIGURE IN TAB LE B-12: BANK-WISE LIST OF SCHEDULED COMMERCIAL BANKS (PAGE 296 TO 299) OF THE ANNUAL PUBLICATION OF RESERVE BANK OF INDIA (RBI). -: 6: - 6 7. THE LD. AUTHORIZED REPRESENTATIVE ALSO PLACED ON RECORD EXTRAORDINARY GAZETTE OF INDIA DATED 3 RD APRIL, 2006, WHICH CLEARLY INDICATED THAT DURING TH E RELEVANT ASSESSMENT YEAR, THE ASSESSEE WAS SCHEDULED BANK. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR TREATING THE ASSESSEE AS SCHEDULED BANK AND GIVING BENEFIT OF CLAIM OF DEDUCTION U/S 36(I)(VIIA) OF THE INCOME-TA X ACT, 1961. 8. THE REVENUE IS ALSO AGGRIEVED FOR CIT(A)S ACTION IN ALLOWING DEDUCTION @ 10% OF AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES IN ADDITION TO DEDUCTION @ 7.5 % OF TOTAL INCOME AS PE R PROVISIONS OF SECTION 36(I)(VIIA)(A) OF RS.7,82,11, 279/-. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT WITH REGARD TO THE CLAIM OF DEDUCTION ON ACCOUNT OF PROVISIONS OF BAD DEBT, T HE AO HAS NOTED THAT TOTAL CLAIM OF DEDUCTION U/S.36(1)(VIIA)(A) COULD NOT HAVE EXCEEDED THE PROVISION FOR BAD AND DOUBTFUL DEBTS. IN FACT, THE ASSESSEE HAD CREATED THE TOTAL -: 7: - 7 PROVISION FOR BAD AND DOUBTFUL DEBTS FOR RS.L1,98,16,090/-. THE BREAK-UP OF THIS PROVISION HAS BEEN DETAILED IN PARA 23 OF THE AO'S ASSESSMENT ORDER. AFTER ANALYZING THE NATURE OF PROVISION, THE AO HELD THAT THE QUALIFYING AMOUNT WAS THE PROVISION FOR NPA AT RS.927.61 LAKHS ONLY WHICH COULD BE TAKEN AS 'PROVISION FOR BAD & DOUBTFUL DEBTS'. ACCORDINGLY, THE AO HELD THAT THE CLAIM OF DEDUCTION COULD NOT HAVE EXCEEDED THE AMOUNT OF RS.927.61 LAKHS. THE AO FURTHER ANALYZED THE PROVISIONS OF ELIGIBILITY FOR DEDUCTION U/S.36(1)(VIIA)(A) AND HELD THAT ASSESSEE WAS ENTITLED TO THE DEDUCTION OF RS.1,45,49,72I/- BEING 7.5% OF TOTAL INCOME ONLY. THE AO CONCLUDED THAT THE DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE BANK WAS NOT AVAILABLE TO THE ASSESSEE BECAUSE IN THE OPINION OF THE AO, THE ASSESSEE WAS NOT A SCHEDULED BANK DURING THE YEAR UNDER CONSIDERATION BECAUSE THE RBI NOTIFICATION TO THAT EFFECT WAS DATED 22.09.2008. ACCORDINGLY, THE AO DETERMINED ITS TOTAL INCOME AT RS.17,94,65,882/-. THE ASSESSEE'S MAIN PLEA WAS THAT IT WAS -: 8: - 8 CREATED BY THE AMALGAMATION OF FOUR ERSTWHILE REGIONAL RURAL BANKS (RRBS) I.E. NIMAR KSHETRIYA GRAMIN BANK, DEWAS- SHAJAPUR KSHETRIYA GRAMIN BANK, SEHORE- RAJGARH KSHETRIYA GRAMIN BANK AND INDORE- UJJAIN KSHETRIYA GRAMIN BANK; AND THAT ALL THE FOUR ERSTWHILE RRBS WERE SCHEDULED BANKS AS PER THE RBIS ACT PRIOR TO THEIR AMALGAMATION. 10. BY THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED ASSESSEES CLAIM AFTER HAVING FOLLOWING OBSERVATIONS :- A CAREFUL READING OF THE SECTION 36(1)(VIIA)(A) TOGETHER WITH THE EXPLANATION ACCORDINGLY MAKES IT CLEAR THAT PRIOR TO A.Y. 2007-08, THE CO-OPERATIVE BANKS WERE ESPECIALLY EXCLUDED FOR ANY DEDUCTION U/S.36(1)(VIIA)(A), BECAUSE OTHERWISE ALSO THEY WERE ELIGIBLE FOR DEDUCTION U/S.80P. -: 9: - 9 FROM A.Y. 2007-08 AND ONWARDS, THE CO-OPERATIVE BANKS WERE DENIED EXEMPTION U/S.80P, BUT NEVERTHELESS INCLUDED FOR DEDUCTION U/S 36(1)(VIIA)(A). FURTHER, IN THE MANNER RURAL BRANCHES HAVE BEEN DEFINED, THE CO-OPERATIVE BANKS HAVING THE STATUS OF SCHEDULED BANKS BECAME ELIGIBLE FOR DEDUCTION IN RESPECT OF. BOTH THE LIMBS [I.E, 7.5% OF TOTAL INCOME AND 10% OF THE AVERAGE ADVANCES). BUT THE CO-OPERATIVE BANKS WHICH DO NOT HAVE THE STATUS OF SCHEDULED BANKS COULD BE ELIGIBLE FOR DEDUCTION ONLY IN RESPECT OF THE FIRST LIMB I.E. 7.5% OF THE TOTAL INCOME. -: 10: - 10 3.1.3 THERE IS NO DISPUTE THAT ASSESSEE BANK IS A CO-OPERATIVE TANK AND BY VIRTUE OF AMENDMENT OF SECTION 36(1)(VIIA)(A), WHEREBY THE CO-OPERATIVE BANK HAVE BEEN MADE ELIGIBLE FOR DEDUCTION, THE ASSESSEE IS ENTITLED TO THE DEDUCTION TO THE EXTENT OF 7.5% OF THE TOTAL INCOME AS PROVIDED IN THE FIRST LIMB OF THAT PROVISION. THE DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES AS PROVIDED IN THE SECOND LIMB OF THAT PROVISION, HOWEVER IS AVAILABLE TO RURAL BRANCHES ONLY. AS PER THE DEFINITION OF 'RURAL BRANCHES', THE BANK HAS TO BE EITHER A SCHEDULED BANK OR A NON- SCHEDULED BANK. IN THE MANNER, DEFINITION OF 'NON-SCHEDULED -: 11: - 11 BANK' HAS BEEN GIVEN IN THE SAID EXPLANATION, THE ASSESSEE BANK CANNOT BE CONSIDERED AS NON- SCHEDULED BANK. THUS, IT WOULD BE ELIGIBLE TO THE DEDUCTION IN RESPECT OF THE SECOND LIMB ONLY IF IT HAS STATUS OF 'SCHEDULED BANK'. THE AO DID NOT ALLOW THIS PART OF THE DEDUCTION (IN RESPECT OF SECOND LIMB) ON THE BASIS OF HIS CONCLUSION THAT THE ASSESSEE BANK WAS NOT A SCHEDULED BANK DURING THE YEAR. IT IS TO BE NOTED THAT THE DEDUCTION UNDER THIS SECOND LIMB IS NOT AVAILABLE TO ANY CO-OPERATIVE ( JUST LIKE THE DEDUCTION AS PER THE FIRST LIMB) UNLESS THE BANK IS A SCHEDULED BANK OR A NON-SCHEDULED BANK. A SCHEDULED BANK WOULD HOWEVER BE -: 12: - 12 ELIGIBLE DEDUCTION IN RESPECT OF BOTH THE LIMBS. AS DISCUSSED IN HEREIN ABOVE PARAS, I HAVE ALREADY HELD THAT THE ASSESSEE BANK WAS A SCHEDULED BANK AS PER THE RBI'S ACT IMMEDIATELY AFTER AMALGAMATION AND THEREFORE, OWING TO THE AMENDMENTS IN THE RELEVANT PROVISIONS OF THE INCOME TAX ACT, THE ASSESSEE BANK QUALIFIES FOR DEDUCTION U/S.36(1)(VIIA)(A) IN RESPECT 01 BOTH THE LIMBS. ACCORDINGLY, THE BENEFIT OF EXEMPTION U/S.36(1)(VIIA)(A) WOULD BE AVAILABLE TO THE ASSESSEE TOWARDS THE PROVISION FOR BAD AND DOUBTFUL DEBTS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2007-08. -: 13: - 13 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN VIEW OF THE FACT THAT THE ASSESSEE IS A SCHEDULED BANK, THE BENEFIT OF DEDUCTION U/S 36(1)(VIIA)(A) HAS BEEN CORRECTLY ALLOWED TO THE ASSESSEE TOWARDS PROVISIONS OF BAD AND DOUBTFUL DEBTS. THIS ISSUE HAS BEEN RECENTLY CONSIDERED BY HON'BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LIMITED ORDER DATED 21 ST FEBRUARY, 2012, WHEREIN THE SUPREME COURT HAD TO CONSIDER WHETHER A BANK WAS ELIGIBLE TO CLAIM A DEDUCTION FO R BAD DEBTS U/S 36(1)(VII) IN RESPECT OF ITS (RURAL & URBAN) ADVANCES AND ALSO CLAIM A PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA) IN RESPECT OF IT S RURAL ADVANCES IN VIEW OF THE PROVISO TO S. 36(1)(V II) WHICH PROVIDES THAT ONLY THE EXCESS OVER THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U/S 36(1)(VIIA) CAN BE CLAIMED. THE SPECIAL BENCH OF THE TRIBUNAL IN DCIT VS. CATHOLIC SYRIAN BANK 88 ITD 185 HELD THAT AS S. 36(1)(VIIA) -: 14: - 14 WAS CONFINED TO RURAL ADVANCES, A CLAIM FOR BAD DEB TS OF URBAN ADVANCES WAS NOT SUBJECT TO THE LIMITATION OF THE PROVISO TO S. 36(1)(VII). HOWEVER, THE FULL BEN CH 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 DEDUCTIO N OF BAD DEBTS U/S 36(1)(VII) ONLY TO EXTENT IT EXCEE DED THE PROVISION ALLOWED AS DEDUCTION UNDER S. 36(1) (VIIA). ON APPEAL TO THE SUPREME COURT, HELD REVERSING 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 T HE CBDT DEMONSTRATE THAT THE 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 ADVANCES AND THE MAKING OF PROVISIONS FOR BAD DEBTS -: 15: - 15 IN RELATION TO SUCH RURAL BRANCHES. THE FUNCTIONING OF SUCH BANKS IS SUCH THAT THE RURAL BRANCHES WERE PRACTICALLY TREATED AS A DISTINCT BUSINESS, THOUGH ULTIMATELY THESE ADVANCES WOULD FORM PART OF THE BOOKS OF ACCOUNTS OF THE HEAD OFFICE. AN INTERPRETA TION WHICH SERVES THE LEGISLATIVE OBJECT AND INTENT IS T O 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 GRANTING SUCH DEDUCTIONS . THE REVENUES ARGUMENT THAT THIS WOULD LEAD TO DOUBLE DEDUCTION I S NOT CORRECT IN VIEW OF THE PROVISO TO S. 36(1)(VII) WHICH PROVIDES THAT IN RESPECT OF RURAL ADVANCES, T HE DEDUCTION 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). (II) U/S 119, THE CBDT IS ENTITLED TO ISSUE CIRCULA RS TO EXPLAIN OR TONE DOWN THE RIGOURS OF LAW AND TO ENSU RE -: 16: - 16 FAIR ENFORCEMENT OF ITS PROVISIONS. THESE CIRCULARS HAVE THE FORCE OF LAW AND ARE BINDING ON THE INCOME TAX AUTHORITIES, THOUGH THEY CANNOT BE ENFORCED ADVERSELY AGAINST THE ASSESSEE. NORMALLY, THESE CIRCULARS CANNOT BE IGNORED. A CIRCULAR MAY NOT OVERRIDE OR DETRACT FROM THE PROVISIONS OF THE ACT BUT IT CAN SEEK TO MITIGATE THE RIGOUR OF A PARTICULAR PROVISION FOR THE BENEFIT OF THE ASSESSEE IN CERTAI N SPECIFIED CIRCUMSTANCES. SO LONG AS THE CIRCULAR IS IN FORCE, IT AIDS THE UNIFORM AND PROPER ADMINISTRATIO N AND APPLICATION OF THE PROVISIONS OF THE ACT. PER S. H. KAPADIA, CJI (CONCURRING) 5. (III) S. 36(1)(VII) & 36(1)(VIIA) ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPECTIVE FIELDS. S. 36(1)(VII) ALLOWS A DED UCTION FOR BAD DEBTS IN RESPECT OF URBAN AND RURAL DEBTS. HOWEVER, BY VIRTUE OF THE PROVISO TO S. 36(1)(VII), THE DEDUCTION IN RESPECT OF RURAL DEBTS IS LIMITED TO THE EXTENT OF DIFFERENCE BETWEEN THE DEBT OR PART THEREOF WRITTEN OFF IN -: 17: - 17 THE PREVIOUS YEAR AND THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER S. 36(1) (VIIA). THE PROVISO PREVENTS BENEFIT OF DOUBLE DEDUCTION WITH REFERENCE TO RURAL LOANS . THIS IS IN CONSONANCE WITH THE CBDTS INTERPRETATION IN THE CIRCULARS. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE APPEAL FILED BY THE ASSESSEE, THE ASSESSEE IS AGGRIEVED FOR MAINTAIN ADDITION OF RS. 24,89,95,045/- ON ACCOUNT OF DEDUCTION CLAIMED U/S 36(1)(VIIA)(A) . IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE HAS CORRECTLY CLAIMED DEDUCTION U/S 36(1)(VIIA)(A) AT RS. 32.72 CRORES. AS PER THE ASSESSING OFFICER, THE ASSESSEE HAS NOT WRITTEN IRRECOVERABLE DEBTS FOR ITS ACCOUNT, THEREFORE, THE ASSESSEE IS NOT -: 18: - 18 ELIGIBLE FOR SUCH DEDUCTION. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY OBSERVING THAT THE ASSESSEE HAS NOT CREATED PROVISIONS BY WRITING OFF ACTUAL BAD DEBTS, THEREFORE, THE ASSESSEE IS NOT ENTITLED IN VIEW OF AMENDED PROVISIONS OF SECTION 36(1)(VIIA)(A) WOULD NOT BE POSSIBLE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF BAD DEBTS IN ITS ACCOUNT, EVEN THOUGH PARTY-WISE RETURN FOR BAD DEBTS HAS NOT BEEN MADE, YET THE ENTRY PASSED BY THE ASSESSEE WAS SUFFICIENT FOR CLAIM OF DEDUCTION IN TERMS OF PROVISIONS OF SECTION 36(1)(VIIA). EVEN THE HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK, 323 ITR 166, OBSERVED AS UNDER :- A FTER INSERTION OF EXPLANATION TO S. 36(1)(VII), ASSESSEE IS REQUIRED NOT ONLY TO DEBIT THE P&L A /C BUT SIMULTANEOUSLY -: 19: - 19 ALSO REDUCE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSETS SIDE OF THE BALANCE SHEET TO THE EXTENT OF THE CORRESPONDING AMOUNT SO THAT AT THE END OF THE YEAR THE AMOUNT OF LOANS AND ADVANCES/DEBTORS IS SHOWN AS NET OF PROVISION FOR IMPUGNED BAD DEBT; ASSESSEE-BANK HAVING, BESIDES DEBITING THE P&L A/C AND CREATING A PROVISION FOR BAD AND DOUBTFUL DEBTS, SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTORS ON THE ASSETS SIDE OF THE BALANCE SHEET, IT WAS ENTITLED TO BENEFIT OF DEDUCTION UNDER S. 36(1)(VII); IT WAS NOT NECESSARY TO CLOSE THE INDIVIDUAL ACCOUNT OF EACH DEBTOR IN THE BOOKS. 9. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE SUPREME COURT, THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR RECOMPUTING THE CLAIM OF DEDUCTION TO THE EXTENT OF AMOUNT WRITTEN OFF IN THE BOOKS OF ACCOUNT, EVEN -: 20: - 20 THOUGH SUCH WRITTEN OFF WAS NOT PARTY-WISE. WE DIRECT ACCORDINGLY. 4. AS THE FACTS DURING THE YEAR UNDER CONSIDERATIO N ARE PARI MATERIA, RESPECTFULLY FOLLOWING THE DECISION O F THE TRIBUNAL, THE MATTER IS RESTORED BACK TO THE FILE O F ASSESSING OFFICER WITH THE SIMILAR DIRECTION GIVEN IN THE AFO REMENTIONED ORDER OF THE TRIBUNAL. 5. GROUND NO. 3 WITH REGARD TO DISALLOWANCE U/S 14A WAS NOT PRESSED BY LD. AUTHORIZED REPRESENTATIVE . THE SAME IS, ACCORDINGLY, DISMISSED IN LIMINE. 6. IN THE RESULT, THE APPEAL IS ALLOWED IN PART FO R STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH AUGUST, 2013. CPU* 2829