DCIT, Berhampur Circle, Berhampur, Berhampur V. The Berhampur Co-op. Central Bank Ltd, Ganjam

ITA 371/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77544 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P N DAVE
• Assessee Lawyers: K AJAY KUMAR
• Keywords: Business income; General deduction; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 381 /CTK/2013 (ASSESSMENT YEAR - 2009 - 10) BERHAMPORE CO - OPERATIVE CENTRAL BANK LTD. TOWN HALL ROAD BERHAMPUR 760 001 PAN: AAAAB2634C (APPELLANT) VS. THE ASST. COMMISSIONER OF INCOME TAX, BERHAMPUR CIRCLE, BERHAMPUR. (RESPONDENT) ITA NO. 37 1/CTK/2013 (ASSESSMENT YEAR - 2009 - 10) THE DY. COMMISSIONER OF INCOME TAX , BERHAMPUR CIRCLE, BERHAMPUR (APPELLANT) VS. THE BERHAMPUR CO - OPERATIVE CENTRAL BANK LTD. BERHAMPUR, DIST: GANJAM. PAN: AAAAB2634C (RESPONDENT) A PPELLANT BY : SHRI P.N. DAVE , AR RESPO NDENT BY : SHRI K. AJAY KUMAR , DR D ATE OF HEARING : 30 /04/2014 DATE OF PRONOUNCEMENT:13 /06 /2014 O R D E R PER: D.T. GARASIA TH ESE CROSS APPEAL S HAVE BEEN FILED AGA INST THE ORDER OF CIT(A) - BERHAMPUR, ODISHA , DATED 13.03 .2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE FOLLOWING G ROUNDS ARE RAISED BY THE ASSESSEE READ AS UNDER: 1. PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNTED AS OD INTEREST RESERVE AND NON - PERFORMING ASSETS UNDER ORISSA COOPERATIVE SOCIETY ACCOUNTING PRACTICE RELATING RURAL BRANCHES OF THE APPEL LANT, DENIAL OF 10%(TEN PERCENT) OF THE AGGREGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES OF THE NON - SCHEDULED BANK APPELLANT, BY LEARNED CIT(A) ON FLIMSY GROUND IS UNWARRANTED AND UN CALLED FOR. 2 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) 2. LEARNED CIT(A) WITHOUT ASKING DETAILS OF AGGREGATE AVERAGE ADVANCE MADE BY RURAL BRANCHES OF APPELLANT FAILED TO EXERCISE HIS CO - EXTENSIVE AND CO - TERMINUS POWER AND DENYING THE RELIEF OF 10% OF THE ABOVE SUM CAUSED PREJUDICE TO THE INTEREST OF JUSTICE. 3. ALLOWANCE BEING GRANT OF LAW IN ADJUDICATION, CLAIM HAVING BEEN MADE IN PROFIT & LOSS ACCOUNT THAT IS ADMISSIBLE, BEING MANDATE OF STATUTE. THEREFORE WHAT THAT IS DUE IS UNDENIABLE. 4. ACCOUNTS OF APPELLANT BEING STATUTORILY AUDITED AND ENTIRE FACTS AND FIGURES RELATING TO RURAL ADVANCE HAVING BEEN FURNISHED TO T HE LEARNED AO AND FORMING PART OF RECORD DENIAL OF BENEFIT OF 10% OF THE AGGREGATE AVERAGE ADVANCE MADE BY RURAL BRANCHES OF APPELLANT IS UNFAIR AND UNJUST. 5. GRANT OF SECTION 36(1)(VIIA) IN PIECE MEAL BY THE LEARNED CIT(A) MERELY ALLOWI NG RELIEF TO THE E XTENT 71 % OF TOTAL INCOME COMPUTED BEFORE MAKING AND DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA OF IT ACT, 1961 AND DENYING THE OTHER PART OF THE GRANT OF THE SAID SECTION IS A FAILURE OF JUSTICE FOR WHICH THAT PART OF HIS ORDER DENYING ALLOWANCE OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE APPELLANT CO - OPERATIVE BANK (NON - SCHEDULED BANK) IS LIABLE TO BE SET ASIDE. 6. AMOUNT RECEIVED BY THE AUDITORS OF THE APPELLANT AND SAME HAVING BEEN TAXED IN THE HANDS OF RECEIVER ADDITIO N U/S 40(A) (IA) OF THE ACT TO THE TOTAL INCOME OF THE APPELLANT AMOUNTS TO DOUBLE TAXATION AND UNFAIR. WHILE THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUND IN THIS APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING RELIEF OF RS. 64,15,028/ - TO THE ASSESSEE ON ACCOUNT OF BAD DEBT PROVISIONS OF OD INTEREST RESERVE AND NPA . 2.1. GROUNDS NO.1,2,3,4 & 5 RAISED BY THE ASSESSEE AND GROUND NO. 1 RAISED BY THE DEPARTMENT ARE INTERCONNECTED AND RELATES TO THE SAME ISSUE. THEREFORE, DISPOSED BY THE COMMON ORDER. 2.2 . THE ASSESSEE IS A CO - OPERATIVE BANK ENGAGED IN BUSINESS OF BANKING. THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED ON 30 - 09 - 200 9 DECLARING TOTAL INCOME AT RS. 21,42,680/ - . DURING THE SCRUTINY PROCEEDING, THE AO ON PERUSAL OF THE AUDIT P & L A/C AND BALANCE SHEET NOTICED THAT ASSESSEE HAS DEBITED THE PROVISIONS ON OD INTEREST RESERVE AND NON - PERFORMING ASSETS AMOUNTING TO RS. 4,55,57,658/ - AND RS.3,78,33,366/ - RESPECTIVELY TOTALLING RS. 8,33,91,024/ - . THE AO WAS OF THE VIEW THAT CLAIMING THE AMOUNT TO A CLAIM OF BAD DEBT U/S.36(1)(VII) AND SINCE NO BAD DEBT HAS BEEN WRITTEN OFF FROM BOOKS, SUCH PROVISIONS ARE NOT ALLOWABLE. ON BEING ASKED, THE ASSESSEE SUBMITTED BEFORE AO TH AT THE PROVIS IONS ARE ALLOWABLE U/S. 36(1)(VI IA) OF THE ACT. HOWEVER, T HE AO WAS OF THE VIEW THAT EVEN FOR 36(1)(VIIA), THE DEBTS HAVE TO BE WRITTEN OFF FROM BOOKS. THEREFORE, THE AO DISALLOWED THE ENTIRE PROVISIONS OF 3 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) RS. 8,33,91,024/ - . HE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN SOUTHERN TECHNOLOGIES LTD., AND M/S. VIJAYA BANK LTD. 2.3. THE MATTER CARRIE D TO CIT(A) AND CIT(A) HAS PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4.3 1 HAVE CAREFULLY CONSIDERED THE MATTER. AS PER SEC. 36(1)(VIIA) A PROVISION OF EXCEEDING 7.5%OF THE TOTAL INCOME IS AN ALLOWABLE DEDUCTION UNDER THAT SECTION. THERE IS NO REQUIREMENT THAT SUCH PROVISION HAVE TO BE WRITTEN OFF FROM THE BOOKS AS IN THE CASE OF BAD DEBTS. IT NEEDS TO BE MENTIONED HERE THAT WH ILE U/S.36(1)(VII) BAD DEBTS HAVE TO BE WRITTEN OFF FROM THE BOOKS SO THAT THE SAME CAN BE CLAIMED AS DEDUCTION U/S.36(1)(VIIA), THERE IS NO SUCH REQUIREMENT OF WRITING OFF THE DEBTS FROM THE BOOKS. IN VIEW OF SUCH CLEAR CUT PROVISIONS IN THE STATUTE, I AM UNABLE TO AGREE WITH THE AO THAT THE PROVISION MADE BY THE APPELLANT IS TO BE DISALLOWED IN ITS ENTIRETY. IT MAY BE MENTIONED HERE THAT ON SIMILAR FACTS IN CASE OF CUTTACK CENTRAL COOP. BANK LTD., FOR ASS T.YR.2009 - 10, AGAINST THE ASSESSEES CLA IM ON ACCOU NT OF PROVISION FOR O D INTEREST RESERVE, PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND OTHER SUCH PROVISIONS, THE AO ALLOWED DEDUCTION @ 7.5% OF THE BUSINESS INCOME U/S.36 (1)(VIIA). THIS ACTION OF THE AO WAS CONFIRMED BY THE C IT(A), CUTTACK VDE HIS ORDER DT. 0 6 - 03 - 2012 AND SUBSEQUENT APPEAL OF THE ASSESSEE WAS ALSO DISMISSED BY THE TRIBUNAL IN ITA NO. 182/CTK/2012 DTD.14 - 09 - 2012. THE DECISIONS RELIED UPON BY THE AO ARE IN THE CONTEXT OF APPLICABILITY OF THE PROVISIONS OF SEC.36(1)(VII) AND NOT 36(1)(VIIA). ON T HE OTHER HAND, THE DECISION OF THE HONBLE SUPREME COURT IN CATHOLIC SYRIAN BANK(2012) 343 ITR 270(SC) AND DCIT VS. KARNATAKA BANK LTD.(2012) 349 ITR 705 SUPPORTS THE CASE OF THE APPEL LANT. IN THE INSTANT CASE THE AO HAS NOT GIVEN ANY DEDUCTION U/S.36(1)(V IIA) AN ACTION WHICH IS CONTRARY TO THE PROVISIONS OF THE STATUTE. ACCORDINGLY, IT IS HELD THAT THE APPELLANT IS ELIGIBLE FOR A DEDUCTION U/S.36(1)(VIIA) TO THE EXTENT OF 7.5% OF THE BUSINESS INCOME BEFORE CONSIDERING DEDUCTION U/S.36(1) ( VIIA). ACCORDINGLY AGAINST THE DEDUCTION OF RS.8,33,91,024/ - CLAIMED BY THE APPELLANT IN ITS RETURN, THE ALLOWABLE DEDUCTION SHALL BE 7.5% OF THE BUSINESS INCOME BEFORE DEDUCTION U/S.36(1)(VIIA) I.E. 7.5% OF RS.8,55,33,704/ - (21,42,680/ - + 8,33,91,024/ - )I.E. RS.64,15,028/ - . THUS AS AGAINST DI SALLOWANCE OF RS.8,33,91.024/ - MADE BY THE AO THE ACTUAL DISALLOWANCE IS SUSTAINED AT RS.7,69,75,996/ - . 2.4. THE ASSESSEE IS IN APPEAL AGAINST NOT ALLOWING 10% OF BAD DEBT DEDUCTION AGAINST RURAL ADVANCE. THEREFORE, ASSESSEE IS IN APPEA L FOR NOT GRANTING DEDUCTION OF 10% AND THE DEPARTMENT IS IN APPEAL AGAINST GRANTING 7.5% OF THE TOTAL INCOME AS DEDUCTION U/S. 36(1)(VIIA). 2.5. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS NEVER CLAIMED THE AMOUNT OF RS. 8,33,91,024/ - AS BAD DEBT U/S. 36(1)(VII) OF THE IT ACT, 1961. BUT CREATED A PROVISION WHICH IS ALLOWABLE FOR A CO - OPERATIVE BANK TO CLAIM DEDUCTION AS 4 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) PROVISION FOR BAD AND DOUBTFUL DEBTS U/S. 36(1)(VIIA) OF I.T. ACT, 1961. RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK (2012)343 ITR 270(SC), THE CIT(A) HAS ALLOWED THE DEDUCTION U/S. 36(1)(VIIA) TO THE EXTENT OF 7.5 % OF THE BUSINESS INCOME BEFORE CONSIDERING THE DEDUCTION U/S. 36(1)(VIIA). THE LEARNE D A R SUBMITTED THAT THE ASSESSEE HAS CLAIMED AS PROVISION FOR BAD AND DOUBT FULL DEBT UNDER SECTION 36(1)(VIIA) OF THE ACT FOLLOWING MANDATE OF CO - OPERATIVE SOCIETIES ACT,1962 AS A MEASURE OF LEGISLATIVE POLICY IS A CO - OPERATIVE BANK. THE ASSESSEE IS NONE BANKING FINANCIAL COMPANY BUT A CO - OPERATIVE BANK. THE ASSESSEE IS ENTITLED FOR PROVISION FOR BAD DEBTS AND DOUBTFUL DEBTS ACCOUNTED AS OD INTEREST RESERVE AND NON - PERFORMING ASSETS UNDER ORISSA CO - OPERATIVE SOCIETY ACCOUNTING PRACTICE RELATING TO RURAL BR ANCHES OF THE ASSESSEE, DENIAL OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES OF THE NON - SCHEDULED BANK APPELLANT, BY LEARNED CIT(A) ON FLIMSY GROUND IS UNWARRANTED AND UN CALLED FOR. THE ASSESSEE HAS MADE A CLAIM IN PROFIT AND LOSS ACCOUNT . THE AMOUNT OF THE ASSESSEE BEING STATUTORY AUDITED AND ENTIRE FACTS AND FIGURES RELATING TO RURAL ADVANCE HAVING BEEN FURNISHED TO THE LEARNED AO AND FORMING PART OF RECORD DENIAL OF BENEFIT OF 10% OF THE AGGREGATE AVERAGE ADVANCE MADE BY RURAL BRANCHES OF APPELLANT IS UNFAIR AND UNJUST. THE CIT(A) HAS ALLOWED THE CLAIM OF 7 % OF THE TOTAL INCOME COMPUTED BEFORE MAKING AND DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA OF IT ACT, 1971 AND DENYING THE OTHER PART OF THE GRANT OF THE SAID SECT ION IS FAILURE OF JUSTICE. THE LEA R N ED AR RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIA N BANK(2012) 343 ITR 270(SC) AND DCIT VS. KARNATAKA BANK LTD.(2012) 349 ITR 705 AND HE HAS SUBMITTED THAT AS PER THIS DECISION THE CIT(A) IS JUSTIFIED IN ALLOWING THE DEDUCTION U/S. 36(I)(VIIA) TO THE EXTENT OF 7.5% OF THE BUSINESS INCOME. THEREFORE, DEPARTMENTS APPEAL SHOULD BE DISMISSED AND ASSESSEES APPEAL MAY BE ALLOWED. 5 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) 2. 6 . THE LEARNED DR RELIED UPON T HE ORDER OF REVENUE AUTHORITIES. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED 10% OF THE PROVISIONS FOR BAD DEBT FOR RURAL ADVANCE AS A DEDUCTION. THE ASSESSEE HAS NOT CLAIMED IN P & L A/ C RELATING TO THE ABOVE CLAIM ON RURAL ADVANCE. FURTHER, CO MPLETE DETAILS OF THE RURAL ADVANCES HAVE ALSO NOT BEEN FURNISHED BEFORE THE AO. MOREOVER, WHILE THE MAIN PROVISIONS IN SEC. 36(1) (VIIA) HAS BEEN AMENDED TO INCLUDE THE CO - OPERATIVE BANK AND THERE IS NO SUCH CORRESPONDING AMENDMENT IN CLAUSE (IA) OF EXPLA NATION TO SEC. 36(1)(VIIA) WHICH DEFINES THE RURAL BRANCH. THEREFORE, CIT(A) IS RIGHTLY JUSTIFIED IN HIS ACTION. 2. 7 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS PER THE SECTION 36(1)(VIIA) WHICH SECTION RELATES TO PROVISION FOR BAD DEBTS AND DOUBTFUL DEBTS MADE BY A SCHEDULED BANK OR A CO - OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK AND AMOUNT OF NOT EXCEEDI NG 7 % OF AGGREGATE AVERAGE ADVANCE MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN PRESCRIBED MANNER. LOOKING TO THIS ABOVE SEC TION THE SUPREME COURT HAS OBSERVED INTERPRETATION AND CONSTRUCTION OF RELEVANT SECTION IN CATHOLIC SYRIAN BANK LTD. (SUPR A) WHEREIN IT IS HELD AS UNDER: THE LANGUAGE OF SECTION 36(1)(VII) OF THE ACT IS UNAMBIGUOUS AND DOES NOT ADMIT OF TWO INTERPRETATIONS. IT APPLIES TO ALL BANKS, COMMERCIAL OR RURAL, SCHEDULED OR UNSCHEDULED. IT GIVES A BENEFIT TO THE ASSESSEE TO CLAIM A DEDUCTION ON ANY BAD DEBT OR PART THEREOF , WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THIS BENEFITS IS SUBJECT ONLY TO SECTION 36(2) OF THE ACT. IT IS OBLIGATORY UPON THE ASSESSEE TO PROVE TO THE ASSESSING OFFICER THAT THE CASE SATISFIES THE INGREDIENTS OF SECTION 36(1)(VII) ON THE ONE HAND AND THAT IT SATISFIES THE REQUIREMENTS STATED IN SECTION 36(2) OF THE ACT ON THE OTHER. THE PROVISO TO SECTION 36(1)(VII) DOES NOT, IN ABSOLUTE TERMS, CONTROL THE APPLIC ATION OF THIS PROVISION AS IT COMES INTO OPERATION ONLY WHEN THE CASE OF THE ASSESSEE IS ONE WHICH FALLS SQUARELY UNDER SECTION 36(1)(VII ) , OF THE ACT. THE EXPLANATION TO SECTION 36(1)(VII), INTRODUCED BY THE FINANCE ACT, 2001, HAS TO BE EXAMINED IN CONJUN CTION WITH THE PRINCIPAL SECTION. THE EXPLANATION SPECIFICALLY EXCLUDED OF THE ASSESSEE FROM THE AMBIT AND SCOPE OF ANY BAD DEBT, OR PART THEREOF, WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE . THUS, THE CONCEPT OF MAKING A PROVISION FOR B AD AND DOUBTFUL DEBTS WILL FALL OUTSIDE THE SCOPE OF SECTION 36(1) (VII) SIMPLICITOR . THE PROVISO WILL HAVE TO BE READ WITH THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. ONCE THE BAD DEBT IS 6 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) ACTUALLY WRITTEN OFF AS IRRECOVERABLE AND THE REQUIREMENTS OF SECTION 36(2) SATISFIED, THEN, IT WILL NOT BE PERMISSIBLE TO DENY SUCH DEDUCTION ON THE APPREHENSION OF DOUBLE DEDUCTION UNDER THE PROVISIONS OF SECTION 36(1)(VII) AND PROVISO TO SECTION 36(1)(VII). THIS DOES NOT APPEAR TO BE THE INTENTION OF THE FRAMERS OF LAW. THE SCHEDULED AND NON - SCHEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF WRITE OFF OF THE IRRECOVERABLE DEBTS UNDER SECTION 36(1)(VII) IN ADDITION TO THE BENEFIT OF DEDUCTION OF BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA). MERE PROVISION FOR BAD AND DOUBTFUL DEBTS MAY NOT BE ALLOWABLE, BUT IN THE CASE OF A RURAL ADVANCE, THE SAME, IN TERMS OF SECTION 36(1)(VIIA)(A), MAY BE ALLOWABLE WITHOUT INSISTING ON AN ACTUAL WRITE OFF. AS PER THE PROVISO TO CLAUSE (VII), THE DEDUCTION O N 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 UNDER CLAUSE (VIIA). THE PROVISO BY AND LARGE PROTECTS THE INTERESTS OF THE REVENUE. IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAUSE (VIIA), THERE WOULD BE NO SUCH DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY, CLAUSE (VIIA)(A) APPLIES ONLY TO RURAL ADV ANCES. AS FAR AS FOREIGN BANKS ARE CONCERNED, UNDER SECTION 36(1)(VIIA)(B) AND AS FAR AS PUBLIC FINANCIAL INSTITUTIONS OR STATE FINANCIAL CORPORATIONS OR STATE INDUSTRIAL INVESTMENT CORPORATIONS ARE CONCERNED, UNDER SECTION 36(1)(VIIA)(C), THEY DO NOT HAV E RURAL BRANCHES. THUS, IT CAN SAFELY BE INFERRED THAT THE PROVISO IS SELF INDICATIVE THAT ITS APPLICATION IS TO BAD DEBTS ARISING OUT OF RURAL ADVANCES. THE SCOPE OF THE PROVISO TO CLAUSE (VII) OF SECTION 36(1) HAS TO BE ASCERTAINED FROM A CUMULATIVE READ ING OF THE PROVISIONS OF CLAUSES (VII), (VIIA) OF SECTION 36(1) AND CLAUSE (V) OF SECTION 36(2) AND ONLY SHOWS THAT A DOUBLE BENEFIT IN RESPECT OF THE SAME DEBT IS NOT GIVEN TO A SCHEDULED BANK. A SCHEDULED BANK MAY HAVE BOTH URBAN AND RURAL BRANCHES. IT M AY GIVE ADVANCES FROM BOTH BRANCHES WITH SEPARATE PROVISION ACCOUNTS FOR EACH. MERELY BECAUSE THE DEPARTMENT HAS SOME APPREHENSION OF THE POSSIBILITY OF DOUBLE BENEFIT TO THE ASSESSEE , THIS WOULD NOT BY ITSELF BE A SUFFICIENT GROUND FOR ACCEPTING ITS INTE RPRETATION. FURTHERMORE, THE PROVISIONS OF A SECTION HAVE TO BE INTERPRETED ON THEIR PLAIN LANGUAGE AND COULD NOT BE INTERPRETED ON THE BASIS OF APPREHENSION OF THE DEPARTMENT. ANOTHER EXAMPLE THAT WOULD SUPPORT THIS VIEW IS THAT, A BANK CAN WRITE OFF A LO AN AGAINST THE ACCOUNT OF A ALONE WHERE IT HAS ADVANCED THE LOAN TO PARTY A. IT CANNOT WRITE OFF SUCH LOAN AGAINST THE ACCOUNT OF B. SIMILARLY, A LOAN ADVANCED UNDER THE RURAL SCHEMES CANNOT BE WRITTEN OFF AGAINST AN URBAN OR A COMMERCIAL LOAN BY THE BANK IN THE NORMAL COURSE OF ITS BUSINESS. THE FULL BENCH OF THE KERALA HIGH COURT EXPRESSED THE VIEW THAT THE LEGISLATURE DID NOT MAKE ANY DISTINCTION BETWEEN PROVISIONS CREATED IN RESPECT OF ADVANCES BY RURAL BRANCHES AND ADVANCES BY OTHER BRANCHES OF T HE BANK. IT ALSO RETURNED A FINDING WHILE PLACING EMPHASIS ON THE PROVISO TO 36(1)(VII), READ WITH CLAUSE (V) OF SECTION 36(2) OF THE ACT THAT THE INTERPRETATION GIVEN BY A DIVISION BENCH OF THAT COURTS IN THE CASE OF SOUTH INDIAN BANK (SUPRA) WAS NOT A CO RRECT ENUNCIATION LAW, INASMUCH AS THE SAME WOULD LEAD TO DOUBLE DEDUCTION. IT TOOK THE VIEW THAT IN A CLAIM OF DEDUCTION OF BAD DEBTS WRITTEN OFF IN NON - RURAL/URBAN BRANCHES IN THE PREVIOUS YEAR , BY VIRTUE OF 7 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) PROVISO TO SECTION 36(1)(VII), THE BANKS ARE ENTITLED TO CLAIM DEDUCTION OF SUCH BAD DEBTS ONLY TO THE EXTENT IT EXCEEDS THE PROVISION CREATED FOR BAD OR DOUBTFUL RURAL ADVANCES UNDER CLAUSE (VIIA) OF SECTION 36(1) OF THE ACT. 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 P ROVISION IS MADE UNDER CLAUSE ( VIIA ), WILL BE COVERED UNDER THE MAIN P ART 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, OB VIOUSLY, 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 TO THE ASSESSING OFFICER FOR COMPUTATION IN ACCORDANCE WITH LAW, IN LIGHT OF THE LAW ENUNCIATED IN THIS JUDGMENT. ASSESSEES APPEALS ALLOWED . WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT WE HELD THAT THE PROVISIONS OF SECTIONS 36(1)(VII) AND 36(A)(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 PROVISIONS 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 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 THE BENEFIT OF DOUBLE DEDUCTION, OPERATING WITH REFERENCE TO RUR AL 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 8 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THIS, OBVIOUSLY, WOULD BE SUBJECT TO SATISFACTION OF THE REQUIREMENTS CONTEMPLATED UNDER SECTION 36(2). WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEE DING, WE FIND THAT THE CIT(A ) HAS NOT ALLOWED THE CLAIM OF 10% OF THE BAD DEBT IN RESPECT OF RURAL ADVANCES. WE FIND THAT THE FACTS AND FIGURE WERE NOT AVAILABLE AND THE COURT HAS ALSO DIRECTED THAT ASSE SSEE SHOULD NOT BE GIVEN DEDUCTION, THEREFORE, WE RESTORE THE ISSUE OF DEDUCTION IN RESPECT OF LOANS ADVANCE UNDER THE RURAL SCHEME TO THE FILE OF AO. THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE DECISION OF HONBLE SUPREME COURT AND ALLOW THE CLAIM AS PER LAW AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE FOLLOWING THE DECISION OF HONBLE SUPREME COURT WE DISMISS THE DEPARTMENTS APPEAL. IN THE RESULT, GROUND NOS . 1,2,3,4&5 RAISED BY THE ASSESSEE IS ALLOWED AND GROUND NO.1 BY THE DEPARTMENT IS DISMISSED. 3 . GROUND NO. 6: - THE ASSESSEE HAS SUBMITTED TH AT HE HAS PAID AN AMOUNT OF RS. 1,36,284/ - . THE ASSE SSEE HAS PAID THIS FEES TO M/S. GLS & CO., CHARTER ACCOUNTANT WHICH REPRESENTS RS. 1,19,124/ - TOWARDS STATUTORY AUDIT FEES AND RS. 17,160/ - TOWARDS TA EXPENSES INCURRED BY THE AUDITORS. THE ASSESSEE DID NOT DEDUCT A TAX BU T THE AUDITOR HAS INCLUDED THIS RECEIPT IN THEIR RETURN FOR A.Y. 20 10 - 11 WHICH WAS FILED ON 8.11.2010. COPY OF RESPECTIVE BILLS AND COPY OF CONFIRMATION LETTER OF THE CHARTER ACCOUNTANT WERE SUB MITTED FOR KIND PERUSAL OF THE AO . HOWEVER, ASSESSING OF FICER DISALLOWED THE SAME. 3.1. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISMISSED THE APPEAL. 3.2. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ASSESSEE HAS SUBMITTED THAT M/S. GLS & CO., CHARTER ACCOUNTANTS HAS RECEIVED AN AMOUNT OF RS.1,36,284/ - WHICH REPRESENTS AT RS. 1,19,124/ - TOWARDS STATUTORY AUDIT FEES. THE ASSESSEE WAS FILED WRITTEN SUBMISSION BEFORE CIT(A). IN THE WRITTEN SUBMISSION THE 9 . ITA NOS. 381&371 /CTK/2013 (A SSESSMENT Y EAR 2009 - 10) ASSESSEE CONTENDED THAT THE RESPECTIVE FEES WHERE ACCOUNTED IN THE RETURN FILED FOR A.Y.2010 - 11. THE MATTER WAS RESTORED TO AO FOR VERIFICATION BEFORE AO. THE ASSESSEE HAS FILED THE COPY OF ACKNOWLEDGEMENT OF RETURN OF INCOME BUT ASSESSEE HAS NOT FILED THE STATEMENT OF INCOME TO SHOW THAT THE SAID RECEIPT OF RS. 1,36,284/ - HAS BEEN ACCOUNTED IN THE INCOME OF CHARTER ACCOUNTANT. THEREFORE, THE CIT(A) IS JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE. THEREFORE, WE DISMISS THE APPEAL OF THE ASSESSEE ON THIS GROUND. GROUND NO. 6 RAISED BY THE ASSESSEE IS DISMISSED. 4 . IN THE RESULT, GROUND NO. 1 TO 5 ARE ALLOWED FOR STATISTICAL PURPOSE AND DEPARTMENTS APPEAL IS DISMISSED. 5. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTAK ON THE OPEN COURT ON 13.6. 2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 13 .6 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER