State Bank Of Hyderabad, Hyderabad V. The Additional Commissioner of Income Tax, Hyderabad

ITA 578/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66279 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K GNANAPRAKASH
• Assessee Lawyers: G KALYANDASPAWAN KUMAR
• Keywords: Earning of tax free income; Wholly owned subsidiary; Bad and doubtful debts
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 578/HYD/2010 ASSESSMENT YEAR: 2007-08 M/S STATE BANK OF HYDERABAD, APPELLANT HYDERABAD (PAN AADCS4009H) VS. THE DY. COMMISSIONER OF INCOME-TAX, RESPONDENT CIRCLE 3(2), RANGE-3, HYDERABAD AND ITA NO. 779/HYD/2010 ASSESSMENT YEAR: 2007-08 THE DY. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 3(2), RANGE-3, HYDERABAD VS. M/S STATE BANK OF HYDERABAD, RESPONDENT HYDERABAD (PAN AADCS4009H) ASSESSEE BY : MR. G. KALYANDAS/PAWAN KUMAR REVENUE BY : MR. K. GNANA PRAKASH DATE OF HEARING : 09/07/2012 DATE OF PRONOUNCEMENT : 07/09/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE O RDERS OF THE CIT(A), GUNTUR FOR THE ASSESSMENT YEAR 2007- 08. ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 2 ITA NO. 578/HYD/10 APPEAL BY THE ASSESSEE 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND THE FACTS. 2.1 THE LEARNED CIT(A) ERRED IN SUSTAINING DISALLOW ANCE OF RS. 5.83 CRORES BEING PROPORTIONATE EXPENDITURE ON EXEMPTED INCOME WHILE ACTUAL EXPENDITURE INCURRED B Y THE BANK ON INVESTMENT DEPARTMENT IS RS. 7.04 LAKHS AND THE HONBLE TRIBUNAL IN THE EARLIER YEARS HAD DETERMINED THE DISALLOWANCE EQUAL TO 2 MONTHS SALAR Y OF INVESTMENT DEPARTMENT. 2.2 WITHOUT PREJUDICE TO THE ABOVE APPELLANT CONTEN DS, HAVING REGARD TO THE INTEREST FREE FUNDS AVAILABLE TO THE APPELLANT AND THE AMOUNT OF INVESTMENT MADE WHOSE INCOME IS EXEMPT, NO DISALLOWANCE COULD BE MADE U/S 14A READ WITH RULE 8D OF THE IT RULES. 3.1THE LEARNED ASSESSING OFFICER ERRED IN NOT ALLOW ING RS. 276.39 CRORES U/S 36(1)(VIIA) OF THE ACT. 3.2 THE LEARNED ASSESSING OFFICER IS NOT CORRECT IN HOLDING THAT THE PROVISION U/S 36(I)(VIIA) OF THE A CT IS ALLOWED TO THE APPELLANT BANK SUBJECT TO MAKING PROVISIONS IN THE BOOKS OF ACCOUNT WHICH WE CONTEND CONTRADICT THE SPIRIT OF LAW. 3.3 THE LEARNED ASSESSING OFFICER FAILED TO NOTE TH AT THE APPELLANT BANK BEING GOVERNMENT UNDERTAKING PARTICIPATING IN THE PUBLIC POLICIES, RURAL DEVELOP MENT PROGRAMS IS ALLOWED ADDITIONAL ALLOWANCE U/S 36(1)(VIIA) OF THE ACT WITHOUT CREATING PROVISIONS IN THE BOOKS OF ACCOUNT. 3.4 THE APPELLANT CONTENDS THAT CLAIM U/S 36(I)(VII A) OF THE ACT IS MADE IN ACCORDANCE WITH LAW AND DECIS IONS RENDERED BY COURTS. 3.5 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT CONTENDS THAT THE PROVISION U/S 36(I)(VIIA) OF THE ACT IN RESPECT OF RURAL BRANCH ADVANCES RS. 276.39 CRORES IS ALLOWABLE AS THE APPELLANT NOT CLAIMED BAD DEBTS RS . 6.07 CRORE IN RESPECT OF RURAL ADVANCES. BAD DEBTS IN ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 3 RURAL ADVANCES ARE REQUIRED TO BE SET OFF AGAINST PROVISION ALLOWABLE IN RESPECT OF RURAL ADVANCES ON LY. AND OUR CONTENTION BASED ON THE LAW AND THE DECISIO NS OF THE COURTS. 3.6 THE APPELLANT THEREFORE CONTENDS THAT THE ASSESSING OFFICER BE DIRECTED NOT TO SET OFF OTHER DEBTS AGAINST DEDUCTION U/S 36(I)(VIIA) OF THE ACT ALLOWE D TO THE BANK IN RESPECT OF RURAL ADVANCES. 4. THE LEARNED CIT(A) IS NOT CORRECT IN HOLDING THA T THE PROVISIONS OF SECTION 115JB OF THE ACT ARE APPLICABLE TO THE BANK AS THE APPELLANT BANK BEING 100% SUBSIDIARY OF STATE BANK OF INDIA, IS NOT REQU IRED TO HOLD ANNUAL GENERAL MEETING WHICH IS MANDATORY A S PER THE PROVISIONS OF SECTION 115JB OF THE ACT. 3. THE FIRST ISSUE ON APPEAL IS REGARDING THE DISAL LOWANCE OF RS.5.83 CRORES BEING PROPORTIONATE EXPENDITURE O N EXEMPTED INCOME U/S.14A. THE AO DISALLOWED RS.5,83,68,430 ON THE GROUND THAT THE RELATABLE EAR NINGS OF EXEMPTED INCOME BY THE ASSESSEE. ON APPEAL, THE CI T(A) HAS DIRECTED THE AO TO WORK OUT THE DISALLOWANCE U/ S.14A IN TERMS OF IT RULE 8D. AGGRIEVED THE ASSESSEE IS ON APPEAL. 4. THE ASSESSMENT YEAR ON APPEAL IS 2007-08 AND HEN CE THE PROVISION OF RULE 8D WILL NOT BE APPLICABLE AS HELD BY MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG CO LTD. 328 ITR 81 (MUM). WE THEREFORE, SET ASIDE THE ISSUE OF DISALLOWANCE OF INCOME U/S14A TO THE FILES OF AO TO MAKE REASONABLE ESTIMATE OF EXPENDITURE WHICH ARE ATTRIB UTABLE TO EARNING OF EXEMPT INCOME AND DISALLOW THE SAME U/S1 4A. 5. THE SECOND GROUND OF APPEAL IS REGARDING DISALLO WANCE OF RS.276.39 CRORES CLAIMED BY THE ASSESSEE U/S.36( 1)(VIIA) IN RESPECT OF ADVANCES FROM THEIR RURAL BRANCHES THE ASSESSEE HAD WRITTEN OFF RS.102.15 CRORES OUT OF L OAN AND ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 4 ADVANCES FROM THE NON RURAL BRANCHES AND CLAIMED TH E SAME DEDUCTION U/S.36(1)(VII). THE ASSESSEE HAD CLAIMED 10% OF THE AGGREGATE AVERAGE RURAL BRANCHES ADVANCE AMOUNT ING TO RS.226.20 CRORES AND THEY HAVE ALSO CLAIMED SUM OF RS.50.18 CRORES BEING PROVISION AND DOUBTFUL DEBTS @ 7.5% OF THE TOTAL INCOME UNDER SEC 36(1)(VIIA). THE AO RESTRICTED THE CLAIM OF RS.276.39 CRORES (RS.226.20 + RS.50.18 CRORES) CLAIMED U/S.36(1)(VIIA) TO RS.46 CRORES SIN CE HE FOUND THAT THE PROVISION ACTUALLY MADE BY THE APPEL LANT WAS TO THE EXTENT OF RS.46 CRORES ONLY. 6. ON APPEAL, BEFORE THE CIT(A), THE AR OF THE ASSE SSEE SUBMITTED THAT THE ASSESSEE HAD CLAIMED THE ENTIRE AMOUNT OF RS. 276.39 CRORES WORKED OUT AS PER THE LIMITS P RESCRIBED IN SECTION 36(1)(VIIA) AND APART FROM THIS HAS ALSO CLAIMED AN AMOUNT OF RS. 102.15 CRORES U/S 36(I)(VII) BEING LOANS FROM NON RURAL BRANCHES ACTUALLY WRITTEN OFF. THE A R OF THE ASSESSEE FURTHER SUBMITTED THAT THE BAD DEBTS OF RS . 6.07 CRORES ACTUALLY WRITTEN OFF OUT OF THE RURAL ADVANC E WERE NOT BEING CLAIMED, SINCE THE PROVISION OF RS. 279.39 CR ORES WAS MUCH HIGHER THAN THE AMOUNT WRITTEN OFF. AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD TH AT THE ASSESSING OFFICER WAS CORRECT IN HOLDING THAT THE C LAIM U/S 36(1)(VIIA) IS TO BE RESTRICTED TO THE AMOUNT OF PR OVISION MADE IN THE BOOKS. SINCE THE PROVISION MADE IN THE BOOKS RS. 46.00 CRORES ONLY, THE CIT(A) HELD THAT THE PRO VISIONS OF RS. 46.00 CRORES CAN BE CONSIDERED UNDER THE PROVIS IONS OF SECTION 36(1)(VIIA) AND NOT THE AMOUNT OF RS. 276.3 9 CRORES. 7. ON FURTHER APPEAL BEFORE US, THE LEARNED COUNSEL SHRI KALYAN DAS REITERATED THE CONTENTIONS MADE BEFORE T HE ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 5 CIT(A). THE LEARNED COUNSEL RELIED UPON THE DECISI ON OF THE CATHOLIC SYRIAN BANK LTD. VS. CIT, 343 ITR 270 (SC) . 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE ISSUE OF BAD D EBTS IS NOW SETTLED BY THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF (A) TRF LTD (323 ITR 397) (B) VIJAYA BANK LTD (323 ITR 166 AND (C) CATHOLIC SYRIAN BANK LTD (343 ITR 270). 9. THE APEX COURT IN THE CASE OF TRF LTD(SUPRA) HAS HELD THAT ANY DEBT WRITTEN OFF AS IRRECOVERABLE SHOULD B E ALLOWED AS DEDUCTION. IN THE CASE OF VIJAYA BANK LTD(SUPRA) , THE APEX COURT HAS HELD THAT IF THE PROVISION FRO BAD D EBTS DEBITED TO THE P&L IS NETTED AGAINST THE CURRENT AS SETS THE PROVISIONS IS AN ALLOWABLE DEDUCTION EVEN IF INDIVI DUAL ACCOUNTS OF THE DEBTORS ARE NOT WTITTEN OFF. IN THE CASE OF CATHOLIC SYRIAN BANK LTD(SUPRA), WHICH WAS NOT AVAI LABLE WITH THE LOWER AUTHORITIES AT THE TIME OF DECIDING THE ISSUE, THE APEX COURT HAS HELD AS UNDER UNDER: (I) THE CLEAR LEGISLATIVE INTENT OF S. 36(1)(VII) & 36(1)(VIIA) TOGETHER WITH THE CIRCULARS ISSUED BY THE CBDT DEMONSTRATE T HAT THE DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DOUBT FUL DEBTS U/S 36(1)(VIIA) IS DISTINCT AND INDEPENDENT OF S. 3 6(1)(VII) RELATING TO ALLOWANCE OF BAD DEBTS . THE LEGISLATIVE INTENT WAS TO ENCOURAGE RURAL ADVANCES AND THE MAKING OF PROVISIO NS FOR BAD DEBTS IN RELATION TO SUCH RURAL BRANCHES. THE FUNCT IONING OF SUCH BANKS IS SUCH THAT THE RURAL BRANCHES WERE PRACTICA LLY TREATED AS A DISTINCT BUSINESS, THOUGH ULTIMATELY THESE ADVANCES WOULD FORM PART OF THE BOOKS OF ACCOUNTS OF THE HEAD OFFICE. AN INT ERPRETATION WHICH SERVES THE LEGISLATIVE OBJECT AND INTENT IS TO BE P REFERRED RATHER THAN ONE WHICH SUBVERTS THE SAME. THE DEDUCTION U/S 36(1)(VII) CANNOT BE NEGATED BY READING INTO IT THE LIMITATION S OF S. 36(1)(VIIA) AS IT WOULD FRUSTRATE THE OBJECT OF GRA NTING SUCH DEDUCTIONS . THE REVENUES ARGUMENT THAT THIS WOULD LEAD TO DOUBLE DEDUCTION IS NOT CORRECT IN VIEW OF THE PROV ISO TO S. 36(1)(VII) WHICH PROVIDES THAT IN RESPECT OF RURAL ADVANCES, THE DEDUCTION ON ACCOUNT OF THE ACTUAL WRITE OFF OF BAD DEBTS WOULD BE LIMITED TO EXCESS OF THE AMOUNT WRITTEN OFF OVER TH E AMOUNT OF THE ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 6 PROVISION WHICH HAD ALREADY BEEN ALLOWED U/S 36(1) (VIIA) ( SOUTHERN TECHNOLOGIES 320 ITR 577 (SC) & VIJAYA BANK 323 ITR 166 (SC) REFERRED) 10. IN THAT CASE THE APEX COURT HAS HELD THAT THE B ANK WOULD BE ENTITLED TO BOTH THE DEDUCTIONS, ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF MERE PROVISION. FURT HER TO PREVENT TO DOUBLE DEDUCTION, PROVISO TO CLAUSE (VII ) WAS INSERTED WHICH SAYS THAT IN RESPECT OF BAD DEBTS AR ISING OUT OF RURAL ADVANCES THE DEDUCTION ON ACCOUNT OF ACTUA L WRITE OFF WOULD BE LIMITED TO THE EXCESS OF THE AMOUNT WR ITTEN OFF OVER THE AMOUNT OF THE PROVISION ALLOWED UNDER CLAU SE (VIIA). IT FOLLOWS THAT DEDUCTION U/S 36(1)(VIIA) I S TO BE ALLOWED ONLY ON THE AMOUNT OF PROVISION MADE FOR BA D AND DOUBTFUL DEBTS SUBJECT TO THE MAXIMUM ON THE BASIS OF RURAL ADVANCES/ INCOME PRESCRIBED UNDER THAT SECTION. THE ALLOWANCE U/S 36(1)(VIIA) CANNOT BE IN EXCESS OF PR OVISION FOR BAD DEBTS ACTUALLY MADE IN THE ACCOUNTS. 11. IN VIEW OF THE VERY CLEAR PRINCIPLES LAID DOWN BY THE APEX COURT IN THE ABOVE JUDGEMENTS, WE DEEM IT FIT TO SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICE R TO DECIDE THE ISSUE IN THE LIGHT OF THE DECISIONS OF THE APEX COURT IN THE CASES OF (A) TRF LTD (323 ITR 397) (B) VIJAYA B ANK LTD (323 ITR 166) AND (C) CATHOLIC SYRIAN BANK LTD (343 ITR 270). 12. THE NEXT ISSUE IS REGARDING THE APPLICABILITY O F PROVISION OF SEC.115JB TO THE ASSESSEE BANK. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE BEI NG A BANK, THE PROVISIONS OF COMPANIES ACT WILL NOT APPL Y TO THE ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 7 ASSESSEE AND HENCE THE ASSESSEE WILL NOT BE LIABLE TO TAX U/S.115JB. 13. THE PROVISIONS OF SEC.115JB WILL BE APPLICABLE TO ALL COMPANIES. HOWEVER, IT IS CONTENDED THAT SEC.115JB WILL BE APPLICABLE ONLY WHERE THE ASSESSEE IS REQUIRED TO S HOW PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH SCHEDULE VI OF CO MPANIES ACT. AS THE BANKS ARE REQUIRED TO PREPARE BALANCE SHEET AND PROFIT & LOSS ACCOUNT IN ACCORDANCE WITH THE BANKIN G REGULATION ACT, PROVISION OF 115JB CANNOT BE APPLIE D TO THE BANKS. IN THE CASE OF MAHARASHTRA STATE ELECTRICIT Y BOARD VS. JCIT (82 ITD 422) IT WAS HELD THAT PROVISIONS O F BOOK PROFIT CANNOT BE APPLIED TO ELECTRICITY COMPANIES. BANKING COMPANIES AND COMPANIES ENGAGED IN GENERATION AND S UPPLY OF ELECTRICITY DO NOT HAVE TO PREPARE THEIR ACCOUNT S IN ACCORDANCE WITH PARTS II AND III OF SCH. VI OF THE COMPANIES ACT BY THE VIRTUE OF PROVISO TO SEC 211(2) OF THE C OMPANIES ACT. WE FIND THAT BY THE FINANCE ACT 2012, WITH EFF ECT FROM 1.4.2013, EVEN COMPANIES TO WHICH PROVISO TO SEC 21 1(2) APPLIES (THE BANKING COMPANIES AND COMPANIES ENGAGE D IN GENERATING AND DISTRIBUTION OF ELECTRICITY), SHOULD PREPARE THEIR P&L AND BALANCE SHEET IN CCORDANCE WITH THE P ROVISIONS OF THE ACT GOVERNING SUCH COMPANIES. THIS WOULD MEA N THAT PRIOR TO AY 2013-14, PROVISIONS OF SEC 115JB WILL N OT APPLY TO COMPANIES TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT, 1956 APPLIES. THE ASSESSEE BEING A C OMPANY TO WHICH PROVISO TO SEC 211(2) OF THE COMPANIES ACT 1956 APPLIES, WILL NOT BE LIABLE TO BE TAXED UNDER SEC 1 15JB. 14. THE MUMBAI TRIBUNAL IN THE CASE OF KRUNG THAI BANK VS. JCIT (133 TTJ 435), TO WHICH ONE OF US IS A P ARTY HAS ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 8 HELD THAT PROVISION OF SEC.115JB CANNOT BE APPLIED TO THE BANKING COMPANY. 15. IN VIEW OF THE ABOVE, AS THE AMENDMENT TO SEC 1 15JB BY THE FINANCE ACT 2012 WILL BE APPLICABLE ONLY FRO M THE AY 2013-2014, WE UPHOLD THE CLAIM OF THE ASSESSEE THAT PROVISION OF SEC.115JB WILL NOT BE APPLICABLE TO TH E ASSESSEE BANK AND SET ASIDE THE ASSESSMENT MADE U/S 115JB ON THE ASSESSEE COMPANY. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA 779 DEPARTMENTAL APPEAL 17. THIS APPEAL IS PREFERRED BY THE REVENUE DIREC TED AGAINST THE ORDER OF CIT(A), GUNTUR, DATED 12/03/20 10 FOR THE ASSESSMENT YEAR 2007-08. 18. THE FIRST ISSUE IN THE APPEAL IS REGARDING DISA LLOWANCE OF BROKEN PERIOD INTEREST OF RS.58.51 CRORES. THE BANK WHICH HAVE PURCHASED GOVERNMENT SECURITIES HAVE PAI D RS.58.51 CRORES TOWARDS INTEREST IN RESPECT OF SECU RITIES PURCHASED FOR THE BROKEN PERIOD FROM THE PRECEDING DUE DATE FOR PAYMENT OF INTEREST UPTO THE DATE OF PURCH ASE. THE BANK HAD ALSO RECEIVED INTEREST OF RS.36.84 CRORES IN RESPECT OF SECURITIES SOLD BY THEM FOR THE BROKEN P ERIOD FROM THE PRECEDING DUE DATE FOR PAYMENT OF INTEREST UPTO THE DATE OF THE SALE. THE ASSESSEE CLAIMED THE AMOUNT OF IN TEREST PAID FOR THE BROKEN PERIOD UPTO THE DATE OF PURCHAS E AS DEDUCTION ON THE GROUND THAT THE SECURITIES WERE HE LD STOCK IN TRADE. THE AO HOWEVER REJECTED THE APPELLANTS CLAIM ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 9 HOLDING THAT THE APPELLANTS CONTENTION THAT THE SE CURITIES CONSTITUTED STOCK IN TRADE. IT HAS NOT BEEN ACCEPTE D SINCE IT WAS FOUND THAT THE SECURITIES HELD IN THE CATEGORY OF HTM (HELD TO MATURITY) DID NOT FORM PART OF THE STOCK. HOWEVER, THE CIT(A) ALLOWED THE CLAIM ON THE GROUND THAT THE SAME WAS IN STOCK IN TRADE AND HENCE THE INTEREST FOR TH E BROKEN PERIOD IS AN ALLOWABLE DEDUCTION, FOLLOWING THE DEC ISION OF ITAT HYDERABAD DATED 18/03/05. AGGRIEVED REVENUE IS ON APPEAL. WE FIND THAT THE ISSUE IS COVERED BY THE D ECISION OF THE MUMBAI BENCH IN THE CASE OF JCIT VS. DENA BANK 139 TTJ 81 (MUM). THEY HAD FOLLOWED THE DECISION OF SP ECIAL BENCH IN THE MUMBAI IN JCIT BANK OF BEHARAIN, 132 TTJ 505 AND THE DECISION OF MUMBAI HIGH COURT IN THE CASE O F AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION VS. CIT 258 ITR 601, WE FIND THAT KERALA HIGH COURT., CIT V S. NEDUNGADI BANK 264 ITR 545 HAS HELD THAT THE BROKEN PERIOD INTEREST IS AN ALLOWABLE DEDUCTION. 19. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE UPHOLD THE ORDER OF CIT(A) AND REJECT THE REVENUES APPEAL ON THIS GROUND. 20. THE NEXT ISSUE IN THE REVENUES APPEAL READ AS UNDER: THE CIT(A) IN DELETING THE DISALLOWANCES MADE ON ACCOUNT OF OMISSION FOR BAD AND DOUBTFUL DEBTS AND BAD DEBTS WRITTEN OFF AS THE ASSESSEE FAIL TO ESTABLISH AS TO WHETHER THE BAD DEBTS WRITTEN OFF CORRESPOND THE ADVANCE AGAINST WHICH NO PROVISION IS MADE IN THE BOOKS TOWARDS BAD AND DOUBTFUL DEBTS 21. THIS ISSUE HAS BEEN COVERED IN OUR DECISION IN ITA 578/H/10 SUPRA IN THE ASSESSEES APPEAL WHEREIN WE HAVE HELD THAT THE BANK WOULD BE ENTITLED TO BOTH THE DE DUCTIONS, ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 10 ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER ON THE BASIS OF CLAUSE (VIIA) IN RESPECT OF MERE PROVISION. FURTHER TO PREVENT TO DOUBLE DEDUCTION, PROVISO TO CLAUSE (VII) WAS INSERTED WHICH SAYS THAT IN RESPEC T OF BAD DEBTS ARISING OUT OF RURAL ADVANCES THE DEDUCTION O N ACCOUNT OF ACTUAL WRITE OFF WOULD BE LIMITED TO THE EXCESS OF THE AMOUNT WRITTEN OFF OVER THE AMOUNT OF THE PROVISION ALLOWED UNDER CLAUSE (VIIA). 22. WE HAVE SET ASIDE THE ASSESSEES APPEAL(SUPRA) ON THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECID E THE ISSUE IN THE LIGHT OF THE DECISIONS OF THE APEX COURT IN THE CASES OF (A) TRF LTD (323 ITR 397) (B) VIJAYA BANK LTD (323 ITR 166 AND (C) CATHOLIC SYRIAN BANK LTD (343 ITR 270). WE SET ASIDE THE APPEAL OF THE REVENUE ALSO TO THE FILES O F THE AO WITH SIMILAR DIRECTIONS. 23. WITH THE RESULT THE APPEAL OF THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 24. TO SUM UP, APPEAL OF THE ASSESSEE AND THE REVEN UES APPEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 07/09/2012. SD/- SD/- (D. KARUNAKARA RAO) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 7 TH SEPTEMBER, 2012. KV ITA NOS. 779 & 578/HYD/2010 STATE BANK OF HYDERABAD 11 COPY TO:- 1) DCIT, CIRCLE 3(2), RANGE-3, HYDERABAD. 2) M/S STATE BANK OF HYDERABAD, HEAD OFFICE, FINANCE AND ACCOUNTS DEPT., GUNFOUNDRY, HYDERABAD 3) THE CIT (A), GUNTUR 4) THE CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.