ACIT,Circle-1, Warangal, Warangal V. Andhra Pradesh Grameena Vikas Bank, Warangal, Warangal

ITA 751/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6490 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PALLAVI AGARWAL
• Assessee Lawyers: T UMAKANTH
• Keywords: Depreciation; Opportunity of being heard; Bad and doubtful debts
• Section: 80C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.751/HYD/2015 ASSESSMENT YEAR 2008-09 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 1, WARANGAL VS. AP GRAMEENA VIKAS BANK, WARANGAL. PAN AAAJA 1351N (APPELLANT) (RESPONDENT) REVENUE BY : SMT. PALLAVI AGARWAL ASSESSEE BY: SHRI T. UMAKANTH DATE OF HEARING : 30.03.2016 DATE OF PRONOUNCEMENT : 22.06.2016 ORDER PER SHRI S. RIFAUR RAHMAN, A.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20/03/2015 OF LD. CIT(A) 3, HYDERABAD FOR AY 2008-09, WHEREIN THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: 1. THE CIT(A) HAS ERRED ON BOTH IN LAW AND ON FACTS . 2. THE CIT(A) ERRED ON FACTS IN AS MUCH AS A DOUBL E DEDUCTION HAS BEEN ALLOWED U/S 36(1)(VIIA) TO THE E XTENT OF RS. 10,46,19,487/-. 3. THE CIT(A) ERRED IN ALLOWING DEDUCTION OF 7.5% OF THE GROSS INCOME WHICH INCLUDES PROVISION FOR RURAL ADVANCES, AS THE CLAIM OF FURTHER DEDUCTION OF 7.5% OF TOTAL INCOME IN THE COMPUTATION AMOUNTS TO THE DOUB LE DEDUCTION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A REGIONAL RURAL BANK PROMOTED BY THE STATE BANK GROU P. THE 2 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. ASSESSEE FILED ITS RETURN OF INCOME ON 06/10/2008 A DMITTING A TOTAL INCOME OF RS. 53,92,26,497/-. THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) VIDE ORDER DATED 30 /12/2010, DETERMINING THE INCOME AT RS. 80,34,06,400/-. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILE D A LETTER DATED 6.10.2010 CLAIMING DEDUCTION UNDER SEC TION 36(1) (VIIA) OF THE I.T. ACT AND IT ALSO FILED A REVISED COMPUTATION IN THIS REGARD. THE A.O. HELD THAT UNDER SECTION 139(5 ) OF THE ACT, THE ASSESSEE WAS ENTITLED TO FILE A REVISED RE TURN BEFORE THE END OF ONE YEAR FROM THE END OF THE RELEVANT AS SESSMENT YEAR OR BEFORE COMPLETION OF THE ASSESSMENT, WHICHE VER IS EARLIER AND THAT SINCE THE ASSESSEE HAS NOT FILED R EVISED COMPUTATION WITHIN THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE CLAIM CANNOT BE ACCEP TED. THE MATTER WAS CARRIED IN APPEAL UP TO ITAT AND VIDE OR DERS DATED 29.04.2013 IN ITA.NO.502 AND 967/2011 THE ITA T DIRECTED THE A.O. TO EXAMINE THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 36(1)(VIIA) AND DECIDE T HE SAME IN ACCORDANCE WITH LAW, AFTER CONSIDERING ALL THE M ATERIAL AND EVIDENCE THAT MAY BE PRODUCED BY THE ASSESSEE. 3. DURING THE PROCEEDINGS BEFORE THE A.O. UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT, TH E ASSESSEE REFERRED TO THE DECISIONS OF THE HONBLE SUPREME CO URT IN THE CASES OF CATHOLIC SYRIAN BANK REPORTED IN 343 ITR 2 70(SC) AND SOUTHERN TECHNOLOGIES REPORTED IN 320 ITR 571(S C) AND SUBMITTED THAT A PLAIN READING OF SECTION 36(1)(VII A) SHOWED THAT THE ASSESSEE WAS ENTITLED TO TWO DEDUCTIONS, F IRSTLY BASING ON PROVISION MADE BY THE APPELLANT, NOT EXCE EDING 10% OF THE AVERAGE RURAL ADVANCES, AND SECONDLY, A SUM NOT EXCEEDING 7.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER SECTION 36(1)(VIIA) AND SECTION S 80C TO 3 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. 80U. ASSESSEE FURTHER SUBMITTED THAT HE HAS DEBITED 5% OF THE AVERAGE RURAL ADVANCES AMOUNTING TO RS.85.57 CR ORES IN THE BOOKS AND THAT WITH REGARD TO CLAIM OF 7.5% OF THE TOTAL INCOME, THE LAW DID NOT PROVIDE FOR PROVISION OF SU CH AMOUNT TO BE MADE IN THE BOOKS FOR THE A.Y. 2008-09. THE A .O. HOWEVER, NOTED THAT THE ASSESSEE HAD MADE A PROVISI ON OF RS.4,33,70,451 APART FROM THE PROVISION OF 7.5% OF THE TOTAL INCOME TOWARDS BAD AND DOUBTFUL DEBTS AND THAT OUT OF THE PROVISION OF RS.4.33 CRORES, A SUM OF ONLY RS.3.10 CRORES PERTAINS TO RURAL DEBTS. OBSERVING THAT A DEDUCTION FOR PROVISION UNDER CLAUSE (VIIA) OF SECTION 36(1) IS M EANT FOR RURAL DEBTS ONLY AS PER THE DECISION OF THE APEX CO URT IN THE CASE OF CATHOLIC SYRIAN BANK REPORTED IN 343 ITR 27 0 (SC) (CITED SURPA) AND THEREFORE, THAT THE ASSESSEE IS E NTITLED TO A DEDUCTION OF THE ACTUAL AMOUNT CREATED IN THE BOOKS OF ACCOUNT TOWARDS THE PROVISION FOR RURAL BAD AND DOU BTFUL DEBT SUBJECT TO THE CEILING SPECIFIED IN SECTION 36(1)(V IIA) OF THE ACT, HE ACCORDINGLY, ISSUED A SHOW CAUSE NOTICE AS TO WHY THE EXCESS CLAIM OF DEDUCTION UNDER SECTION 36(1)(V IIA) OF RS.10,46,19,487 SHOULD NOT BE DISALLOWED. THE ASSES SEE SUBMITTED ITS REPLY STATING THAT DURING THE A.Y. 20 08-09, THE LAW DID NOT PROVIDE FOR MAKING A PROVISION OF 7.5% OF THE TOTAL INCOME IN THE BOOKS OF ACCOUNT AND THEREFORE, THE P ROPOSAL TO MAKE THE DISALLOWANCE MAY BE DROPPED. THE A.O. WAS NOT CONVINCED WITH THE ASSESSEES CONTENTIONS. HE, THER EFORE, DISALLOWED THE CLAIM OF EXCESS DEDUCTION TOWARDS PR OVISION OF BAD AND DOUBTFUL DEBTS OF RS.10,46,19,487. ON AP PEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE GIVING PARTIAL RE LIEF TO THE ASSESSEE BY OBSERVING AS UNDER : 5.1. I HAVE CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS OF THE AR. THE APPELLANT HAD DEBITE D A 4 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. SUM OF RS.9000.42 LAKHS IN ITS P & L ACCOUNT CONSIS TING OF : I. PROVISION FOR RURAL ADVANCES RS.85.57 CRORES. II. PROVISION TOWARDS BAD AND DOUBTFUL DEBTS RS.433.73 LAKHS III. PROVISION TOWARDS FRAUDS RS.9.69 LAKHS. 5.2. THE APPELLANT HAD SUBMITTED THE FOLLOWING REVISED COMPUTATION OF INCOME : PROFIT AFTER DEPRECIATION AS PER INCOME TAX ACT. 53,92,26,496 ADD: 5% OF AVERAGE AGGREGATE RURAL ADVANCES. 85,57,00,000 TOTAL INCOME BEFORE DEDUCTION U/S.36(1)(VIIA) 1,39,49,26,494 LESS: 5% ON AVERAGE ADVANCE 85,57,00,000 7.5% ON TOTAL INCOME 10,46,19,487 96,03,19,487 TOTAL INCOME : 43,46,07,009 5.3. SEC.36(1)(VIIA) PROVIDES AS FOLLOWS : '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 I N SECTION 28- (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOUB TFUL DEBTS MADE BY (A) A SCHEDULED BANK '', AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF PER CENT OF THE TOTAL INCOME '' AND AN AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGREGAT E AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. ' 5.4. IN THE NORMAL COURSE, PROVISIONS ARE NOT A DEDUCTIBLE EXPENSE. SEC.36( L)(VIIA) IS A SPECIAL PROVISION THAT PERMITS SUCH A DEDUCTION FOR BAD AND DOUBTFUL DEBTS FOR SPECIFIED CATEGORIES OF ASSESSEE S. HOWEVER, THE SUB-SECTION STATES THAT DEDUCTION SHAL L BE ALLOWED 'IN RESPECT OF ANY PROVISION FOR BAD AND 5 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. DOUBTFUL DEBTS MADE BY' THE ASSESSEE. THIS PHRASE APPLIES TO BOTH SEGMENTS OF THE DEDUCTION ALLOWED UNDER THE SUB-SECTION: OF TEN PERCENT OF THE AVERAG E AGGREGATE RURAL ADVANCES AS WELL AS SEVEN AND ONE- HALF PERCENT OF THE TOTAL INCOME. IN OTHER WORDS, T HE DEDUCTION OF SEVEN AND ONE-HALF PERCENT OF THE TOTA L INCOME IS NOT AN ABSOLUTE ALLOWANCE INDEPENDENT OF THE ENTRIES, IF ANY, IN THE BOOKS OF ACCOUNT BUT IS PER MITTED ONLY IN RESPECT OF A PROVISION ACTUALLY MADE BY AN ASSESSEE AND IS CONSEQUENTLY, CIRCUMSCRIBED BY THE EXTENT OF SUCH PROVISION. 5.5. THIS VIEW HAS ALSO BEEN UPHELD IN THE CASE OF STATE BANK OF PATIALA WHERE IT WAS HELD: 'THE DEDUCTION ALLOWABLE UNDER SECTION 36(1)(VIIA) OF THE INCOME-TAX ACT, 1961, IS IN RESPECT OF THE PROVISION MADE. THEREFORE, MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBT EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION. THE PROVISO TO CLAUSE (VII) OF SECTION 36(1) ALSO SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE ACCOUNT BOOKS IS NECESSARY FOR CLAIMING DEDUCTION UNDER SECTION 36(1)(VIIA).' THE COURT, THEREFORE, UPHELD THE VIEW THAT THE ALLOWANCE U/S 36(1)(VIIA) HAD TO BE LIMITED TO THE AMOUNT OF PROVISION CREATED BY THE ASSESSEE IN ITS BOOKS. 5.6. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE JURISDICTIONAL ITAT IN THE DECISION CITED BY THE ASSESSING OFFICER IN THE CASE OF STATE BANK OF HYDERABAD. 5.7. IT FOLLOWS THAT NOT ONLY MUST THE PROVISION FOR BAD DEBTS BE DEBITED TO THE P&L ACCOUNT IN ORDE R TO ENABLE AN ASSESSEE TO CLAIM DEDUCTION U/S 36(1)(VII A), THE AMOUNT OF DEDUCTION ALLOWABLE IS LIMITED BY THE PROVISION SO DEBITED. 5.8. FURTHER, IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS CIT [2012] 343 ITR 270 (SC), IT HAS BE EN HELD BY THE SUPREME COURT THAT SEC. 36(1)(VIIA) APP LIES ONLY TO RURAL ADVANCES. THEREFORE, THE DEDUCTION UN DER THIS SUB-SECTION MUST BE LIMITED TO THE AMOUNT OF 6 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. PROVISION RELATING TO RURAL ADVANCES IN THE BOOKS O F THE APPELLANT. 5.9. AS NOTED ABOVE, THE TOTAL PROVISION DEBITED BY THE APPELLANT WAS 9000.42 LAKHS. OF THIS, PROVIS ION OF RS.8557 .00 LAKHS WAS MADE AS 5% OF THE AVERAGE AGGREGATE RURAL ADVANCES. THE APPELLANT HAD ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT OUT OF THE PROVISION OF RS.433.73 LAKHS, RS,310.00 LAKHS RELAT ED TO RURAL BRANCHES. THEREFORE, THE TOTAL PROVISION R ELATING TO RURAL BRANCHES WAS RS.89903. 73 LAKHS. 5.10. AGAINST THIS, THE APPELLANT HAD CLAIMED THE FOLLOWING DEDUCTIONS: 5% ON AVERAGE ADVANCE RS.85,57,00,000 7.5% ON TOTAL INCOME AS PER SEC.36(1)(VIIA) RS.10,46,19,487 TOTAL RS.96,03,19,487 THE DEDUCTION ALLOWABLE U/S 36(1)(VIIA) MUST, THERE FORE, BE LIMITED TO THE TOTAL PROVISION OF RS.89903. 73 L AKHS CREATED BY THE APPELLANT RELATING TO RURAL BRANCHES . 5.11. IT IS ALSO SEEN FROM THE REVISED COMPUTATION OF INCOME FILED BY THE APPELLANT THAT W HILE THE APPELLANT HAD ADDED BACK THE SUM OF RS.85,57,00,000, IT HAD NOT ADDED BACK THE BALANCE PROVISION OF RS.433.73 LAKHS. THE AR HAS SOUGHT TO ARGUE THAT THE SUM OF RS.433.73 LAKHS WAS ALLOWABLE AS A DEDUCTION IN ANY CASE. I DO NOT AGREE WITH THI S PLEA. THE AMOUNTS DEBITED TO THE P & L ACCOUNT WERE MERE PROVISIONS AND DID NOT REPRESENT AN ACTUAL WRI TE- OFF OF THE DEBTS IN QUESTION. THEREFORE, THE APPELL ANT WAS NOT ENTITLED TO A CLAIM U/S 36(1)(VII) FOR THIS SUM. SECONDLY, THE DEDUCTION U/S 36(1)(VIIA) HAS BEEN CLAIMED AND ALLOWED ON THE BASIS OF THE VERY SAME PROVISION AND THE APPELLANT CANNOT CLAIM DEDUCTION FOR THE SAME AMOUNT U/S 36(1)(VIIA) WITHOUT FIRST ADDIN G IT BACK. INDEED, THE APPELLANT HAD ITSELF ADDED BACK T HE PROVISION OF RS.85,57,00,000 AND THERE IS NO REASON WHY THE SAME TREATMENT SHOULD NOT BE ACCORDED TO TH E SUM OF RS.433.73 LAKHS. 7 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. 5.12. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO ADD THE PROVISION OF RS.89,90,073 LA KHS BEFORE PROCEEDING TO ALLOW THE DEDUCTION U/S.36(1)(VIIA). 5.13. THE APPELLANT HAS ALSO SUBMITTED THAT THE PROVISION OF RS.86,67,00,000 REPRESENTED 5% OF THE AVERAGE AGGREGATE RURAL ADVANCES. THE CLOSING BALAN CE OF THE RURAL ADVANCES WAS RS.1711.35 CRORES. THE PROVISION OF RS.85,57,00,000 REPRESENTS 5% OF THIS CLOSING BALANCE AND NOT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES AS COMPUTED UNDER RULE 6ABA. THE ASSESSING OFFICER IS, THEREFOR E, DIRECTED TO RE-COMPUTE THE AGGREGATE AVERAGE RURAL ADVANCE IN ACCORDANCE WITH RUE 6ABA FOR THE PURPOSE OF ALLOWING THE DEDUCTION. 6.0. IN THE RESULT, THE APPEAL IS PARTLY ALLO WED. 4. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. D.R. BESIDES SUPPORTING THE ORDER OF T HE AO RELIED UPON THE ORDER OF ITAT IN THE ASSESSEES OWN CASE FOR A.Y. 2009-2010 WHEREIN THE DISALLOWANCE WAS CON FIRMED. 6. THE LD. COUNSEL FOR THE ASSESSEE, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORI TIES BELOW, HAS ALSO RELIED UPON THE DECISION OF THIS TR IBUNAL IN ITA.NO.1742/2014 FOR THE A.Y. 2010-2011 DATED 25.03 .2015 IN THE CASE OF DECCAN GRAMEENA BANK WHEREIN, AFTER FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF SBH VS. DCIT (IN ITA.NO.1232/H/2006) , ITAT HELD THAT 7.5% DEDUCTION OF THE TOTAL INCOME CAN BE CLAIMED INDEPENDENT OF ANY PROVISIONS MADE FOR BAD AND DOUB TFUL DEBTS. COPY OF THE SAID ORDER FOR THE A.Y. 2010-201 1 IN THE CASE OF DECCAN GRAMEENA BANK IS FILED BEFORE US. 8 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ONLY ISSUE IS WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 36 (1)(VIIA) OF THE ACT @ 7.5% OF THE TOTAL INCOME WITHOUT CREATING A PROVISION FOR THE SAME IN ITS BOOKS OF ACCOUNT. 8. WE FIND THAT SIMILAR ISSUE IN ASSESSEES OWN CA SE FOR THE A.Y. 2009-2010 IN ITA.NO.610/HYD/2013 DATE D 12.08.2015 THE TRIBUNAL AT PARA-6 OF ITS ORDER HAS HELD AS UNDER : 6. ON A REFERENCE TO THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT, IT IS VERY MUCH CLEAR THAT FOR CLAIMING DEDUCTION UNDER THE SAID PROVISION, ASSESSEE HAS TO CREATE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT. THEREFORE, CONTENTION OF LD. AR THAT THERE IS NO NEED FOR MAKING ANY PROVISION FOR BAD AND DOUBTFUL DEBTS FOR CLAIMING DEDUCTION U/S 36(1)(VIIA) IS NOT ACCEPTABL E. THE HONBLE P & H HIGH COURT IN CASE OF STATE BANK OF PATIALA VS. CIT (SUPRA) WHILE EXAMINING THE PROVISIONS OF SECTION 36(1)(VIIA) HELD THAT FOR CLAIMING DEDUCTION UNDER THE SAID PROVISION, ASSESSEE BANK HAS TO MAKE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT AND DEDUCTIO N U/S 36(1)(VIIA) IN RESPECT OF RURAL ADVANCES CAN ON LY BE ALLOWED TO THE EXTENT OF THE PROVISION MADE. THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 51/HYD/2015 DATED 10/04/2015, WHILE DEALING WITH IDENTICAL ISSUE, HAS HELD AS UNDER: IT IS OBSERVED THAT THE ASSESSEE IN THE PRESENT CASE, BEING ELIGIBLE BANK, IS ENTITLED TO CLAIM DEDUCTION AS PER THE MAIN PROVISION CONTAINED IN CLAUSE (A) OF S.36(1)(VIIA), IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER S.36(1)(VIIA) AND CHAPTER VIA AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. A 9 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. PERUSAL OF THE IMPUGNED ORDER OF THE LEARNED CIT(A) HOWEVER, SHOWS THAT IT WAS STATED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT NO PROVISION WAS MADE TOWARDS AVERAGE RURAL ADVANCES. IF IT IS SO, IT IS NOT CLEAR AS TO WHAT IS THE BASIS ON WHICH THE PROVISION OF RS.22.40 CRORES (RS.5.38 CRORES IN RESPECT OF URBAN ADVANCES AND RS.17.02 CRORES IN RESPECT OF RURAL ADVANCES)WAS MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. MOREOVER, ALL THESE FACTS AND FIGURES WERE FURNISHE D BY THE ASSESSEE BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME AND THE ASSESSING OFFICER THEREFORE, DID NOT HAVE ANY OPPORTUNITY TO VERIFY THE SAME. THE CLAIM OF THE ASSESSEE OF HAVING ADJUSTED THE AMOUNT OF RS.22.24 CRORES TOWARDS BAD DEBTS WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION AGAINST THE OPENING BALANCE OF THE PROVISION OF RS.40.13 CRORES WAS ALSO MADE BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE LEARNED CIT(A), AND THE ASSESSING OFFICER DID NOT HAVE ANY OPPORTUNITY TO VERIFY THE SAME. HAVING REGARD TO ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT IT WOULD BE FAIR AND PROPER AND IN THE INTERES TS OF JUSTICE TO RESTORE THE ISSUE RELATING TO THE ASSESSEES CLAIM FOR DEDUCTION UNDER S.36(1)(VIIA)T O THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH, IN ACCORDANCE WITH THE PROVISION OF S.36(1)(VIIA) AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE AND AFTER VERIFYING ALL THE RELEVANT FACTS AND FIGURES. WE OR DER ACCORDINGLY. THIS APPEAL OF THE REVENUE IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. KEEPING IN VIEW OF THE AFORESAID ORDER OF THE COORDINATE BENCH, WE ARE INCLINED TO REMIT THE MATT ER BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER VE RIFYING THE FACT WHETHER ASSESSEE HAS CREATED ANY PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT IN TERMS WITH SECTION 36(1)(VIIA). IN CASE IT IS FOUND THAT ASSESSEE HAS MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT, THEN, DEDUCTION U/S 36(1)(VIIA) CAN BE ALLOWED TO ASSESSEE. IN CASE IT IS FOUND THAT ASSESSEE HAS NOT MADE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT, THE N, ASSESSEE WOULD NOT BE ELIGIBLE FOR ANY DEDUCTION U/ S 36(1)(VIIA) IN VIEW OF THE RATIO LAID DOWN BY THE H ONBLE 10 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. P&H HIGH COURT IN CASE OF STATE BANK OF PATIALA VS. CIT(SUPRA). WITH THE AFORESAID OBSERVATIONS, WE REM IT THE ISSUE BACK TO THE FILE OF AO FOR DECIDING AFRES H AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE. GROUND RAISED BY THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. 9. THUS, WE FIND THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY T HE DECISION OF THE HONBLE HIGH COURT OF PUNJAB & HARY ANA IN THE CASE OF STATE BANK OF PATIALA REPORTED IN 272 I TR 54 WHEREIN IT HAS BEEN HELD THAT IT IS NECESSARY TO MA KE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE ACCOUNT BOOKS IN THE SAME PREVIOUS YEAR IN WHICH SUCH PROVISION IS C LAIMED AS DEDUCTION UNDER SECTION 36(1)(VIIA). THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CIT VS. ANDHRA BANK LT D., IN ITA.NO.715/HYD/2012 FOR THE A.Y. 2007-08 VIDE ORDE RS DATED 04.10.2013 HAS FOLLOWED THE DECISION CITED SUPRA IN THE CASE OF STATE BANK OF PATIALA AND HAS HELD AS UNDER : 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN FACT THIS IS THE FIRST YEAR IN WHICH THE ISSUE HAS ARISEN AS THE PROVISION MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IS LESS THAN THE AMOUNT ALLOWABLE U/S 36(1)(VIIA) OF THE IT ACT. THE LEARNED CIT(A) AFTER CONSIDERING THE PROVISIONS OF LAW AS WELL AS THE ACTUAL PROVISION MADE BY THE ASSESSE E FOR BAD AND DOUBTFUL DEBTS, ULTIMATELY CONCLUDED VI DE PARAS 6.9 AND 6.10 IN HIS ORDER AS UNDER: 6.9 IF THE INTENTION OF THE LEGISLATURE IS THAT DEDUCTION SHOULD NOT BE LINKED TO THE PROVISION MADE IN THE ACCOUNTS, THE LANGUAGE OF THE SECTION WILL NOT HAVE THE WORDING IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE, INSTEAD IT WOULD HAVE STATED THAT THE SCHEDULED BANK WOULD BE ENTITLED TO A DEDUCTION OF AN AMOUNT WHICH IS AN AGGREGATE OF 7.5% OF THE TOTAL INCOME AND 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES 11 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. WITHOUT REFERENCE TO ANY PROVISION. THEREFORE, I AM OF THE OPINION THAT ANY PROVISION IN THE SECTION REFERS TO ANY PROVISION MADE IN THE ACCOUNTS OF THE ASSESSEE BANK AND DEBITED THE AMOUNT OF SUCH DEBT OR PART OF THE DEBT IN THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF P&H IN THE CASE OF STATE BANK OF PATIALA VS. CIT 272 ITR 54 WHERE IT HAS BEEN HELD THAT IT IS NECESSARY TO MAKE A PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE ACCOUNT BOOKS IN THE SAME PREVIOUS YEAR IN WHICH SUCH PROVISION IS CLAIMED AS DEDUCTION U/S 36(1)(VIIA). THEREFORE, IT IS HELD THAT DEDUCTION IS AVAILABLE ONLY TO THE EXTENT OF THE PROVISION MADE IN THE BOOKS AND ACCORDINGLY THE DEDUCTION FOR PROVISIONS OF BAD AND DOUBTFUL DEBTS AS COMPUTED U/S 36(1)(VIIA) IS RESTRICTED TO THE AMOUNT PROVIDED BY THE APPELLANT IN ITS BOOKS AND THE AO IS JUSTIFIED IN ALLOWING THE PROVISION MADE OF RS. 97,48,84,948/- U/S 36(1)(VIIA) OF IT ACT AND DISALLOWING THE CLAIM OF RS. 334,43,19,444/-. 6.10 HOWEVER, IF THE RETURNED INCOME IS TAKEN AT RS. 288,27,68,633/- AS DIRECTED IN PARA 5.5 THEN THE AO WILL HAVE TO ADD BACK THE AMOUNT OF RS. 236,94,34,496 (RS. 334,43,19,444 RS. 97,48,84,948) IN THE COMPUTATION. 35. SINCE THE CIT(A) FOLLOWED THE DECISION OF THE HONBLE HIGH COURT OF P&H IN CASE OF STATE BANK OF PATIALA (SUPRA), WE DO NOT FIND ANY REASON TO DIFFER FROM THE ORDER OF THE CIT(A). MOREOVER, THE COORDINATE BENCH OF ITAT, BANGALORE IN CASE OF SYNDICATE BANK (SUPRA) HAS ANALYSED THE ISSUE AND CONCLUDED AS UNDER: 48. AS FAR AS GR.NO.3 RAISED BY THE REVENUE IN THE ORIGINAL GROUNDS OF APPEAL IS CONCERNED, THE AO DISALLOWED THE ENTIRE CLAIM FOR DEDUCTION OF RS.503,49,00,000/- ON THE FOLLOWING GROUND. A) THE PROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL ADVANCES WAS CREATED BY DEBIT TO 12 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. PROFIT AND LOSS ACCOUNT OF ONLY A SUM OF RS.295,55,54,682 WHEREAS THE CLAIM FOR DEDUCTION ACTUALLY MADE U/S.36(1)(VIIA) OF THE ACT WAS A SUM OF RS.503,49,00,000/-. THE AO WAS OF THE VIEW THAT AS LAID DOWN BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT 272 ITR 53 (P & H), CLAIM FOR DEDUCTION U/S.36(1)(VIIA) OF THE ACT CANNOT BE GREATER THAN THE AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT AS PROVISION. THE AO THEREFORE PROPOSED TO DISALLOW A SUM OF RS.207,93,45,318 (DIFFERENCE BETWEEN RS.503,49,00,000 AND RS.295,55,54,682). B) APART FROM THE ABOVE THE AO ALSO DISALLOWED THE SUM OF RS.295,55,54,682 OUT OF RS.503,49,00,000 CLAIMED AS DEDUCTION U/S.36(1)(VIIA) OF THE ACT. THE REASONS GIVEN FOR DISALLOWING CLAIM FOR DEDUCTION OF RS.295,55,54,682/- U/S.36(1)(VIIA) OF THE ACT BY THE AO WAS THAT THERE WAS ALREADY CREDIT BALANCE IN THE PBDD AS ON 1.04.2005 BALANCE B/F WAS RS. 912,57,47,169. ACCORDING TO THE AO 10% OF AARA CAN BE CREATED AS PROVISION EACH YEAR PROVIDED THERE IS NO BROUGHT FORWARD BALANCE AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN THE PBDD ACCOUNT.10% OF THE AARA AS ADMITTED BY THE ASSESSEE AS PER REVISED CENSUS OF 2001 WAS 352.53 CRORES. ACCORDING TO THE AO EVEN IF BAD DEBTS WRITTEN OFF OF RS.179,21,88,992 IS REDUCED STILL THE BALANCE IN THE PBDD ACCOUNT WAS RS.733,35,58,177/-. SINCE THE BALANCE SO AVAILABLE IN PBDD ACCOUNT WAS MORE THAN 10% OF AARA, THE AO HELD THAT DEDUCTION ON THE BASIS OF NEW PROVISION OF RS.295,55,54,682/- CANNOT BE ALLOWED. IN THIS REGARD THE AO REFERRED TO THE CONTENTION OF THE ASSESSEE WHICH WAS TO THE EFFECT THAT IN EACH YEAR THE ASSESSEE CAN CREATE 10% OF AARA AND CONCLUDED THAT THE EXPRESSION NOT EXCEEDING TEN PERCENT OF THE AGGREGATE AVERAGE ADVANCES USED IN SEC.36(1)(VIIA)OF THE ACT CANNOT MEAN THAT PROVISION CAN BE CREATED EACH YEAR IRRESPECTIVE OF THE AVAILABLE BALANCE IN THE PBDD ACCOUNT. THE AO ALSO REFERRED TO A SITUATION WHERE THERE IS NO CLAIM FOR BAD DEBTS IN A YEAR EVEN THEN THE ASSESSEE WILL BE ENTITLED TO CLAIM DEDUCTION BY WAY OF PBDD WHICH ACCORDING 13 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. TO THE AO WOULD NOT BE THE INTENTION OF THE LEGISLATURE. THE AO THUS REFUSED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF 10% OF AARA. 49. THE CIT(A) DELETED THE ADDITION MADE BY THE AO BY FOLLOWING THE DECISION OF THE DECISION OF THE ITAT IN ASSESSEES OWN CASE REPORTED IN 78 ITD 103 WHEREIN IT WAS HELD THAT IRRESPECTIVE OF THE DEBIT TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS (PBDD), AN ASSESSEE IS ENTITLED TO 10% OF THE AARA AS DEDUCTION U/S.36(1)(VIIA) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE AFORESAID DECISION WAS AS FOLLOWS: 20. THE LEARNED CIT HAS ALSO ACTED UNDER THE MISCONCEPTION THAT DEDUCTION UNDER CL. (VIIA) IS RELATED TO THE ACTUAL AMOUNT OF PROVISION MADE BY THE ASSESSEE FOR BAD AND DOUBTFUL DEBTS. THE TRUE MEANING OF THE CLAUSE, AS INDICATED EARLIER, IS THAT ONCE A PROVISION FOR BAD AND DOUBTFUL DEBTS IS MADE BY A SCHEDULED BANK HAVING RURAL BRANCHES, THE ASSESSEE IS ENTITLED TO A DEDUCTION WHICH IS QUANTIFIED NOT WITH RESPECT TO THE AMOUNT PROVIDED FOR IN THE ACCOUNTS, BUT WITH RESPECT TO A CERTAIN PERCENTAGE OF THE TOTAL INCOME AND ALSO A CERTAIN PERCENTAGE OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE BANK. IN OTHER WORDS, THIS IS A SPECIFIC DEDUCTION GIVEN BY THE STATUTE IRRESPECTIVE OF THE QUANTUM PROVIDED BY THE ASSESSEE IN ITS ACCOUNTS TOWARDS PROVISION FOR BAD AND DOUBTFUL DEBTS. 50. IN THE APPEAL BEFORE THE TRIBUNAL, IN GROUND NO.3 OF THE ORIGINAL GROUNDS OF APPEAL, THE REVENUE HAS CHALLENGED THE ORDER OF CIT(A) IN SO FAR AS IT RELATES TO THE DELETION OF A SUM OF RS.207,83,45,338 WHICH IS THE DIFFERENCE BETWEEN RS.503,49,00,000 AND RS.295,55,54,682. THE LEARNED DR RELIED ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF CANARA BANK IN ITA NO.58/BANG/2004 DATED 14 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. 9.6.2006. IN THE AFORESAID DECISION THIS BENCH CONSIDERED THE DECISION OF THE ITAT IN THE CASE OF SYNDICATE BANK 78 ITD 103(BANG)AND THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA)AND HELD THAT THE DECISION RENDERED BY THE HONBLE HIGH COURT HAS TO BE FOLLOWED. THE ABOVE DECISION IS THE DECISION BROUGHT TO OUR NOTICE ON THE ISSUE RENDERED AFTER THE DECISION IN ASSESSEES OWN CASE. JUDICIAL DISCIPLINE DEMANDS THAT WE FOLLOW THE LATER DECISION WHICH HAS CONSIDERED BOTH THE DECISIONS ON THE ISSUE. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF CANARA BANK(SUPRA), ALLOW GR.NO.3 RAISED BY THE REVENUE AND HOLD THAT DISALLOWANCE TO THE EXTENT OF RS.207,83,45,338/- BE RESTORED. THUS GR.NO.3 RAISED BY THE REVENUE IS ALLOWED. 10. HOWEVER, REVENUE RAISED TWO GROUNDS CITING THAT CIT(A) HAS GIVEN RELIEF TO ASSESSEE. ON CAREFUL REA DING OF THE CIT(A)S ORDER, WE FIND THAT CIT(A) HAS ALLOWED DED UCTION U/S 36(1)(VIIA) TO THE EXTENT THE PROVISION WAS MADE BY THE ASSESSEE AND RIGHTFULLY REJECTED THE PLEA OF THE AS SESSEE TO CLAIM 7.5% AS TOTAL INCOME. WE DO NOT FIND ANY INST ANCES OF DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE. THE GROUN D NO. 2 RAISED BY THE REVENUE IS MISPLACED. 11. WITH REGARD TO GROUND NO. 3 (REFER THE EARLIER DISCUSSION AT PARAS 7 9), THE CIT(A) HAS FOLLOWED THE RULES LAID DOWN BY THE HONBLE P&H HIGH COURT IN THE CASE OF STATE BANK OF PATIALA VS. CIT (SUPRA) AND FOUND TO BE IN ORDER. HENCE, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 15 ITA.NO. 751/HYD/2015 AP GRAMEENA VIKAS BANK, WARANGAL. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.06.2016. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACOUNTANT MEMBER HYDERABAD, DATED 22 ND JUNE, 2016 KV COPY TO : 1. ANDHRA PRADESH GRAMEENA VIKAS BANK, H.NO.2-5-8/1 , OLD BUS DEPOT ROAD, RAMNAGAR, HANAMKONDA, WARANGAL. 2. ACIT, CIRCLE-1, WARANGAL. 3. CIT(A)-III, HYDERABAD. 4. CIT-III, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE