DCIT 2(1), MUMBAI V. CENTRAL BANK OF INDIA, MUMBAI

ITA 7677/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8284 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-11-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 09-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 7677/M/2010 ASSESSMENT YEAR: 1996-1997 DCIT-2(1), AAYAKAR BHAVAN, R.NO.575, 5 TH FLOOR, M.K. ROAD, MUMBAI 400 020. VS. M/S. CENTRAL BANK OF INDIA, CENTRAL OFFICE, CENTRAL ACCOUNTS (B/S) DEPARTMENT, CHANDERMUKHI, 4 TH FLOOR, NARIMANPOINT, MUMBAI-21. PAN:AAACC2498P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GIRIJA DAYAL, CIT-DR RESPONDEN BY : SHRI F.V. IRANI DATE OF HEARING:5.11.2012 DAT E OF ORDER:7.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 9.11.2010 IS DI RECTED AGAINST THE ORDER OF CIT (A)-4, MUMBAI DATED 24.8.2010 FOR THE ASSESSMEN T YEAR 1996-1997. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE ORDER OF THE CIT (A) IS OPPOSED TO LAW AND F ACTS OF THE FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT THE AMOUNT OF RS. 105,99,46,975/- IS ALLOWABLE AS BAD DEBT WITHOUT APPRECIATING THAT THE SAME IS NOT ALLOWABLE AS DEDUCTION U/S 36(1)(VIIA) OF THE IT AC T AND BAD DEBT OF RS. 26.69 CRORES HAS ALREADY BEEN ALLOWED U/S 36(1) (VII) OF THE IT ACT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT (A) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. 3. AT THE OUTSET, SHRI F.V. IRANI, LD COUNSEL FOR T HE ASSESSEE MENTIONED THAT THE REVENUE IS AGGRIEVED ON THE DECISION OF THE CIT (A) WHO HELD THAT AMOUNT OF RS. 105,99,46,975/- WAS ALLOWED AS BAD DEBTS WITHOUT APPRECIATING THAT THE SAME IS NOT ALLOWABLE AS DEDUCTION U/S 36(1)(VIIA) OF THE ACT. BAD DEBT OF RS. 26.69 WAS ALLOWED 2 AS DEDUCTION U/S 36(1)(VII) OF THE ACT. IN THIS REG ARD, THE LD COUNSEL MENTIONED THAT ORIGINALLY, ASSESSING OFFICER IS OF THE OPINION THA T THE PROVISION FOR BAD DEBTS AMOUNTING TO RS. 105,99,46,975/- HAS TO BE DEDUCTED FROM COMBINED WRITE OFF OF RURAL AND NON-RURAL ADVANCES AS AGAINST THE ASSESSE ES CLAIM THAT THE SAID PROVISION HAS TO BE ADJUDICATED SET OFF AGAINST THE RURAL DEB TS ONLY AND NON-RURAL DEBTS OF RS. 118,61,62,725/- HAS TO BE ALLOWED IN FULL. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE SAID TREATMENT BY THE ASSESSEE HAS A SUPPORT FR OM THE RECENTLY DECIDED SUPREME COURT JUDGMENT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CIT (2012) 343 ITR 270 WHEREIN, THE PROVISIONS OF THE CLAUSE-(VII) AND CL AUSE-(VIIA) OF SECTION 36 (1) WERE EXPLAINED AND READ OUT THE F OLLOWING PARA FROM THE SAID ORDER OF THE HONBLE SUPREME COURT. HOWEVER, THE REVENUE DISPUTES THE POSITION THAT THE PROVISO TO CLAUSE (VII) REFERS ONLY TO RURAL ADVANCES. IT SAYS THAT THERE ARE NO SUCH WORDS IN THE PROVISO WHICH INDICATES THAT THE PROVISO APPLY ONLY TO RURAL ADVANCES. THERE IS NO MERIT IN THE OBJECTION RAISED BY THE REVENUE. FIRSTLY, THE CBDT ITSELF HAS RECOGNIZED THE POSITION THAT A BANK WOULD BE EN TITLED TO BOTH THE DEDUCTION, ONE UNDER CLAUSE (VII) ON THE BASIS OF A CTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN RESPECT O F A MERE PROVISION. FURTHER, TO PREVENT DOUBLE DEDUCTION, THE PROVISO T O CLAUSE(VII) WAS INSERTED WHICH SAYS THAT IN RESPECT OF BAD DEBT(S) ARISING O UT OF RURAL ADVANCES, THE DEDUCTION ON ACCOUNT OF ACTUAL WRITE OFF WOULD BE L IMITED TO THE EXCESS OF THE AMOUNT WRITTEN OFF OVER THE AMOUNT OF THE PROVI SION ALLOWED UNDER CLAUSE (VIIA). THUS, THE PROVISO TO CLAUSE (VII) S TOOD INTRODUCED IN ORDER TO PROTECT THE REVENUE. IT WOULD BE MEANINGLESS TO IN VOKE THE SAID PROVISO WHERE THERE IS NO THREAT OF DOUBLE DEDUCTION. IN C ASE OF RURAL ADVANCES, WHICH ARE COVERED BY THE PROVISIONS OF CLAUSE (VIIA ), THERE WOULD BE NO SUCH DOUBLE DEDUCTION. THE PROVISO LIMITS ITS APPLICATI ON TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIED. CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. THIS HAS BEEN EXPLAINED BY THE CIRCULARS ISSUED BY THE CBDT. THUS, THE PROVISO INDICATES THAT IT IS LIMITED IN ITS APPLICA TION TO BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE BANK REPRESENTS ONLY BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE ACCOUNT OF THE BANK REPRESENTS O NLY DEBT(S) ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESS MENT IS NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE(VII). 3.1. FURTHER, LD COUNSEL REFERRED THE TRIBUNAL ORDE R IN ASSESSEES OWN CASE FOR THE AY 1989-1990, WHICH WAS DECIDED IN FAVOUR OF THE AS SESSEE RELYING ON THE SPECIAL BENCH DECISION IN THE CASE OF CIT VS. CATHOLIC SYRI AN BANK LTD. (88 ITD 185). 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 3 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE J UDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK L TD (SUPRA) AND FIND, IN PRINCIPLE, THE SAME STRENGTH IN THE CLAIM OF THE ASSESSEE. HOW EVER, CONSIDERING THE FACT THAT THE SAID DECISION OF THE HONBLE SUPREME COURT, DAT ED 17 TH FEBRUARY, 2012 WAS NOT AVAILABLE AT THE RELEVANT POINT OF TIME AND HOWEVER , THE CIT (A) FOLLOWED THE SAID DECISIONS IN THE ASSESSEES OWN CASE, WHICH CONSIDE RED THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF VIJAYA BANK VS. CIT (CIVIL APPEAL NO.3286-3287/2010) WHILE GIVING RELIEF TO THE ASSESSEE AS EVIDENT FROM PARA 6 OF THE IMPUGNED ORDER. THE JUDGMENT IN THE CASE OF VIJAYA BANK (SUPRA) WAS FOL LOWED BY THE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD (SUPRA) WHICH IS RELIED UPON BY THE LD COUNSEL BEFORE US. CONSIDERING THE SETTLED NATURE OF THE I SSUE AT THE LEVEL OF HONBLE SUPREME COURT, WE ARE OF THE OPINION THAT ORDER OF CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE R EVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF NOVEMBER, 2012. SD/- SD/- (VIVEK VARMA) (D. KARUNAKARA R AO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 7.11. 2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. 4 // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI