Appeal details
Counselvise Citation
[2016] 124 COUNSELVISE.COM (IT) 5061 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
14-12-2016
Appeal Filed By
Assessee
Bench Allotted
A
Next Hearing Date
23-09-2016
Assessment Year
2006-2007
Appeal Filed On
14-06-2016
Judgement Text
, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , J UDICIAL MEMBER M.P. NO S . 1 12, 113, 114 & 115 /MDS/2016 [IN I.T.A. NO S . 245, 246, 247 & 248/MDS/2014 ] ASSESSMENT YEAR S :20 04 - 05,08 - 09,07 - 08 & 2006 - 07 THE LAKSHMI VILAS BANK LTD., SALEM ROAD, KATHAPARAI, KARUR. [PAN: A A A C T 4291P ] VS. THE ASSISTANT/JOINT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE I, TIRUCHIRAPALLI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. S I T H ARAMAN, C.A. / RESPONDENT BY : S MT. R. ILAVARASI , J CIT / DATE OF HEARING : 23 .0 9 .2016 / DAT E OF P RONOUNCEMENT : 14 . 1 2 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH E S E FOUR MISCELLANEOUS PETITION S ARE FILED BY THE ASSESSEE SEEKING RECALL OF THE ORDER OF THE TRIBUNAL PASSED IN I.T.A. NO S . 245, 246, 247 & 248 /MDS/201 4 FOR THE ASSESSMENT YEAR S 2004 - 05, 2006 - 07, 2007 - 08 & 2008 - 09 VIDE ITS CONSOLIDATED ORDER DATED 29 .0 1 .2016 IN RESPECT OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] ON THE GROUND THAT BY REVERSING THE FINDINGS OF THE M.P . NO S . 1 12 TO 115 /M/ 1 6 2 ORDER OF THE LD. CIT(A) AND RESTORING THE ORDER OF THE ASSESSING OFFICER, THEREBY HOLDING THAT FOR CALCULATING DEDUCTION UNDER SECTION 36(1)(VIIA), THE AGGREGATE AVERAGE RURAL ADVANCES AT THE BEGINNING OF THE YEAR SHOULD BE DEDUCTED FROM THE AGGREGATE AVERAGE RU RAL ADVANCES AT THE END OF THE YEAR IS A MISTAKE APPARENT ON RECORD SINCE THE TRIBUNAL HAS NOT FOLLOWED THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03, WHEREIN IT WAS HELD THAT THE AGGREGATE AVER AGE RURAL ADVANCES AT THE BEGINNING OF THE YEAR SHOULD NOT BE DEDUCTED FOR ALLOWING THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AND PRAYED FOR RECTIFICATION OF THE ORDER BY RECALLING THE ORDER PASSED BY THE TRIBUNAL. 2. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT WHILE DECIDING THE APPEAL S , BY MAKING DETAILED DEDUCTION AND REFERRING TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT 343 ITR 270 , THE TRIBUNAL HAS PASSED A DETAILED ORDER BY REVERSING THE FIN DINGS OF THE LD. CIT(A) AND RESTORED THAT OF THE ASSESSING OFFICER AND THEREFORE, HE PLEADED THAT NO RECTIFICATION/ RECALLING THE ORDER OF THE TRIBUNAL IS WARRANTED. M.P . NO S . 1 12 TO 115 /M/ 1 6 3 3. WE HAVE HEARD BOTH SIDES AND CONSIDERED THE SUBMISSIONS AT LENGTH. WITH REGARD TO A LLOWABILITY OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 86. THE NEXT COMMON GROUND RAISED IN THE APPEAL OF THE REVENUE IN I.T.A. NOS. 245, 246, 247 & 248/MDS/2014 [A.Y. 2004 - 05, 2006 - 07, 2007 - 08 & 2008 - 0 9] IS WITH REGARD TO ALLOWABILITY OF DEDUCTION UNDER SECTION 36(I)(VIIA) OF THE ACT. IN THE FOLLOWING ASSESSMENT YEARS, THE ASSESSING OFFICER HAS MADE DISALLOWANCE AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 36(I)(VIIA) OF THE ACT. A.Y. CLAIMED IN THE RETURN ALLOWED BY THE AO DISALLOWANCE MADE BY THE AO 2004 - 05 22,20,00,000/ - 4,52,90,296/ - 17,67,09,704/ - 2006 - 07 8,22,82,529/ - 5,64,78,408/ - 2,58,04,121/ - 2007 - 08 10,18,36,091/ - 1,95,53,562/ - 8,22,82,529/ - 2008 - 09 17,59,91,049/ - 7,43,64,614/ - 10,16,26, 435/ - 87. THE ABOVE DISALLOWANCES IS ON ACCOUNT OF DEDUCTION CLAIMED EVERY YEAR ON THE OUTSTANDING BALANCES OF AVERAGE ADVANCES MADE BY THE BANK AT THE END OF THE ACCOUNTING YEAR, AS PER RULE 6ABA. SINCE THE INCOME IS REQUIRED TO BE COMPUTED SEPARATELY FOR EACH YEAR AS EACH ACCOUNTING YEAR IS A SEPARATE UNIT FOR ASSESSMENT PURPOSES, DEDUCTION HAS BEEN WORKED OUT ON THE AVERAGE ADVANCE MADE BY THE RURAL BRANCH OF THE BANK DURING THE YEAR. DEDUCTION IS AVAILABLE FOR THE PROVISION FOR BAD AND DOUBTFUL DEBT MADE IN RESPECT OF INCREMENTAL ADVANCES MADE BY THE RURAL BRANCHES DURING THE YEAR. THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS INTERPRETED THE ACT AND RESTRICTED THE DEDUCTION UNDER SECTION 36(I)(VIIA) TO THE AVERAGE ADVANCES MADE BY RURAL BRANCH OF THE BANK DURING THE YEAR. BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A. NO. 552 & 553/MDS/2009 FOR THE ASSESSMENT YEARS 2001 - 02, 2002 - 03 DATED 18.12.2009 DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE AND DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON THIS ACCOUNT. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FOR THE SAKE OF CLARITY AND TO HAVE BETTER UNDERSTANDING OVE R THE ISSUE, THE ENTIRE FACTS WITH REGARD TO M.P . NO S . 1 12 TO 115 /M/ 1 6 4 THE ISSUE IS REPRODUCED FOR THE ASSESSMENT YEAR 2004 - 05 IN I.T.A. NO. 245/MDS/2014. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED AS UNDER: 3. ALLOWABLE DEDUCTION U/S 36(1)(VIIA): IN THE ASSESSME NT ORDER DATED 29.12.2006, THE AO DISALLOWED THE ENTIRE CLAIM OF DEDUCTION U/S 36(1)(VIIA), SINCE THE ASSESSEE DID NOT PROVIDE DETAILS OF PROVISION CREATED FOR BAD AND DOUBTFUL DEBTS, PROOF OF THE POPULATION PLACES WHERE THE RURAL BRANCHES ARE LOCATED, MON THLY AVERAGE AGGREGATE ADVANCES OUTSTANDING BALANCES ETC. THE CIT(A) DELETED THE ADDITION MADE BY THE AO BASED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF 'CATHOLIC SYRIAN BANK LTD., CS CIT'. THE HON'BLE ITAT IN THE ORDER DATED 22.02.201 3 REMITTED BACK THE ISSUE TO THE AO AS UNDER: - WE ARE OF THE VIEW THAT THE CIT(A) HAS IGNORED THE DECISION OF HON'BLE APEX COURT TO THE EXTENT AFORESAID. THEREFORE, WE RESTORE THE GROUND BACK TO THE ASSESSING OFFICER TO RE - DECIDE THE ISSUE IN THE LIGHT OF OBSERVATIONS MADE HEREIN ABOVE AND PASS FRESH ORDER AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. AS PER DIRECTIONS OF THE HON'BLE ITAT THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PROVISIONS MADE, PROOF OF THE POPULATION PLACE S WHERE THE RURAL BRANCHES ARE LOCATED WITH AVERAGE AGGREGATE ADVANCES OUTSTANDING BALANCES ETC. THE ASSESSEE BANK SUBMITTED THE ABOVE DETAILS. FURTHER IT WAS STATED THAT IN THE PROFIT AND LOSS ACCOUNT UNDER PROVISIONS AND CONTINGENCIES, THE PROVISION FO R NPA TO THE TUNE OF RS.22,20,00,000/ - WAS MADE. AFTER CAREFUL CONSIDERATION OF THE FURNISHED PARTICULARS, THE ISSUE WAS DECIDED AS UNDER - IN THE ASSESSMENT ORDER IN PAGE NO.18, IN PARA NO.2, THE AO OBSERVED AS UNDER. - THE DEDUCTION MENTIONED IN THE FI RST PROVISO VIZ, THAT FOR ASSETS CLASSIFIED BY RBI AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED IS TO BE AVAILED OF AT THE OPTION OF THE ASSESSEE. THE VERY WORD OPTION M.P . NO S . 1 12 TO 115 /M/ 1 6 5 INDICATES THAT THE ASSESSEE HAS BEEN ALLOWED TO CHOOSE EIT HER OF THE TWO DEDUCTIONS. IN OTHER WORDS, IF THE ASSESSEE CHOOSES FOR THE OPTION TO CLAIM A DEDUCTION IN THE PROVISO, IT CANNOT CLAIM A DEDUCTION AS MENTIONED IN CLAUSE 'A'. BASED ON THE ABOVE, THE ASSESSEE WAS ASKED TO CLARIFY WHETHER IT EXERCISE OPTIO N (A) I.E. WHETHER IT CLAIMS DEDUCTION ON DOUBTFUL DEBTS AS CLASSIFIED BY THE RBI OR (B) 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVERAGE RURAL ADVANCES. THE ASSESSEE BANK STATED THAT IT CLAIMS AS PER OPTION (B). 3.1 THE OTHER ISSUE INVOLVED R ELATES TO QUANTUM OF DEDUCTION AVAILABLE UNDER MAIN PROVISION OF SECTION 36(1)(VIIA)(A). IT IS RELEVANT TO MENTION HERE THAT THE ASSESSEE WAS CLAIMING DEDUCTION EVERY YEAR ON THE OUTSTANDING BALANCES OF AVERAGE ADVANCES MADE BY THE BANK AT THE END OF THE A CCOUNTING YEAR, AS PER RULE 6ABA. SINCE THE INCOME IS REQUIRED TO BE COMPUTED SEPARATELY FOR EACH YEAR AS EACH ACCOUNTING YEAR IS A SEPARATE UNIT FOR ASSESSMENT PURPOSES, DEDUCTION HAS TO BE WORKED OUT ON THE AVERAGE ADVANCE MADE BY RURAL BRANCH OF THE BAN K DURING THE YEAR. DEDUCTION IS AVAILABLE FOR THE PROVISION FOR BAD AND DOUBTFUL DEBT MADE IN RESPECT OF INCREMENTAL ADVANCES MADE BY THE RURAL BRANCHES DURING THE YEAR. IN THE ASSESSMENT ORDER, THE AO IN PAGE NO.18 AND IN PARA NO.1 OBSERVED AS UNDER: - .THE DEDUCTIONS ARE AVAILABLE ONLY IN RESPECT OF ADVANCES MADE BY THE RURAL BRANCHES IN RELEVANT YEAR, AS CAN BE SEEN FROM THE WORDING 'AGGREGATE AVERAGE ADVANCES MADE BY A RURAL BRANCHES' USED IN THIS SECTION AND ALSO THE WORDS THE AMOUNT OF ADVANCES MADE BY EACH RURAL BRANCH USED IN RULE 6 ABA THE INCOME IS TO BE COMPUTED SEPARATELY FOR EACH YEAR AFTER GRANTING DEDUCTION. THE SPECIFICATION OF 'ADVANCE' IN THIS CONTEXT PERTAINS TO ADVANCES CONTAINING THE CLOSING BALANCE OF THE PRECEDING YEAR.' BASED ON THE ABOVE OBSERVATION, THE ISSUE WAS DECIDED AS UNDER. - M.P . NO S . 1 12 TO 115 /M/ 1 6 6 3.1. IT IS WORTH MENTIONING THAT THE RBI PROVIDES FOR MAKING PROVISION FOR BAD AND DOUBTFUL DEBT WHICH HAS BECOME NPA AS PER THE PRUDENTIAL NORMS PRESCRIBED BY IT. THESE NORMS DIRECT BANKS TO M AKE PROVISION IN RESPECT OF SECURED ADVANCES TO THE EXTENT OF 20% OF THE AMOUNT IF THE DEBT REMAINS DOUBTFUL FOR ONE YEAR, THIS PROVISIONING INCREASES TO 30% IF THE DEBT/ADVANCE REMAINS DOUBTFUL FOR A PERIOD BETWEEN 1 TO 3 YEARS AND PROVISIONING GOES UPTO 50% IF THE DEBT IS DOUBTFUL FOR MORE THAN 3 YEARS. HOWEVER, IF THE ADVANCE IS NOT COVERED BY REALISABLE VALUE OF SECURITY, THEN PROVISIONING CAN BE MADE UPTO 100% OF THE ADVANCE GIVEN. THE BANKS ARE REQUIRED TO MAKE PROVISIONING FOR 100% OF THE ADVANCE IN RESPECT OF 'LOSS OF ASSETS'. THUS, AFTER A GAP OF FEW YEARS, ALMOST THE ENTIRE AMOUNT OF LOAN WHICH BECOMES BAD AND DOUBTFUL HAS TO BE PROVIDED FOR BY THE BANKS. THE BANKS ARE ALLOWED DEDUCTION IN RESPECT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS. 3.2. IN THIS CONTEXT, ALLOWING DEDUCTION UNDER SUB - CLAUSE (A) OF CLAUSE (VIIA) OF SUB - SECTION (1) OF SECTION 36 IN RESPECT OF BOTH THE LIMBS OF THE SUB - CLAUSE (I) DEDUCTION IN RESPECT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS (II) DEDUCTION @ 10% ON TH E CUMULATIVE OUTSTANDING BALANCE AT THE END OF THE ACCOUNTING YEAR (AVERAGE AGGREGATE ADVANCES) OF THE LOAN GIVEN BY THE RURAL BRANCHES, YEAR AFTER YEAR ON THE SAME AMOUNT ADVANCED, WITHOUT RECOURSE TO THE FIGURE OF THE AMOUNT ACTUALLY ADVANCED BY THE RURA L BRANCHES OF THE BANK DURING THE YEAR, WOULD RESULT IN ALLOWING DEDUCTION WHICH MAY BE MORE THAN THE AMOUNT ADVANCED BY THE RURAL BRANCHES OF THE BANK . THIS IS ABSURD AND OF COURSE NOT THE INTENTION OF LEGISLATURE. 3.3. THIS CAN BE EXPLAINED WITH A S IMPLE EXAMPLE. FOR ARGUMENT SAKE, SAY THE RURAL BRANCHES OF A BANK MADE ADVANCES DURING THE FINANCIAL YEAR 1989 - 90, SAY TO THE EXTENT OF RS.10 CRORES AND NO ADVANCES WERE MADE BY THE RURAL BRANCHES, IN THE FOLLOWING 10 YEARS. IF THE INTERPRETATION OF THE A SSESSEE AS EVIDENT FROM CLAIM OF DEDUCTION U/S 36(1)(VII)(A) IS ACCEPTED, THE ASSESSEE WOULD CLAIM DEDUCTION, UNDER THE MAIN PROVISION OF SECTION 36(1)(VIIA)(A) ON THE AGGREGATE OUTSTANDING RURAL ADVANCES WHICH REMAIN SAME THROUGHOUT @ 10% AS PER SUB - CLAUS E (A) OF CLAUSE (VIIA) OF SUB - SECTION(L) OF SECTION 36 FOR EVERY 10 YEARS FOLLOWING ASST. YEAR 1990 - 91 WITHOUT MAKING ANY ADVANCE IN LAST 10 YEARS (ENTIRE AMOUNT LENT WOULD BE WRITTEN OFF M.P . NO S . 1 12 TO 115 /M/ 1 6 7 BY WAY OF PROVISION). THIS INTERPRETATION IS ABSURD. DEDUCTION FOR T HE PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED BY THE ASSESSEE BANK HAS TO BE WORKED OUT IN RESPECT OF ADVANCES MADE DURING THE YEAR. A DEDUCTION HAS TO BE WORKED OUT FOR EACH YEAR, BASED ON INCREMENTAL ADVANCES GIVEN BY THE RURAL BRANCHES OF THE BANK, FR OM THE INCOME COMPUTED FOR EACH ACCOUNTING YEAR. 3.4. ANY OTHER INTERPRETATION OF CLAUSE (VIIA)(A) (AS ADOPTED BY THE ASSESSEE BANK) WOULD RESULT IN ABSURDITY. THUS ALLOWING DEDUCTION FOR THE SAME ADVANCE YEAR AFTER YEAR ON ACCOUNT OF GRANTING DEDUCTION UNDER SECOND LIMB OF SUB - CLAUSE (A) OF CLAUSE (VIIA) OF SUB - SECTION (1) OF SECTION 36 @ 10% OF THE AVERAGE AGGREGATE ADVANCES MADE BY THE RURAL BRANCHES WHICH ARE OUTSTANDING AT THE END OF THE ACCOUNTING YEAR AND AT THE SAME TIME ALLOWING DEDUCTION FOR T HE PROVISIONS MADE FOR BAD AND DOUBTFUL DEBT WOULD RESULT IN DEDUCTION WHICH MAY BE MORE THAN THE AMOUNT LENT BY THE RURAL BRANCHES OF THE BANK. NEEDLESS TO SAY, THIS WAS NOT THE INTENTION OF THE LEGISLATURE. THE ASSESSEE HAS CLAIMED DEDUCTION TO THE EXT ENT OF RS.22,20,00,000/ - . THIS HAS BEEN WORKED OUT AS UNDER: ON RURAL ADVANCES (10% OF AGGREGATE AVERAGE RS.8,97,38,394 NON RURAL ADVANCES (7.5 OF TOTAL INCOME) RS.4,10,56,320 10% OF DOUBTFUL AND LOSSESS RS.9,12,05,286 TOTAL R S. 22,20,00,000 3.5. THIS CLAIM IS NOT CORRECT IN THE CONTEXT OF DISCUSSIONS ABOVE AND IS REWORKED AS UNDER. IT IS RELEVANT TO MENTION THAT THE ASSESSEE BANK HAS MADE PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.22,20,00,000/ - ONLY AS SHOWN IN THE SCHEDULE 17 OF THE ANNUAL REPORT. THE ACTUAL WORKING OF THE ALLOWABLE DEDUCTION U/S 36(1)(VIIA) WOULD BE AS FOLLOWS: (A) AGGREGATE AVERAGE RURAL ADVANCES AS ON 31.03.2004 89,73,83,937 (B) AGGREGATE AVERAGE RURAL ADVANCES AS ON 31.03.2003 72,98 ,45,944 (C) INCREASE IN AGGREGATE AVERAGE RURAL ADVANCES DURING THE YEAR [(A) - (B)] 16,75,37,933 M.P . NO S . 1 12 TO 115 /M/ 1 6 8 (D) DEDUCTION ALLOWABLE ON AGGREGATE RURAL ADVANCES [ @ 10% OF (C)] 1,67,53,799 (E) 7.5% OF GROSS TOTAL INCOME BEFORE DEDUCTION UNDER CHAPTER VIA 2,85, 36,497 (F) TOTAL OF (D) AND (E) 4,52,90,296 (G) PROVISION MADE FOR BAD AND DOUBTFUL DEBTS BY THE BANK 22,20,00,000 (H) LEAST OF (F) OR (G) ALLOWABLE AS DEDUCTION U/S 36(1)(VIIA) 4,52,90,296 3.6. THE ASSESSEE IS THEREFORE ENTITLED TO A DEDUCTION OF RS. 4,52,90,296/ - ONLY AND THEREFORE THE ALLOWANCE IS LIMITED TO THE ABOVE EXTENT AND THE EXCESS CLAIM OF RS. 17,67,09,704/ - (22,20,00,000 - 4,52,90,296) IS DISALLOWED. 88. FROM THE ABOVE, FOR THE ASSESSMENT YEAR 2004 - 05, IN THE ASSESSMENT ORDER 29 .12.2006, THE ASSESSING OFFICER DISALLOWED THE ENTIRE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT SINCE THE ASSESSEE DID NOT PROVIDE DETAILS OF PROVISION CREATED FOR BAD AND DOUBTFUL DEBTS, PROOF OF THE POPULATION PLACES WHERE THE RURAL BRANCHE S ARE LOCATED, MONTHLY AVERAGE AGGREGATE ADVANCES OUTSTANDING BALANCES, ETC. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BASED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT. ON APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER DATED 22.02.2013 REMITTED BACK THE ISSUE TO THE ASSESSING OFFICER TO RE - DECIDE THE ISSUE IN THE LIGHT OF OBSERVATIONS MADE HEREIN ABOVE AND PASS FRESH ORDER AFTER AFFORDING ADEQUATE OPPORTUNITY OF HE ARING TO THE ASSESSEE. IN THE SECOND ROUND OF LITIGATION, AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 36(1)(VIIA), THE ASSESSEE BANK WAS ASKED TO CLARIFY WHETHER IT EXERCISE OPTION (A) I.E. WHETHER IT CLAIMS DEDUCTION ON DOUBTFUL DEBTS AS CLASSIFIED BY THE RBI OR (B) 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVERAGE RURAL ADVANCES AND THE ASSESSEE BANK STATED THAT IT CLAIMS AS PER OPTION (B). ACCORDINGLY, THE ASSESSING OFFICER HAS RESTR ICTED THE SAME AS TABULATED HEREINABOVE AFTER REWORKING THE AGGREGATE AVERAGE RURAL ADVANCES. THE ASSESSING OFFICER HAS RECOMPUTED THE AGGREGATE AVERAGE RURAL ADVANCES BY ADOPTING ONLY THE INCREMENTAL ADVANCES MADE DURING THE YEAR BY THE RURAL BRANCHES AND ALSO BY EXCLUDING BRANCHES WHICH WERE SITUATED AT PLACES WITH POPULATION OF MORE THAN 10,000 ACCORDING TO THE LATEST CENSUS. THE ASSESSING OFFICER HAS ALSO HELD THAT THE PROVISION FOR 'STANDARD ADVANCES' CANNOT BE MADE PART OF PROVISION FOR BAD AND M.P . NO S . 1 12 TO 115 /M/ 1 6 9 DOUBTF UL DEBTS FOR WHICH DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS ALLOWABLE. 89. THE QUESTIONS OF LAW RAISED BEFORE THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK WERE AS FOLLOWS: . WHETHER THE FULL BENCH OF THE HIGH COURT HAS GROSSLY ERRED IN REVERSING THE FINDING OF THE EARLIER DIVISION BENCH THAT ON A CORRECT INTERPRETATION OF THE PROVISO TO CLAUSE (VII) OF SECTION 36(1) AND CLAUSE (V) TO SECTION 36(2) IS ONLY TO DENY THE DEDUCTION TO THE EXTENT OF BAD DEBTS WRITTEN OFF IN THE BOOKS WITH RESPECT TO WHICH PROVISION WAS MADE UNDER CLAUSE (VIIA) OF THE INCOME TAX ACT? WHETHER THE FULL BENCH WAS CORRECT IN REVERSING THE FINDINGS OF THE EARLIER DIVISION BENCH THAT IF THE BAD DEBT WRITTEN OFF RELATE TO DEBT OTHER THAN FOR WHICH THE PROVI SION IS MADE UNDER CLAUSE (VIIA), SUCH DEBTS WILL FALL SQUARELY WITHIN THE MAIN PART OF CLAUSE (VII) WHICH IS ENTITLED TO BE DEDUCTION AND IN RESPECT OF THAT PART OF THE DEBT WITH REFERENCE TO WHICH A PROVISION IS MADE UNDER CLAUSE (VIIA), THE PROVISO WILL OPERATE TO LIMIT THE DEDUCTION TO THE EXTENT OF THE DIFFERENCE BETWEEN THAT PART OF DEBT WRITTEN OFF IN THE PREVIOUS YEAR AND THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA)?' [PARA 11 OF THE ORDER] 90. A FTER EXAMINING THE VARIOUS CIRCULARS ISSUED BY THE BOARD IN RELATION TO SECTION 36(1)(VIIA) AND 36(1)(VII) AND ALSO THE STATEMENT OF OBJECTS AND REASONS TO THE FINANCE ACT 1986, THE HON'BLE SUPREME COURT CAME TO THE CONCLUSION THAT THE LEGISLATIVE INTENTIO N BEHIND THE INTRODUCTION OF SECTION 36(1)(VIIA) WAS TO ENCOURAGE RURAL ADVANCES AND TO AID CREATION OF THE PROVISION FOR BAD DEBTS IN RELATION TO SUCH RURAL BRANCHES. SOME OF THE SALIENT FINDINGS OF THE HON'BLE SUPREME COURT ARE AS FOLLOWS: A MERE PROVIS ION FOR BAD AND DOUBTFUL DEBTS IS NOT AN ALLOWABLE DEDUCTION IN THE COMPUTATION OF TAXABLE PROFITS. HOWEVER, IN THE CASE OF RURAL ADVANCES, IN LINE WITH THE POLICY TO PROMOTE RURAL BANKING, A PROVISION MAY BE ALLOWABLE U/S SEC.36(1)(VIIA), WITHOUT INSISTIN G ON AN ACTUAL WRITE - OFF. PROVISIONS OF SECTIONS 36(1) (VII) AND 36(1)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND THEY OPERATE IN THEIR RESPECTIVE FIELDS. M.P . NO S . 1 12 TO 115 /M/ 1 6 10 A SCHEDULED BANK MAY HAVE BOTH URBAN AND RURAL BRANCHES. IT MAY GIVE A DVANCES FROM BOTH BRANCHES WITH SEPARATE PROVISION ACCOUNTS FOR EACH. IN THE NORMAL COURSE OF ITS BUSINESS, AN ASSESSEE BANK IS TO MAINTAIN DIFFERENT ACCOUNTS FOR THE RURAL DEBTS AND FOR NON - RURAL/URBAN DEBTS. MAINTENANCE OF SUCH SEPARATE ACCOUNTS WOULD NO T ONLY BE A MATTER OF MERE CONVENIENCE BUT WOULD BE THE REQUIREMENT OF ACCOUNTING STANDARDS. THE BAD DEBTS WRITTEN OFF IN DEBTS, OTHER THAN THOSE FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA), WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(1)(VI I), 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 UND ER CLAUSE (VIIA). IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAUSE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS, LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY, CLAUSE (VIIA) APPLIE S ONLY TO RURAL ADVANCES. IF THE AMOUNT OF BAD DEBT ACTUALLY WRITTEN OFF IN THE ACCOUNTS OF THE BANK REPRESENTS ONLY DEBT ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROV ISO TO CLAUSE (VII). A STATUE IS NOT NORMALLY CONSTRUED TO PROVIDE FOR A DOUBLE BENEFIT UNLESS IT IS SPECIFICALLY SO STIPULATED OR IS CLEAR FROM THE SCHEME OF THE ACT. PROVISO TO SEC 36(1)(VII) WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION, OPERATING WI TH 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. 91. A NUMBER OF CASES DECIDED BY THE HON'BLE HIGH COURTS AND ALSO BY THE APEX COURT ARE CITED / REFERRED TO IN THE ABOVE JUDGEMENT. CASES OF VIJAYA BANK VS. CIT (323 ITR 166) AND SOUTHERN TECHNOLOGIES VS JCIT (320 ITR 577) ARE REFERRED TO THEREIN. ACCOUNTING S TANDARD AS29 M.P . NO S . 1 12 TO 115 /M/ 1 6 11 AND ALSO THE EFFECT OF BOARD'S CIRCULAR'S HAVE ALSO BEEN DISCUSSED AT LENGTH IN THE ORDER ALONG WITH THE SUBJECT OF INTERPRETATION AND CONSTRUCTION OF THE RELEVANT SECTIONS. THUS, THE JUDGEMENT IS A COMPREHENSIVE ONE WHICH HAS CONSIDERED THE R ATIOS LAID DOWN BY VARIOUS COURTS, THE IMPLICATIONS OF BOARD'S CIRCULARS AND ACCOUNTING STANDARDS. 92. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CATHOLIC SYRIAN BANK THAT '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) MAY BE ALLOWABLE WITHOUT INSISTING ON AN ACTUAL WRITE OFF .IN CASE OF RURAL ADVANCES WHICH ARE COVERED BY CLAUSE (VIIA), THERE WOULD BE NO DOUBLE DEDUCTION. THE PROVISO, IN ITS TERMS , LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. INDISPUTABLY CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES.' (EMPHASIS SUPPLIED) (PARA 25&27). 93. THUS, IT CAN BE SEEN THAT IN THE CASE OF PROVISION MADE TOWARDS NON - RURAL D EBTS, NO DEDUCTION CAN BE ALLOWED AS THERE IS NO SPECIFIC PROVISION IN THE INCOME TAX ACT TO ALLOW THE SAME. THIS INDICATES THAT THE PROVISION MADE TOWARDS URBAN DEBT SHOULD BE ADDED BACK AND ALLOWED ONLY WHEN BAD DEBTS ARE REALLY WRITTEN OFF. THE QUESTION OF DOUBLE DEDUCTION BEING ALLOWED DOES NOT ARISE THEREIN AT ALL, BECAUSE IT IS ALLOWED ONLY ON ACTUAL WRITE OFF. THE HON BLE APEX COURT HAS ALSO HELD THAT THE PROVISO TO SECTION 36(1)(VII) APPLY ONLY IN RESPECT OF RURAL DEBTS. IN VIEW OF THE ABOVE DECISIO N AND IN VIEW OF THE OPTION EXERCISED BY THE ASSESSEE THAT IT CAN CLAIMS DEDUCTION ON DOUBTFUL DEBTS AS PER OPTION (B) I.E. 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVERAGE RURAL ADVANCES, THE ASSESSING OFFICER HAS RIGHTLY WORKED OUT THE ALLOWABLE D EDUCTION, WHICH IS LESS THAN THAT OF THE PROVISION MADE BY THE ASSESSEE AS DOUBTFUL DEBTS, ALLOWED THE DEDUCTION OF BAD DEBTS FOR ALL ASSESSMENT YEARS AND REMAINING BALANCE WAS BROUGHT TO TAX. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD. CIT(A) AND CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER FOR ALL THE ABOVE ASSESSMENT YEARS. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 4. THE MAIN CONTENTION OF THE LD. COUNSEL FOR THE PETITIONER IS THAT THE TRIBUNAL, WHILE DECIDING THE ISSUE, HAS NOT CONSIDE RED THE DECISION M.P . NO S . 1 12 TO 115 /M/ 1 6 12 OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF CIT V. CITY UNION BANK AND IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03. THE CASE LAW RELIED ON BY THE ASSESSEE IS IN ITS PAPER BOOK VIDE ORDER DATED 10.03.2006 IN ASSESSEE S OWN CASE, THE COORDINATE BENCH OF THE TRIBUNAL HAS FOLLOWED THE DECISION OF ITS ORDER DATED 22.05.2003 IN I.T.A. NO. 1162/MDS/95 FOR THE ASSESSMENT YEAR 1991 - 92, HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE BECAUSE THE ACCOUNTING STANDARD 29 PRES CRIBED BY THE ICAI HAS BEEN ISSUED IN 2003 AND THE SAME IS APPLICABLE FROM THE ASSESSMENT YEAR 2004 - 05 ONWARDS. FURTHER, THE CASE LAW RELIED ON IN ASSESSEE S OWN CASE VIDE ORDER DATED 25.05.2012 HAS NO APPLICATION TO THE FACTS OF THE CASE SINCE THAT DECISI ON DEALS WITH ENTIRELY DIFFERENT ISSUES AND THERE WAS NO ISSUE OF DISALLOWANCE UNDER SECTION 36(1)(VIIA) OF THE ACT. MOREOVER, THE CASE LAW RELIED ON BY THE ASSESSEE IN THE CASE OF CITY UNION BANK LTD. VIDE ORDER DATED 08.07.2011 , THE COORDINATE BENCH OF T HE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BASED ON THE DECISION IN THE CASE OF SOUTH INDIAN BANK LTD. V. CIT 262 ITR 129 (KER), WHEREIN, THE HON BLE HIGH COURT HAS ALLOWED THE CLAIM OF THE ASSESSEE SINCE THE TRIBUNAL HAS OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED ANY DEBTS WRITTEN OFF IN RESPECT OF RURAL BRANCH IN THE EARLIER YEAR AND THEREFORE, THE FACTS OF THAT CASE HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. M.P . NO S . 1 12 TO 115 /M/ 1 6 13 5 . THE NEXT GROUSE OF THE PETITIONER IS THAT IN VIEW OF THE DECISIO N OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. L.G. RAMAMURTHI AND OTHERS 110 ITR 453, THE TRIBUNAL HAS NOT TAKEN CONSISTENT VIEW BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WHICH IS NOT LEGALLY CORRECT. FIRST OF AL L, WE FIND THAT THE TRIBUNAL HAS DECIDED THE ISSUE MAINLY RELYING ON THE DECISION IN THE CASE OF CATHOLIC SYRIAN BANK LTD. V. CIT [2012] 343 ITR 270 (SC), WHEREIN VARIOUS DECISION OF THE HIGH COURTS, APEX COURT AND ACCOUNTING STANDARD 29 HAVE BEEN CONSIDER ED. 6. OVER AND ABOVE, IN THE CASE OF CIT V. HI TECH ARAI LTD. [2010] 321 ITR 477 (MAD.) , WHEREIN, THE HON BLE JURISDICTIONAL HIGH COURT HAS HELD THAT SIMPLY BECAUSE THE COORDINATE BENCH OF THE TRIBUNAL HAD EARLIER TAKEN A DIFFERENT VIEW, THE TRIBUNAL O N THIS OCCASION ALSO OUGHT TO HAVE FOLLOWED THE SAME. WHEN IT IS FOUND THAT THE TRIBUNAL HAS APPLIED THE LAW CORRECTLY IN THE IMPUGNED ORDER, THERE IS NO GAINSAYING THAT THERE WAS AN EARLIER ORDER BY THE COORDINATE BENCH AND THEREFORE, FOR THAT REASON, THI S TIME ALSO THE TRIBUNAL SHOULD HAVE BLINDLY FOLLOWED ITS OWN EARLIER DECISION EVEN IF SUCH EARLIER DECISION DID NOT REFLECT THE CORRECT POSITION OF THE LAW . THEREFORE, IT CANNOT BE SAID THAT THE DECISION TAKEN BY THE TRIBUNAL IS A MISTAKE APPARENT ON REC ORD. THUS, THE CASE LAW M.P . NO S . 1 12 TO 115 /M/ 1 6 14 RELIED ON BY THE PETITIONER HAS NO APPLICATION. THEREFORE , WE FIND NO MISTAKE APPARENT ON RECORD WHILE DECIDING THE APPEAL S OF THE REVENUE AND IT CLEARLY FALLS OUTSIDE THE PURVIEW OF SECTION 254(2) OF THE INCOME - TAX ACT, 1961. ACCORDINGLY, THE MISCELLANEOUS PETITION S FILED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, ALL THE M.P S . FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED ON THE 14 TH DECEMBER , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 14 . 1 2 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.
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