UNION BANK OF INDIA (ERSTWHILE-ANDHRA BANK),MUMBAI V. DY. COMMISSIONER OF INCOME TAX , CIRCLE-1(1), HYDERABAD

MA 50/HYD/2025

AI Insights

The case revolves around the Union Bank of India (Erstwhile Andhra Bank) seeking rectification of an earlier Tribunal order that denied their claim for a deduction on account of bad debts written off for non-rural advances. The Tribunal had previously rejected this claim, citing the risk of double deduction, which was not considered in earlier years. The assessee argued that the Tribunal's observation regarding the non-raising of the double deduction issue in earlier years was incorrect and that the Supreme Court's decision in Catholic Syrian Bank Ltd. still applied. However, the Tribunal found that the circumstances had changed, and the Supreme Court's decision did not support the assessee's claim under the current facts, leading to the dismissal of the M.A.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716842 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-08-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2015-2016
• Appeal Filed On: 11-06-2025
• Other Referred Cases: Catholic Syrian Bank Ltd vs CIT (2012) 343 ITR 270 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASSESSEES OWN CASE A.YS.; SACHIN KUMAR
• Assessee Lawyers: T. SURYANARAYANA
• Keywords: Bad and doubtful debts

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER M.A. No.50/Hyd/2025 (In आ.अपी.सं /ITA No.193/Hyd/2019) (निर्धारण वर्ा/Assessment Year:2015-16) Union Bank of India (Erstwhile Andhra Bank),Hyderabad. PAN AAACU0564G ……Appellant Vs. Deputy Commissioner of Income Tax, Circle-1(1), Hyderabad. …..Respondent निर्धाररती द्वधरध/Assessee by: Shri T. Suryanarayana, Advocate. रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 25.07.2025 घोर्णध की तधरीख/Pronouncement: 20.08.2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This Miscellaneous Application (“M.A.”) has been filed by M/s. Andhra Bank (“the assessee”) under section 254(2) of the Income Tax Act, 1961 (“the Act”) seeking rectification of the order of the Tribunal dated 21.04.2025 in ITA No. 193/Hyd/2019 for the assessment year 2015-16. Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 2 2. The brief facts of the case are that, for the assessment year 2015–16, this Tribunal had decided the issue relating to claim of deduction by the assessee under section 36(1)(vii) of the Act on account of actual write-off of bad debts for both rural and non- rural advances, as well as deduction under section 36(1)(viia) of the Act on account of provision for bad and doubtful debts for both rural and non-rural advances. The specific dispute in this year was with respect to the claim of deduction under section 36(1)(vii) of the Act on account of bad debts for non-rural advances without reducing such amount from the balance available in the provision created for non-rural advances under section 36(1)(viia) of the Act, which the assessee had already claimed as deduction. The assessee contended that it was entitled to the full deduction without such reduction and that the proviso to section 36(1)(vii) of the Act do not apply. In support of it’s claim, the assessee had relied on the judgment of the Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT (2012) 343 ITR 270 (SC) and also on the order of this Tribunal in assessee’s own case for the assessment years 2012- Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 3 13 to 2014–15, wherein the claim of the assessee was allowed. However, in the present year, this Tribunal rejected the claim, observing that allowing the same would result in a double deduction, a fact that was not raised by the Revenue in assessee’s own case in earlier years, and therefore not considered in those years. 3. The assessee has now filed this MA, contending that there are two apparent mistakes in the Tribunal’s order i.e. a) with regards to the observation at para no. 15.1 of the order, that the issue of double deduction was not raised before the Tribunal in earlier years. b) that at para 15.2 of the order, the Tribunal observed that after insertion of Explanation 2 to section 36(1)(vii) of the Act, the decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd.(Supra) is not applicable, which according to the assessee is factually incorrect. 4. As far as the first argument of the assessee is concerned, the Learned Authorised Representative (“Ld. AR”) submitted that the Tribunal’s observation that the double deduction issue was Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 4 not raised by the Revenue in earlier years is factually incorrect. According to the Ld. AR, the Tribunal had considered para no. 45 of order of Hon’ble Supreme Court in Catholic Syrian Bank Ltd.(Supra), which clearly supports the assessee’s position even in the present year. 5. With regards to the second argument, it was further submitted that the insertion of Explanation 2 to section 36(1)(vii) of the Act does not make the decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd.(Supra) inapplicable, and that on identical facts, this Tribunal in the assessee’s own case for earlier years had held that the said decision still applies. The Ld. AR contended that the earlier orders of this Tribunal, having accepted the assessee’s claim, should be followed for consistency. 6. The Learned Departmental Representative (“Ld. DR”) opposed the MA and submitted that the assessee’s plea amounts to seeking a review of the Tribunal’s order, which is not permissible under section 254(2) of the Act. Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 5 7. We have carefully considered the submissions made in the MA and perused the record. The assessee’s main contention is that the Tribunal’s observation, that the double deduction issue was not raised by the Revenue in earlier years is factually incorrect, since, according to the assessee, the issue was considered while discussing para no. 45 of the Hon’ble Supreme Court’s judgment in Catholic Syrian Bank Ltd. (supra). In this regard, it is crucial to reproduce the para no. 15 of the order of this tribunal, which is to the following effect : “ 15. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. There is no dispute about the facts that the assessee has claimed the deduction u/s.36(1)(viia) of the Act by creating provision on account of non-rural advances. It is also undisputed that the assessee has now raised the claim for the deduction u/s.36(1)(vii) of the Act on account of write off of non-rural advance without reducing the same from the balance standing under the head ‘provision for bad and doubtful debts’ which has been created u/s.36(1)(viia) of the Act. We found that, the identical issue has been decided by this Tribunal in assessee's own case for A.Ys. 2013-14 and 2014- Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 6 15 (supra) in para nos.46 to 52, which are to the following effect : “ 46. The next issue that came up for our consideration from Ground No.6 of assessee’s appeal is deduction towards bad debts written off in respect of non-rural branches u/s 36(1)(vii) of the Act for Rs.329,62,82,921/-. The Assessing Officer noticed from the computation of income that the assessee has claimed bad debts written off in respect of non- rural debts written off at Rs.329,62,82,921/-. It was submitted that amount was claimed in view of the Hon'ble Supreme Court decision in the case of Catholic Syrian Bank Ltd vs CIT (2012) 343 ITR 270 (SC). The Assessing Officer did not accept the explanation of the assessee and according to the Assessing Officer, in the same judgment it was held that the claim of bad debts made u/s 36(1)(vii) should be limited to claim made u/s 36(1)(viia) and the overall claim of the assessee shall be subject to provisions of section 36(2)(v) of the Act. Since the assessee has already availed benefit u/s 36(1)(viia) for both creation of provision and actual written off of debts, further deduction for a write off non-rural bad debts cannot be accepted and thus, disallowed Rs.329,62,82,921/- towards deduction claimed in respect of bad debts written off for non-rural debts. Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 7 47. On appeal, the Ld. CIT (A) sustained the addition made by the Assessing Officer. 48. The Ld. Counsel for the assessee submitted that the Ld. CIT (A) is erred in sustaining addition made by the Assessing Officer towards bad debts written off pertains to non-rural branches u/s 36(1)(vii) without appreciating fact that the Hon'ble Supreme Court in Para 45 in the case of Catholic Syrian Bank Ltd vs. CIT (Supra) very clearly explained the position of deduction towards provision for bad debts u/s 36(1)(viia) and deduction towards bad debt written off u/s 36(1)(vii). Further, this issue is also covered in favour of the assessee by the decision of ITAT Hyderabad in assessee’s own case for the A.Y.2012-13 in ITA No.1018/Hyd/2017, where the Tribunal by following the decision of Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT (2012) 343 ITR 270 (SC) deleted the additions made by the AO. Therefore, he submitted that the Ld. CIT (A) has clearly erred in sustaining additions made by the Assessing Officer. 49. The Ld. DR, on the other hand, supporting the orders of the Ld. CIT (A) submitted that the law is clear in as much as after insertion of Explanation (2) by the Finance Act 2013 w.e.f. A.Y 2013-14 for the purpose of proviso to clause (vii) of section 36(1) and 36(2)(v) of the Act, the account referred to therein shall be only one account in respect of provision Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 8 for bad and doubtful debts created u/s 36(1)(viia) and such account which related to all types of advance including advance made by rural branches, therefore, the appellant is erred in once again relying upon the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra) which was rendered before the amendment. The Ld. CIT (A) after considering the relevant facts has rightly sustained the addition made by the Assessing Officer and their order should be upheld. 50. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. The appellant has claimed deduction towards bad debts written of in respect of non-rural branches for Rs.329,62,82,921/- without reducing said written off from credit balance available in provision for bad and doubtful debts created u/s 36(1)(viia) in respect of rural branches. The Assessing Officer did not accept the contention of the assessee on the ground that after insertion of Explanation (2) to provisions of sub-section (vii) of section 36(1), the account referred to therein shall be one account for all the advances including advances made by the rural branches of an assessee bank. It is the contention of the assessee that even after insertion of Explanation 2 to proviso to sub clause (vii) of section 36(1), the ratio laid down by the Hon'ble Supreme Court holds good, because the Hon'ble Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 9 Apex Court has clearly explained the law in respect of deduction towards provision for bad & doubtful debts u/s 36(1)(viia) of the Act and deduction towards bad debts written off u/s 36(1)(viia) and as per the ratio laid down by the Hon'ble Supreme Court, the scheduled commercial banks would continue to get full benefit of write off of irrecoverable debts u/s 36(1)(vii) in addition to the benefit of deduction for provision for bad & doubtful debts u/s 36(1)(viia). 51. We find that an identical issue has been considered by the Tribunal in assessee’s own case for the A.Y.2012-13 in ITA No.1018/Hyd/2017, where the Tribunal by following the decision of Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd vs CIT (supra) held as under: “48. We have heard both parties, perused the material available on record and gone through the orders of the authorities below. The appellant has claimed deduction towards bad debts written of in respect of non-rural branches for Rs.166,35,33,701/- without reducing from said written off from credit balance available in provision for bad and doubtful debts created u/s 36(1)(viia) in respect of rural branches. The Assessing Officer did not accept the contention of the assessee on the ground that after insertion of Explanation (2) to provisions of sub- section (vii) of section 36(1), the account referred to therein Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 10 shall be one account for all the advances including advances made by the rural branches of an assessee bank. It is the contention of the assessee that even after insertion of Explanation 2 to proviso to sub clause (vii) of section 36(1), the ratio laid down by the Hon'ble Supreme Court holds good, because the Hon'ble Apex Court has clearly explained the law in respect of deduction towards provision for bad & doubtful debts u/s 36(1)(viia) of the Act and deduction towards bad debts written off u/s 36(1)(viia) and as per the ratio laid down by the Hon'ble Supreme Court, the scheduled commercial banks would continue to get full benefit of write off of irrecoverable debts u/s 36(1)(vii) in addition to the benefit of deduction for provision for bad & doubtful debts u/s 36(1)(viia). We find that the Hon'ble Supreme Court in Para 45 of their order has explained the position of law in respect of deduction towards provision for bad & doubtful debts and actual write off of bad debts u/s 36(1)(viia) and 36(1)(vii). The Hon'ble Supreme Court very categorially held that the scheduled commercial bank would continue to get the full benefit of write off of bad debts u/s 36(1)(vii) in addition to the benefit of deduction for the provision for bad & doubtful debts u/s 36(1)(viia). The Hon'ble Supreme Court has also taken support from circular issued by the CBDT while rendering its judgment and observed that the Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 11 apprehension of the Revenue with regard to the double deduction i.e. one at stage of provision and another at the stage of actual write off and further, the excess, if any, of the write off over the amount outstanding to the credit of the account created under clause (viia) is taken care by insertion of proviso. The relevant finding of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra) is as under: “45. Under Section 36(1)(vii) of the ITA 1961, the tax payer carrying on business is entitled to a deduction, in the computation of taxable profits, of the amount of any debt which is established to have become a bad debt during the previous year, subject to certain conditions. However, a mere provision for bad and doubtful debt(s) is not allowed as a deduction in the computation of taxable profits. In order to promote rural banking and in order to assist the scheduled commercial banks in making adequate provisions from their current profits to provide for risks in relation to their rural advances, the Finance Act, inserted clause (viia) in sub-section (1) of Section 36 to provide for a deduction, in the computation of taxable profits of all scheduled commercial banks, in respect of provisions made by them for bad and doubtful debt(s) relating to advances made by their rural branches. The deduction is limited to a Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 12 specified percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules, 1962. Thus, the provisions of clause (viia) of Section 36(1) relating to the deduction on account of the provision for bad and doubtful debt(s) is distinct and independent of the provisions of Section 36(1)(vii) relating to allowance of the bad debt(s). In other words, the scheduled commercial banks would continue to get the full benefit of the write off of the irrecoverable debt(s) under Section 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debt(s) under Section 36(1)(viia). A reading of the Circulars issued by CBDT indicates that normally a deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt(s). No deduction is allowable in respect of a mere provision for bad and doubtful debt(s). But in the case of rural advances, a deduction would be allowed even in respect of a mere provision without insisting on an actual write off. However, this may result in double allowance in the sense that in respect of same rural advance the bank may get allowance on the basis of clause (viia) and also on the basis of actual write off under clause (vii). This situation is taken care of by the proviso to clause (vii) which limits the allowance on the basis of the actual Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 13 write off to the excess, if any, of the write off over the amount standing to the credit of the account created under clause (viia). 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. We find no merit in the objection raised by the Revenue. Firstly, CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on 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). Thus, the proviso to clause (vii) stood introduced in order to protect the Revenue. It would be meaningless to invoke the said proviso where there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction. The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 14 has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii). 46. Accordingly, the above question is answered in the affirmative, i.e., in favour of the assessee(s). For the above reasons, I agree that the appeals filed by the assessees stand allowed and the appeals filed by the Revenue stand dismissed with no order as to costs.” 49. In this view of the matter and by respectfully following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra), we direct the Assessing Officer to delete the addition made towards bad debts written off in respect of non-rural branches u/s 36(1)(vii) of the I.T. Act, 1961 for Rs.166,35,33,701/-.” 52. In this view of the matter and by respectfully following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd vs. CIT (Supra), we direct the Assessing Officer to delete the addition made towards bad Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 15 debts written off in respect of non-rural branches u/s 36(1)(vii) of the I.T. Act, 1961 for Rs.329,62,82,921/-.” 8. On perusal of above, it can be found that, para no. 50 of the order of this Tribunal for assessee’s own case for A.Ys. 2013-14 & 2014-15, para no. 48 of the order of this Tribunal for assessee’s own case for A.Y. 2013-13 and para no. 45 of the decision of Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd.(Supra) are also reproduced in the above reproduction. From all these reproduction it can be undoubtedly concluded that, in those cases the issue of double deduction have been decided on the basis of the facts of claim of the assessee for deduction towards bad debts written of in respect of non-rural branches without reducing said written off from credit balance available in provision for bad and doubtful debts created u/s 36(1)(viia) in respect of rural advances. The issue of double deduction for adjustment against non-rural advances, was not there in those cases. Further, the facts before the Hon’ble Supreme Court were that the assessee therein had created a provision under section 36(1)(viia) only in respect of rural Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 16 branches, and claimed deduction under section 36(1)(vii) for actual bad debts in respect of both rural and non-rural advances. Importantly, in that case, no provision for non-rural advances had been claimed under section 36(1)(viia)of the Act. Therefore, the Hon’ble Supreme Court held that granting deduction under section 36(1)(vii) in respect of non-rural advances, without setting it off against any provision under section 36(1)(viia) of the Act, did not result in a double deduction. This Tribunal in assessee’s own case for A.Ys. 2012-13 to 2014-15 following the decision of Hon’ble Supreme Court in the case of Catholic Syrian Bank Ltd. (supra) decided in favour of the assessee, in absence of the facts that it was a case of claim of the assessee for deduction towards bad debts written of in respect of non-rural branches without reducing said written off from credit balance available in the provision for bad and doubtful debts created u/s 36(1)(viia) of the Act in respect of non-rural advances and not the rural advances. In contrast, the present case is materially different. In the present case, the assessee has claimed deduction under section 36(1)(viia) of the Act for provisions relating to both rural Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 17 and non-rural advances. In addition, the assessee again seeking to claim deduction under section 36(1)(vii) of the Act for bad debts relating to non-rural advances without reducing it from the balance of provision created for non-rural advances, contrary to the mandate of the proviso to section 36(1)(vii) of the Act. Therefore, the reliance placed by the assessee on Catholic Syrian Bank Ltd. (supra) is misplaced. The decision of the Hon’ble Supreme Court was rendered on fundamentally different facts, where the core element of possible double deduction in respect of non-rural advances was absent. In the present case, the double deduction aspect arises directly from the assessee’s own claim structure for this year. 9. Further, the assessee has also pointed out another alleged mistake in the Tribunal’s order, namely that at para 15.2 of the order, it was observed that after insertion of Explanation 2 to section 36(1)(vii) of the Act, the decision of the Hon’ble Supreme Court in Catholic Syrian Bank Ltd. (supra), which was rendered prior to such insertion, would not be applicable. The submission of the Ld. AR in this regard is that, on identical facts, this Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 18 Tribunal in the assessee’s own case has already held that even after such insertion, the said decision of the Hon’ble Supreme Court is still applicable. 10. We are of the considered view that, this Tribunal has already dealt with the issue in the impugned order, and entertaining the present objection would amount to a review of the earlier decision, which is not permissible under section 254(2) of the Act. Moreover, in earlier years, this Tribunal had given its findings in the absence of the Revenue bringing to its notice the crucial fact that the claim results in a double deduction. In those earlier years, the findings were rendered on the basis that the assessee had claimed deduction towards write-off in respect of non-rural advances without reducing the said write-off from the credit balance available in the provision for bad and doubtful debts created under section 36(1)(viia) only in respect of rural branches. The said factual premise is not correct in the present case, as here the provision under section 36(1)(viia) covers both rural and non-rural advances. Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 19 11. In our considered view, a “mistake apparent from the record” under section 254(2) of the Act must be an obvious and patent error that does not require long-drawn reasoning or reappreciation of facts. The assessee, in this MA is seeking reappraisal of the earlier findings on merits, which is outside the limited scope of section 254(2) of the Act. In this context, we rely on the decision of the Hon'ble Supreme Court in the case of CIT vs M/S. Reliance Telecom Ltd. (2022) 284 TAXMAN 0517 (SC) dated 03.12.2021,has held that while considering the application under Section 254(2) of the Act, the Tribunal is not required to re-visit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. 12. In view of the above discussion, we find no mistake apparent from the record in the Tribunal’s order warranting rectification under section 254(2) of the Act. The MA filed by the assessee is accordingly dismissed. Printed from counselvise.com M.A. No.50/Hyd/2025 (In ITA No.193/Hyd/2019) 20 13. In the result, the MA filed by the assessee stands dismissed. Order pronounced in the open Court on 20th August, 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 20.08.2025. * Reddy gp Copy of the Order forwarded to : 1. Union Bank of India, Erstwhile Andhra Bank, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai-400 021 2. ACIT, Circle 3(4), Mumbai./DCIT, Circle 1(1), Hyderabad. 3. Pr. CIT, Mumbai / Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard File. BY ORDER, Printed from counselvise.com "