TMI Blog2000 (6) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee, has raised a preliminary objection on the ground of jurisdiction to the impugned order of the Commissioner. It is pointed out by the learned counsel that the assessment for the assessment year 1987-88 was subject-matter of appeal before the Commissioner of Income-tax (Appeals) (hereinafter referred to as 'CIT (A)' for short). Since the CIT(A) has decided the issue relating to relief under Section 36(1)(viia) vide para 20 of the appellate order, the Commissioner has no jurisdiction to invoke the revisionary powers under Section 263 with respect to the order of the Assessing Officer which has got merged with the appellate order. Reliance in this connection is placed on the Full Bench decision of the Hon'ble Karnataka High Court in the case of CIT v. Hindustan Aeronautics Ltd. 157 ITR 315 : 27 Taxman 751. 4. On merits also, the learned counsel objects to the order of the Commissioner by stating that the assessee bank has made a provision for bad and doubtful debts and, therefore, it is eligible for deduction under Section 36(1)(viia) which only prescribes the method of quantification of deduction which is relatable to advances made by the rural branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal filed before the CIT(A). The only possible grievance of the assessee before the CIT(A) was that since the Assessing Officer enhanced the returned income by making various additions, the 5 per cent deduction mentioned in Section 36(1) (viia) should have been with reference to such enhanced income as against the total income returned by the assessee. Hence, Dr. Krishna asserts that the Commissioner did have the jurisdiction under Section 263 to revise the order passed by the Assessing Officer. 7. Countering the arguments of the learned counsel of the assessee with regard to the merits of the case, the learned counsel for the Revenue argues that the assessee bank did not make any provision for bad and doubtful, debts in respect of advances made from rural branches and, therefore, in view of the specific provisions of Section 36(1)(viia) r.w. Section 36(1)(vzz) and the proviso thereunder, the assessee is not eligible for the deduction claimed. Therefore, the impugned order of the Commissioner under Section 263 does not call for any interference, it is argued by the learned counsel for the Revenue. 8. We have considered the rival submissions, the ratio of the decisions cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for bad and doubtful debts. On referring to the order of, the CIT(A) dated 9-8-1989 in ITA 168/MNG/ CIT(A)/88- 89, for the assessment year 1987-88, we find that para 20 of the appellate order reads as under : 20. Relief under Section 36(1)(viia).-The Assessing Officer has apparently through oversight omitted to allow the appellant's claim in this regard. He is directed to allow a deduction of 2 per cent of the advances made by the appellant in the rural branches and further 5 per cent on the income, before allowing the above, in accordance with the provisions of this Section. From the above, it is abundantly clear that the specific issue relating to the quantification of deduction under Section 36(1)(viia) was raised by the assessee before the first appellate authority who has also adjudicated the issue vide para 20 of the appellate order which we have extracted above. In the circumstances, the Revenue's contention that this issue was not subject matter of appeal before the CIT(A) cannot be accepted as correct. 9. It is well settled law that the revisionary powers of the Commissioner under Section 263 does not extend to matters which have been considered and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us and co-extensive with those of the assessing authority and even extend to the power of enhancement in appropriate cases. We are fortified in taking this view by the ratio of the following decisions : CIT v. Kanpur Coal Syndicate : 53 ITR 225 (SC), Jute Corporation of India Ltd. v. CIT : 187 ITR 688 : 53 Taxman 85 (SC), CIT v. Mc. Millan Co. Ltd. : 33 ITR 182 (SC), CIT v. Shapoorji Pallonji Mistry : 44 ITR 891 (SC), CIT v. Rai Bahadur Hardutroy Motilal Chamaria : 66 ITR 443 (SC), J.K. Synthetics (supra), CIT v. Karamchand Premchand (P.) Ltd. : 74 ITR 254 (Guj.), CIT v. Scindia Steam Navigation Co. Ltd. : 80 ITR 589 (Bom.). It has also been ruled by the Hon'ble Calcutta High Court that when a particular point is subject matter of an appeal and the same is decided by the appellate authority, the Commissioner is not competent to revise the order on that point on the ground that a particular aspect of that point was not dealt, with by the appellate authority vide Oil India Ltd. (supra); CIT v. Kanti Kumar Kanoria. Respectfully following the ratio of the decisions cited supra, we find merit in the assessee's preliminary objection an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any separate provision in respect of the advances made from rural branches. 12. For a meaningful discussion of the dispute in this case, we consider it necessary to reproduce the relevant clauses of Section 36(1) as applicable the assessment year in question :- 36(1). Other deductions.-The deduction provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28- (i) .... (ia) .... (ib) .... (ii) .... (iia) .... (iii) .... (iv).... (v) .... (va) .... (vi) .... (vii) subject to the provisions of Sub-section (2), the amount of (any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year): [Provided that in the case of a bank to which Clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause;] (viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank (not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be allowed unless the assessee has debited the amount of such debt or part of such debt in that previous year to the provision for bad and doubtful debts account made under that clause. 13. Rule 6ABA of the Income-tax Rules, 1962 reads as under : 6ABA. For the purposes of Clause (viia) of Sub-section (1) of Section 36, the aggregate average advances made by the rural branches of a scheduled bank shall be computed in the following manner, namely :- (a) the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year shall be aggregated separately; (b) the sum so arrived at in the case of each such branch shall be divided by the number of months for which the outstanding advances have been taken into account for the purposes of Clause (a); (c) the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank. Explanation - In this rule, rural branch and scheduled bank shall have the meanings assigned to them in the Explanation to Clause (viia) of Sub-section (1) of Section 36. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank having rural branches in India. This clause has been specifically enacted for the purpose of covering the possible losses suffered by the rural branches in advancing monies to the rural sector and is in the nature of an incentive to the scheduled banks for providing the facility of rural credit. This has to be seen in the light of the economic policy of the Government of India and the credit policy laid down by the RBI with specific reference to programmes for rural development, economic aid to weaker sections of the society, creation of rural employment opportunities, credit to small and medium farmers in the rural areas and so on. A glance at the annual report of the assessee bank for the year under consideration reveals that the bank was actively involved in various such programmes relating to the rural sector. 17. That apart, the order of the learned Commissioner seems to imply that the assessee should make a provision for bad and doubtful debts relating specifically to advances made from rural branches. Such a presumption is unwarranted by the text of Clause (viia) of Section 36(1). This clause only makes a reference to any provision for bad and doubtful debts. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viid). Therefore, the reliance placed by the learned Commissioner on the views expressed by Kanga Palkhiwala (extracted in para 14 above) is misplaced. On the contrary the authors' views lend support to the assessee's claim in the present case as nothing is on record to suggest that the assessee is claiming double deduction in respect of the same items of debts. 20. The learned Commissioner has also acted under the misconception that deduction under Clause (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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