TMI Blog2008 (3) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 50,52,099 made by the Assessing Officer out of the depreciation by not treating steel furniture, counters and electric fittings as the plant and machinery of the bank. 3.That the learned CIT (Appeals) should not have upheld the addition to the extent of Rs. 7,44,363 made by the Assessing Officer by estimating the expenses for earning the dividend as 10 per cent of the dividend income. 4.That the learned CIT (Appeals) should not have upheld the addition made by the Assessing Officer in respect of rebates given on the settlement of advances of Rs. 17,73,70,005. 5.That the learned CIT (Appeals) should not have upheld the addition made by the Assessing Officer to the extent of Rs. 23,93,94,000 in respect of bad debts written off which are exclusive of the provisions allowed for rural debts under section 36(1)( viia ). 6.That the learned CIT (Appeals) should not have upheld the addition made by the Assessing Officer in respect of computation of book profits under section 115JA by treating these as provisions for unascertained liabilities as per Explanation ( c ) of section 115JA(2). Rebate allowed on advances Rs. 17,73,70,005 Provisions fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41,79,486 Provision for Income-tax written back Rs. 5,27,83,967." 2. Rival contentions have been heard and record perused. Common grounds of appeal have been raised in both the years, we have, therefore, heard both the appeals together and are now disposing off the same by this consolidated order. 3. Facts in brief are that assessee is a public sector undertaking carrying on business of banking. Since it is a public sector undertaking, it is required to obtain prior approval of Committee on Dispute (COD) before persuing the appeal. As necessary approval from COD has been obtained, we have heard both the appeals on merit, Ground No. 1 in both the years relates to addition made by the Assessing Officer amounting to Rs. 3,71,500 being interest on investment made in 2.5 per cent Bihar Jamindari Abolition Compensation Bonds, 1973. As these bonds were not transferred in the name of the assessee, the assessee did not account for interest on these bonds. The Assessing Officer on the basis of accrual added the interest for 12 months in the income of the assessee. Contention of the assessee was that matter is subjudice in the Code of law, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the Assessing Officer restricted the claim of depreciation by treating the same as furniture and fixture. 7. We have considered the rival contentions and found from the record that issue is squarely covered by the order of the ITAT in assessee s own case in I.T.A. No. 1910/Delhi/1999 for assessment year 1995-96 where it was held as under : "Sixth ground in the appeal is against the disallowance of depreciation of Rs. 10,90,809 on steel furniture. The assessee had claimed the impugned depreciation on the basis of an earlier order of the Tribunal holding that the steel furniture at the training college at Chandigarh constituted plant and machinery. The Assessing Officer disallowed the claim by observing that the decision of the Tribunal had not been accepted by the Department and the matter was pending before the Delhi High Court. The CIT (Appeals) confirmed the disallowance by following the order of his predecessor for assessment years 1992-93 and 1993-94. No judgment of the High Court reversing the order of the Tribunal has been brought to our notice by the learned DR. Till then therefore, the earlier order of the Tribunal stand and hence respectfully following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusive and whether the assessee is entitled to deduction will depend on the provisions of law relating thereto. 11. In the order of assessment, the Assessing Officer observed that rebate granted was only provision for unascertained liability, and that rebate granted out of interest which has not been included in the income in view of section 43D, the claim of assessee is not admissible. 12. We have considered the rival contentions and gone through the orders of the authorities below and found from the record that during the assessment years 1996-97 and 1997-98, the ITAT, vide its common order, set aside this to the file of the Assessing Officer to examine the nature of claim. We also found that Assessing Officer/CIT (Appeals) had allowed the claim of rebate from the assessment year 2001-02 onwards after examining the nature of claim in depth. No further appeal has been alleged to be filed by the department against the order of CIT (Appeals) for the assessment year 2001-02 onwards, the claim has been allowed by the Assessing Officer himself from the assessment year 2002-03. As the nature of the claim are same in the relevant assessment year under consideration, we allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stated by the appellant bank itself an amount of Rs. 2393.94 lakhs has been allowed to the appellant bank under section 36(1)( viia ) of the Income-tax Act. Thus as per the provisions of proviso to section 36(1)( vii ), the write off Rs. 89,52,92,306 is to be restricted by the amount of provisions allowed under section 36(1)( viia ) of the Income-tax Act." 15. As per learned AR, the lower authorities were not justified in disallowing the bad debt write off in respect of urban advances amounting to Rs. 89.55 crores, and allowing only Rs. 65.61 crores. He placed reliance on the judgments of Hon ble High Court of Kerala in the case of South Indian Bank Ltd. v. CIT [2003] 262 ITR 579 , judgment of Hon ble Madras High Court in the case of CIT v. City Union Bank Ltd. [2007] 291 ITR 144 and judgment of Hon ble Kerala High Court in the case of Dhanalakshmi Bank Ltd. v. CIT [2003] 131 Taxman 774 in support of the proposition that proviso to clause ( vii ) of section 36(1) restricts the amount of bad debt written off against which deduction was claimed under section 36(1)( viia ) on provision basis. He further submitted that in the case of assessee-bank, the deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of the deduction relating to any such debt shall be limited to the amount by which such debt exceeds the credit balance in the provision for bad and doubtful debt account made under that clause. Accordingly, the CIT(Appeals) granted further relief of Rs. 65.61 crores as against assessee s claim of Rs. 89.55 crores which was allowed by the Assessing Officer to the extent of Rs. 23.93 crores. 17. We have considered the rival contentions carefully gone through the orders of the authorities below. The proviso to clause ( vii ) of section 36(1) of the Income-tax Act, 1961, was inserted with effect from 1-4-1985, by the Finance Act, 1985. The intention of the Legislature in enacting the provisos to clause ( vii ) of section 36(1) was to see that the double benefit in respect of the same bad debt is not given to a scheduled bank. There is no dispute to the fact that bank use to give both urban and rural advances. In the instant case, the assessee has claimed deduction of Rs. 23.93 crores under section 36(1)( viia ) in respect of the advances made by rural branches on provisions basis in earlier years, whereas during the year it has written off bad debt of Rs. 89.55 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction to the extent of bad debt written off in the books with respect to which provision was made under clause ( viia ). To make it clear, if the bad debt written off relates to debts other than for which the provision is made under clause ( viia ), such debts will fall squarely under the main part of clause ( vii ) which is entitled to 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 ). 19. In the interest of justice and fair play, we restore the matter for computation of amounts eligible for deduction under clauses ( vii ) and ( viia ) of the Act, to the file of the Assessing Officer for deciding the same as per our above discussion, subject to the overall ceiling as stipulated under sub-clause ( a ) of clause ( viia ) of section 36(1) of the Act. We direct accordingly. This direction is applicable both for the assessment years 1998-99 and 1999-2000 under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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