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TMI Blog2012 (8) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant. 3. That on facts as well as on law, the Learned CIT(A) has erred in confirming disallowance of Rs. 44,10,54,680 in respect of bad debt written off pertaining to nonrural branches claimed under section 36(1)(vii) in total disregard of the judicial pronouncements and the circulars of the CBDT. 4. That on facts as well as on law, the Learned CIT(A) has erred in concurring with the view of the Learned Assessing Officer that the Proviso to clause (vii) of sub-section (1) of section 36 applies to both rural and non-rural branches of the appellant bank. 6. That your appellant begs your leave to urge any additional ground or modify any other grounds at the time of hearing." 2. The first two grounds are relating to the disallowance of provision of for bad and doubtful debts. 3. At the time of hearing before us, both the parties fairly conceded that this issue is covered against assessee in assessee's own case for A.Yr. 2003-04 vide ITA No.2486/Kol/2007. Therefore we dismiss ground No.1 and 2 by respectfully following the Tribunal's order in assessee's own case dated 30th September, 2009. The relevant observations of the ld. Tribunal are as under :- 7. We have carefully c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below. We have also gone through the cases cited by the learned AR of the assessee (supra). On consideration of the provisions of Section 36(1)(viia), as also section 36(2)(v) and also considering the provisions of Section 36(1)(vii) of the Act, we find substance in the submissions of the learned AR of the assessee. Hon'ble Kerala High Court has held that the scope of the proviso to clause (vii) of section 36(1)(vii) has to be ascertained from a cumulative reading of the provisions of clauses (vii) & (viia) of Section 36(1) and clause (v) of Section 36(2) of the Act. It was held that the intention of the Legislature in enacting the proviso to clause (vii) of Section 36(1) and clause (v) of Section 36(2) simultaneously is only to see that a double benefit in respect of the same bad debt is not given to a scheduled Bank. A scheduled bank may have both urban and rural branches and advances given from both branches. It was also held that as a result of the amendment, the scheduled Bank would be entitled to the deduction of the entire bad debt relating to advances made by the urban branches written off in the books and also the difference between the amount written o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which is what ultimately matters, then there would be a mismatch between the rural branch accounts and the head office accounts. Therefore, in order to prevent such mismatch and to be in conformity with the accounting practice, the banks should maintain separate accounts. Of course, all accounts would ultimately get merged account into the account of the head office, which will ultimately reflect into account (balance sheet), though containing different items. 37. Another example that would support this view is that, a bank can write off a loan against the account of A' alone where it has advanced the loan to party A'. It cannot write off such loan against the account of 'B'. Similarly, a loan advanced under the rural schemes cannot be written off against an urban or a commercial loan by the bank in the normal course of its business. 38. The Full Bench of the Kerala High Court expressed the view that the Legislature did not make any distinction between provisions created in respect of advances by rural branches and advances by other branches of the bank. It also returned a finding while placing emphasis on the proviso to Section 36(1) (vii), read with clause (v) of Section 36( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent items of deduction and operate in their respective fields. 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) (vii), 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 under clause (viia). The proviso to Section 36(1) (vii) will relate to cases covered under Section 36(1) (viia) and has to be read with Section 36(2) (v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with 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. This, obviously, would be subject to satisfaction of the requirements contemplated under Section 36." 8.2. While concluding with the view of the Hon'ble Apex Court Judge Shri Swatanter Kumar it is further observed that "2. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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