TMI Blog2012 (8) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) VI, Kolkata pertaining to A.Yr. 2001-02. 2. The assessee has raised the following grounds of appeal :- 1.That on facts as well as on law, the Learned CIT(A) has erred in confirming disallowance of provision for bad and doubtful debts to the extent of Rs.63,45,02,440 claimed by the appellant under the first Proviso to sub- clause (a) of clause (viia) of sub-section (1) of section 36. 2. That on facts as well as on law, the Learned CIT(A) has erred in confirming the view of the Learned Assessing Officer that the deduction for provision for doubtful debts for an amount not exceeding 5% of doubtful assets or loss assets as per the first Proviso to sub-clause (a) of clause (viia) of sub-section (1) of section 36 is an optional deduction and not an additional deduction as claimed by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court s decision in the case of Catholic Syrian Bank Ltd. vs CIT, Thrissur vide Civil Appeal No.1143 of 2011 along with several civil appeals decided by Hon ble Supreme Court by Swatanter Kumar, Judge on 17.02.2012 as reported in TaxIndiaOnline.com 2012-TIOL-16-SC-IT-LB . 7. On the other hand, the ld. DR, appearing on behalf of the revenue could not contradict the above submission of assessee. 8. After hearing the rival submissions and on careful perusal of materials available on record, we consider it fit to reproduce the observations made by the Tribunal in assessee s own case for A.Yr.2003-04 vide ITA NO.2486/Kol2007 dated 30.09.2009 which are placed at para 10 and 10.1 are as under :- 10. We have carefully considered the submissions of the learned Representatives of the parties and the orders 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while passing the order in the case of Catholics Syrian Bank Ltd. vs CIT the Hon ble Apex Court Judge Shri Swatanter Kumar has observed as under :- 36. Merely because the Department has some apprehension of the possibility of double benefit to the assessee, this would not by itself be a sufficient ground for accepting its interpretation. Furthermore, the provisions of a section have to be interpreted on their plain language and could not be interpreted on the basis of apprehension of the Department. This Court, in the case of Vijaya Bank v. Commissioner of Income Tax Anr. [(2010) 5 SCC 416], held that under the accounting practice, the accounts of the rural branches have to tally with the accounts of the head office. If the repaid amount in subsequent years is not credited to the profit and loss account of the head office, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ductions are available to a scheduled bank in relation to rural loans etc., whereas Section 36(1) (vii) deals with general deductions available to a bank and even non-banking businesses upon their showing that an account had become bad and written off as irrecoverable in the accounts of the assessee for the previous year, satisfying the requirements contemplated in that behalf under Section 36(2). The provisions of Section 36(1) (vii) operate in their own field and are not restricted by the limitations of Section 36(1) (viia) of the Act. In addition to the reasons afore-stated, we also approve the view taken by the Special Bench of ITAT and the Division Bench of the Kerala High Court in the case of South Indian Bank (supra). 41. To conclude, we hold that the provisions of Sections 36(1) (vii) and 36(1) (viia) of the Act are distinct and independent 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 bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, CBD ..... X X X X Extracts X X X X X X X X Extracts X X X X
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