TMI Blog2013 (3) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision for bad debts debited to the P&L is netted against the current assets the provisions is an allowable deduction even if individual accounts of the debtors are not wtitten off. Thus the bank would be entitled to both the deductions, one under Clause (vii) on the basis of actual write off and another on the basis of clause (viia) in respect of mere provision but to prevent to double deduction, proviso to clause (vii) was inserted which says that in respect of bad debts 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 deduction u/s 36(1)(viia) is to be allowed only on the amount of provision made for bad and doubtful debts subject to the maximum on the basis of rural advances/ income prescribed under that section - Thus set aside the issue to the file of the AO to decide the issue in the light of the above decisions. Applicability of provision of Sec.115JB to the assessee bank - assessee contented that being a bank, the provisions of companies act will not apply to it and hence will not be liable to tax u/s.115JB - Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntend contradict the spirit of law. 3.3 The learned Assessing Officer failed to note that the appellant bank being government undertaking participating in the public policies, rural development programs is allowed additional allowance u/s 36(1)(viia) of the Act without creating provisions in the books of account. 3.4 The appellant contends that claim u/s 36(i) (viia) of the Act is made in accordance with law and decisions rendered by courts. 3.5 Without prejudice to the above, the appellant contends that the provision u/s 36(i) (viia) of the Act in respect of rural branch advances Rs. 276.39 crores is allowable as the appellant not claimed bad debts Rs. 6.07 crore in respect of rural advances. Bad debts in rural advances are required to be set off against provision allowable in respect of rural advances only. And our contention based on the law and the decisions of the courts. 3.6 The appellant therefore contends that the Assessing Officer be directed not to set off other debts against deduction u/s 36(i) (viia) of the Act allowed to the Bank in respect of rural advances. 4. The learned CIT(A) is not correct in holding that the provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the assessee, the CIT(A) held that the Assessing Officer was correct in holding that the claim u/s 36(1)(viia) is to be restricted to the amount of provision made in the books. Since the provision made in the books Rs.46.00 crores only, the CIT(A) held that the provisions of Rs.46.00 crores can be considered under the provisions of section 36(1)(viia) and not the amount of Rs.276.39 crores . 7. On further appeal before us, the learned counsel Shri Kalyan Das reiterated the contentions made before the CIT(A). The learned counsel relied upon the decision of the Catholic Syrian Bank Ltd. Vs. CIT, 343 ITR 270 (SC) . 8. We have heard the arguments of both the parties and perused the record. We find that the issue of bad debts is now settled by the decisions of the Hon'ble Supreme Court in the case of (a) TRF Ltd (323 ITR 397) (b) Vijaya bank Ltd (323 ITR 166 and (c) Catholic Syrian Bank Ltd (343 ITR 270) . 9. The Apex Court in the case of TRF Ltd(supra) has held that any debt written off as irrecoverable should be allowed as deduction. In the case of Vijaya Bank Ltd(supra), the Apex court has held that if the provision for bad debts debited to the P L is netted against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under that section. The allowance u/s 36(1)(viia) cannot be in excess of provision for bad debts actually made in the accounts. 11. In view of the very clear principles laid down by the Apex Court in the above judgements , we deem it fit to set aside the issue to the file of the Assessing Officer to decide the issue in the light of the decisions of the Apex Court in the cases of (a) TRF Ltd (323 ITR 397) (b) Vijaya bank Ltd (323 ITR 166) and (c) Catholic Syrian Bank Ltd (343 ITR 270). 12. The next issue is regarding the applicability of provision of Sec.115JB to the assessee bank. The contention of the assessee is that the assessee being a bank, the provisions of companies act will not apply to the assessee and hence the assessee will not be liable to tax u/s.115JB. 13. The provisions of Sec.115JB will be applicable to all companies. However, it is contended that Sec.115JB will be applicable only where the assessee is required to show profit loss account in accordance with schedule VI of companies act. As the banks are required to prepare balance sheet and profit loss account in accordance with the Banking Regulation Act, provision of 115JB cannot be applied to the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod upto the date of purchase as deduction on the ground that the securities were held stock in trade. The AO however rejected the appellant's claim holding that the appellant's contention that the securities constituted stock in trade. It has not been accepted since it was found that the securities held in the category of HTM (held to maturity) did not form part of the stock. However, the CIT(A) allowed the claim on the ground that the same was in stock in trade and hence the interest for the broken period is an allowable deduction, following the decision of ITAT Hyderabad dated 18/03/05. Aggrieved Revenue is on appeal. We find that the issue is covered by the decision of the Mumbai Bench in the case of JCIT Vs. Dena Bank 139 TTJ 81 (Mum). They had followed the decision of Special Bench in the Mumbai in JCIT Bank of Beharain , 132 TTJ 505 and the decision of Mumbai High Court in the case of American Express International Banking Corporation Vs. CIT 258 ITR 601, we find that Kerala High Court., CIT Vs. Nedungadi Bank 264 ITR 545 has held that the broken period interest is an allowable deduction. 19. Respectfully following the above decisions, we uphold the order of CIT(A) and re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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