TMI Blog2015 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... section that where it is provided that the special reserve is to be created and maintained by the special entity from its profit derived from the eligible business, then such non-creation of special reserve by the assessee cannot be made good by creating any reserve on a later date. The books of account of the assessee are admittedly audited and in the absence of any reserve being created in such audited books of account, no remedy is available to the assessee to create such a reserve on a later date. The facts in the case of CIT vs. Punjab State Industrial Development Corporation (2009 (11) TMI 37 - PUNJAB AND HARYANA HIGH COURT) were different, wherein the assessee had already created a reserve before claiming the deduction under section 36(1)(viii) of the Act. However, the assessee therein was entitled to a higher deduction under section 36(1)(viii) of the Act for which opportunity was granted to create additional reserve. In the facts of the present case, there was no reserve created by the assessee and in the absence of same, we find no merit in the alternate plea raised by the assessee and the same is dismissed.- Decided against assesse. - ITA No.234/PN/2013 - - - Dated:- 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 94,973/-. The assessee then filed second revised return of income declaring total income of ₹ 3,17,06,440/- in which it claimed the following deductions :- (a) Deduction of ₹ 25,70,792/- claimed under section 36(1)(viia) (provision), (b) Deduction of ₹ 11,51,111/- claimed under section 36(1)(viii), (c) Allowance under section 40(ia) of ₹ 33,077/- has been claimed for TDS paid during the A.Y. 2009-10 pertaining to expenses disallowed in A.Y. 2008-09 due to non-payment of TDS in A.Y. 2008-09. 5. The case of the assessee was selected for scrutiny. The Assessing Officer show-caused the assessee to provide proof as to whether the amount was transferred during the year to special reserve account created for the purpose of section 36(1)(viii) of the Act. In response, the assessee stated that the said deduction of ₹ 11,51,111/- on account of section 36(1)(viii) of the Act was claimed in the revised return of income filed on 28.03.2011 and working of the same was enclosed therein. It was, further, claimed by the assessee that the debiting of such provision to the Profit Loss Account was not a condition precedent for claiming the deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the facts of the present case. The assessee is in appeal against the order of the CIT(A). 7. The Ld. Authorized Representative for the assessee pointed out that no reserve was created while claiming the deduction under section 36(1)(viii) of the Act. The plea of the Ld. Authorized Representative for the assessee in this connection was that if the legislature wanted creation of such reserve then wording of section would be different. Our attention was drawn to the wording of section 34(3a) of the Act. Further reliance was placed on the ratio laid down by the Hon ble Punjab Haryana High Court in the case of CIT vs. Punjab State Industrial Development Corporation (supra). It was pointed out by the Ld. Authorized Representative for the assessee that after making claim of deduction in the computation of income filed alongwith the revised return, the assessee had made a prayer before the authorities below that it be allowed an opportunity to make reserves and pass entries. The contention of the Ld. Authorized Representative for the assessee was that all these being beneficial provision then the provision ought to be interpreted liberally. Further, the Ld. Authorized R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. 11. For computing the income under the head business income certain deductions are allowed from such business income and one such deduction is laid down in section 36(1)(viii) of the Act. The said section provides a deduction not exceeding 20% of the profits derived from eligible business computed under the head Profits and gains of business or profession , in respect of any special reserve created and maintained by a specified entity and the said amount having been carried to such reserve account. The condition of maintaining the special reserve was incorporated w.e.f. 01.04.1998 by the Finance Act, 1997. The wordings of sub-section are that special reserve should be created and maintained by a specified entity from the profits of the eligible business for the relevant previous year from which deduction is to be claimed. The section further provides that the amount should be carried to such reserve account. In other words, it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions. We have also anxiously perused the authorities cited at Bar in order to determine the controversy on hand. The relevant portion of Section 36(1)(viia) of the Act, as applicable for the assessment year under consideration i.e. A.Y. 2008-09 reads as under : - [(viia) [in respect of any provision for bad and doubtful debts made by (a) a scheduled bank [not being [* * *] a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank [or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : 10. A bare perusal of aforesaid section clearly brings out that the deduction specified therein is in respect of any provision for bad and doubtful debts made by .. an eligible assessee. The presence of the aforesaid expression in the section supports the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to the provisions of Section 36(1)(viia) of the Act and observed that ..the deduction allowable under the above provisions is in respect of the provision made and further went on to hold that ..making of a provision for bad and doubtful debts equal to the amount mentioned in this section is must for claiming such deduction. In view of the aforesaid judgement of the Hon ble Punjab Haryana High Court, in our view, the position sought to be canvassed by the assessee deserves to be repelled. We reproduce hereinafter the relevant portion of the order of the Hon ble High Court, which reads as under :- 5. Sec.36(1)(viia) of the Act as applicable to the asst. yr. 1985-86, reads as under : in respect of any provision for bad and doubtful debts made by a scheduled bank [not being a bank approved by the Central Government for the purposes of cl.(viiia) or a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank, an amount not exceeding ten per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) or an amount not exceeding two per cent of the aggregate average advances made by the rural bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es deserve to be upheld inasmuch as the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, and therefore, in our view, the lower authorities were justified in restricting the deduction to ₹ 50,00,000/-, being the amount of Provision actually made in the books of account. 12. The learned counsel for the assessee has cited certain decision in support of his proposition that the claim of deduction under Section 36(1)(viia) of the Act is not linked to making of a Provision in the account books. At the outset, we may observe that the decisions relied upon by the assessee are of various Benches of the Tribunal and not of any High Court. Therefore, the judgement of the Hon ble High Court in the case of State Bank of Patiala (supra), which is contrary to the decisions of the Tribunal relied upon by the assessee; and being solitary judgement of a High Court, is required to be applied, having regard to the established norms of judicial discipline. For the said reason, we refrain from discussing each of the decisions of the Tribunal relied by the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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