TMI Blog2015 (7) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... Act which would amount to double deduction? - Held that:- This Court in the assessee's case itself [2014 (11) TMI 179 - KARNATAKA HIGH COURT] had remanded the matter to the Assessing Authority and directed the Assessing Authority to decide the said questions of law in terms of the judgment of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. v. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA] - Decided in favour of revenue for statistical purposes. Unrealized lease rentals on NPA's - whether allowable deduction despite the same not having not accrued and not satisfying Section 43D and RBI Guidelines which did not equate unrealized lease rental of NPA's with that of bad and doubtful debts as claimed by the Assessee? - assessee is one of the leading Scheduled Commercial Banks in the Private Sector - Held that:- There is a communication issued by the Reserve Bank of India to all commercial banks calling upon to follow the "Guidance Note on Accounting for Leases" issued by the ICAI, making it clear that their earlier instructions on treatment of leasing activity on par with loans and advances would continue to remain in force. Therefore, the said communication/guidel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Whether the appellate authorities were correct in holding that Bad debts of ₹ 9934910/- was an allowance deduction u/s 36(1)(vii) of the Act despite the same having been deducted by the Assessee in the computation made under Section 36(1)(viia) of the Act? (4) Whether the appellate authorities were correct in holding that excessive claim under proviso to Section 36(1)(viia) of the Act is allowable despite the assessee claiming deduction under Section 36(1)(viia) of the Act which would amount to double deduction when the section contemplated either one of the dedn. contemplated in Section 36(1)(viia) or Proviso to Section 36(1)(viia) of the Act? (5) Whether the Tribunal was right in holding unrealized lease rentals on NPA's is allowable deduction despite the same not having not accrued and not satisfying Section 43D and RBI Guidelines which did not equate unrealized lease rental of NPA's with that of bad and doubtful debts as claimed by the Assessee? 3. The substantial questions of law-1, 2, 3 and 4 arose for consideration in the assessee's case itself in I.T.A.Nos.675 and 657/2008. By an elaborate judgment, this Court considered the said questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the assessee claimed for deduction in respect of unrealized lease rentals on the NPAs, which is found to be in accordance with the guidelines and the instructions issued by the Reserve Bank of India, which is empowered to deal with such matters in terms of Section 43-D of the Act. In fact, in the earlier years, the unrealized lease rentals were allowed. Therefore, following the said judgment, the claim of the assessee towards unrealized lease rentals was directed to be allowed. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. 6. The Tribunal at para-9 of the impugned order extracted Section 43-D of the Act and held that the said Section clearly implies that to the extent that have been written off under Section 36(1)(vii) would be allowed subject to the condition that in the year of actual receipt, it would be taxed and therefore, upheld the order of the First Appellate Authority on this aspect of the matter. Aggrieved by the said order, the Revenue is in these appeals. 7. The learned Counsel for the Revenue assailing the impugned order contended that, a reading of Section 43-D of the Act makes it clear that, it applies only to the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. 10. A reading of the aforesaid provision makes it clear that, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institutions as mentioned in the said Section to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Therefore, it is clear that the said benefit is not conferred on the assessee in respect of all categories of bad and doubtful debts. It is restricted to such categories of bad and doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts. 11. Rule 6EA of the Income Tax Rules (for short hereinafter referred to as 'the Rules') prescribes the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arities observed by the auditors of the borrowers which remain to be rectified; (14) basic weakness revealed by the financial statements of the unit, for example, continued cash loss beyond one year. (ii) The irregularities referred to in sub-clauses (i) in the accounts of the borrowers are, - (1) where the accounts are overdrawn beyond the drawing power or the sanctioned limit, for a temporary period; (2) instalments in respect of term-loans are overdue for less than 6 months or import bills under letters of credit or instalments under deferred payment carried are overdue for less than 3 months; (3) bills not exceeding 10% to 15% of the total out standings in the bills purchased or discounted account of the borrower are overdue for payment for a period of less than 3 months and refund in respect of unpaid bills is not forthcoming immediately. (c) Advances recalled, i.e., where the repayment is highly doubtful and revival of the unit is not considered worthwhile and a decision has been taken to recall the advances. (d) Suit-filed accounts, i.e., where legal action or recovery proceedings have been initiated and suits are pending for recovery of advances. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to income account before the asset became non-performing, and remaining unrealized, should be reversed or provided for in the current accounting period. Therefore, there is a communication issued by the Reserve Bank of India to all commercial banks calling upon to follow the Guidance Note on Accounting for Leases issued by the ICAI, making it clear that their earlier instructions on treatment of leasing activity on par with loans and advances would continue to remain in force. Therefore, the said communication/guidelines has no bearing in understanding Section 43D of the Act. 13. When the legislature has expressly used the words income by way of interest in Section 43D of the Act, if we had to include in that Section the unrealized rentals from equipment leasing activity, it would amount to the Court rewriting the Section, which is impermissible in law. In fact, the authorities have not carefully read the aforesaid statutory provision. It is a case of misreading the provision. A liability under the Income Tax Act cannot be foisted on the basis of analogy. Unless the statute provides, no tax to be levied. Similarly, when the statute expressly provides how the income recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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