9911796707
TMI Blog2016 (3) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... branches claimed under section 36(1)(vii). 2. That the learned CIT(A) has erred in holding that the debts written off by the non-rural branches of the bank are also to be adjusted against the provision allowed u/s. 36(1)(viia). 3. That the Learned CIT(A) has erred in confirming the disallowances of Rs. 96,65,00,000 being 10% of the doubtful and loss assets claimed under 3rd proviso to section 36(1)(viia). 4. That the learned CIT(A) has erred in holding that claim of the bank is without proper basis and evidence. 5. That the Learned CIT(A) has erred in confirming the disallowances of Rs. 30,00,00,000 claimed under section 36(1)(viii) for creation of special reserve under the said provision. 6. That the Learned CIT failed to appreciate the fact that bank is financial corporation and a public Company. 7. That the Learned CIT(A) has erred in confirming the addition of Rs. 9,68,139 being provision for intangible asset in computing "Book Profit" under section 115JB." 4. First of all, Ld. AR of assessee has not pressed for adjudcitation ground No. 7, hence, same is dismissed as not pressed. 5. The first and second ground relate to the common issue raised by assessee in this appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the legislature is clear when the section was allowing the provision made on total income. It includes all types of advances made by the Bank. If the intention of the legislature was only to allow provision made for rural advances, then this concession could not have been given. Under section 36(1)(vii) of the Act, deduction on account of bad debts which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of such debts to the provision for bad and doubtful debt account under section 36(1)(viia) of the act as required by section 36(2) (v) of the Act. This was clarified by CBDT in Instruction no. 17/2008, Dated: November 26, 2008. As seen from record the appellant complied with the provisions of section 36(1)(vii) by adjusting the bad debts written off by rural branches against the provision allowed u/s 36(1)(viia). But as per IT Act, section 36(2)(v), the bad debts written off should be adjusted against the provision allowed u/s 36(1)(viia). In my opinion, the assessee bank is entitled to deduction under clause (vii) only of the difference between the provision made under clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words'ten percent' had been substituted. In the third proviso the language says at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions which clearly means it is an additional deduction which clearly states that it is not an additional deduction, but an optional deduction. The claim of the appellant is without proper basis and evidence. Hence the clam of the appellant is rejected." Being aggrieved by this order of Ld. CIT(A) Assessee preferred second appeal before us. Shri B.K.Ghosh and Shri Pijush Dey, both Ld. Authorized Representatives appearing on behalf of assessee and Shri G.Mallikaujana, Ld. Departmental Representative appearing on behalf of Revenue. 7. We have heard rival contentions of both the parties and perused the materials available on record. Before us the ld. AR submitted that the provision for doubtful debts as allowable under section 36(1)(viia) is in respect of provision made against advances of rural branches only. The bad debts in respect of advances of non rural branches is to be allowed fully u/s 36(1)(vii) and as such it is not required to be set off against provision for bad debts claimed u/s 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the urban branches written off in the books and also the difference between the amount written off in the books relating to advances made by the rural branches during the previous year relevant to the assessment year and credit balance in the provisions for bad and doubtful debt account relating to advances made by the rural branches made in clause (viia). It was held that if the bad debt written off relates to debts other than for which provision is made under clause (viia), such debt will fall squarely under the main part of clause (vii) which is entitled to deduction and in respect of that part of the debt with reference to which the provision is made under clause (viia), the provisos will operate to limit the deduction to the extent of the difference between that part of debt written off in the previous year and the credit balance in the provision for the bad and doubtful debts accounts made under clause (viia). Further, the Special Bench of the ITAT in the case of Catholic Syrian bank Ltd. (supra) has held that the debts actually written off which do not arise out of the rural advances are not affected by the proviso to clause (vii) and that only those bad debt which arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that of the one decided by the Tribunal, we find no reason to deviate from the orders of the Tribunal taken in assessee's own case. Hence, common ground No. 3 & 4 raised by assessee are dismissed. 10. The fifth and sixth grounds relate to the common issue raised by the assessee in this appeal is that ld. CIT(A) erred in confirming the disallowances of Rs. 30 crores claimed u/s 36(1)(viii) of the Act for the creation of special reserve. 11. During the year the assessee has claimed the deduction of Rs. 30 crores in terms of the provisions provided u/s 36(1)(viii) of the Act by creating a special reserve for its long term finance business. This deduction is available to a financial corporation engaged in long term finance for industry, agricultural and infrastructure facility. The financial corporation has been described to include a public company and a government company. On query by the AO, the assessee submitted that as per section 11 of Banking Companies Act, 1970, a Nationalized Bank is an Indian company for the purpose of Income Tax Act. Besides the Government of India holds more than 51% shares of the Bank, so it can also be regarded as Government Company. However the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequently, the deduction was disallowed. Now let us examine whether the deduction specified under section 36(1)(viii) of the Act is available to the present assessee i.e. Allahabad bank. The relevant portion of the section 36(1)(viii) of the Act is reproduced below: Explanation.- In this clause,- (a) "specified entity" means,- (i) A financial corporation specified in section 4A21 of the Companies Act, 1956(1 of 1956) (ii) A financial corporation which is a public sector company; (iii) A banking company; (iv) A co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; (v) A housing finance company; and (vi) Any other financial corporation including a public company; (b) ... .... (c) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; From the aforesaid definition we find that the banking company has been duly included in the specified entity to which the provisions of section 36(1)(viii) are duly applicable. Besides the above we are of the opinion that any entity incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
