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TMI Blog2016 (5) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... k vs CIT decided by Supreme court reported in 18 taxmann.com 282. 2.1 The Ld CIT(A) ought to have considered section 36(1 )(vii) and Section 36(1 )(viia) are independent and cannot be intermingled or read into each other. . 2.2 The Ld CIT(A)grossly erred in not considering the word " Deduction" appearing in the section 36(viia) implies that an expenditure which an Assessee may subtract from Gross Total Income to determine taxable income" 2.3 The Ld CIT(A) failed to appreciate and consider provision already made by the Appellant in the books of account towards for NPA and Bad debt''. 2.4 The Ld CIT(A) grossly erred in not considering the basis of provision to be made for 36(viia) discussed in para 29 of the decision of Catholic Syrian Bank vs CIT decided by Supreme court reported in 18 taxmann.com 282. 2.5 The Learned CIT(A) further erred in stating the Appellant had not passed any provision in the books. 2.6 The Ld CIT(A) ought to considered that the case law relied by the Ld AO in State Bank of Patiala vs CIT reported in 143 Taxman 196 was no longer applicable after the decision of Catholic Syrian Bank vs CIT decided by Supreme court reported in 18 taxmann.com 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer made addition of Rs. 60,00,000/- to the retuned income alongwith Rs. 2,13,92,491/- claimed as deduction u/s.36(1)(viia) of the Act on adhoc basis at 7.5% of gross total income as no satisfactory explanations was furnished in hearing proceedings, assessed total income of Rs. 29,12,33,214/- and raised demand. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). 5. The ld. Authorised Representative contested the action of the Assessing Officer in denying the claim u/s.36(1)(viia) of the Act and ignoring the provision of Rs. 95,50,416/- debited in the books of accounts and erred in not allowing claim based on the decision of State Bank of Patiala (supra). The ld. Authorised Representative also challenged the validality of reassessment proceedings and filed written submissions and supported the case with judicial decisions. The ld. Commissioner of Income Tax (Appeals) considered the additional grounds were the ld. Assessing Officer erred in not allowing deduction u/s.36(1)(viia) of the Act as per return of income and the deduction should be allowed based on the decision of Apex Court in the case of Catholic Syrian Bank vs. CIT 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the same amount is made in this accounts. In the assessee's case, provisions was made only to the extent of Rs. 1,06,63,566/- and the same was allowed. The assessee's further claim of Rs. 6,54,46,855/- was negative by the Assessing Officer. The assessee contended that the provision has been debited in the books of accounts and hence the same IS to be allowed as deduction and reliance was placed on the case of SBP vs CIT (2005) 272 ITR 54 (P&H). The contention of the assessee is far from truth since, the assessee debited Rs. 1,06,u3,566/- only in the Income and Expenditure ale under the head "''provisions and reserves made''. It is not known how the assessee placed reliance on the decision of P&H High Court in the case of SBP vs CIT and Another (2005) 272 ITR (54). The decision was actually against the assessee. It was clearly held as under: Making of a provision for bad and doubtful debt equal to the amount mentioned in this section is a must for claiming such deduction." "We are, therefore, satisfied that the Tribunal was right in holding that since the assessee made a provision of Rs. 1, 19,36,000/- for bad and doubtful debts, its claim for deduction uls 36(1)(viia) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entitled to deduction after 1-4-1989. ** ** ** 58. Section 36(1)(vii) provides for a deduction in the computation of taxable profits for the debt established to be a bad debt. Section 36(1)(viia) provides for a deduction in respect of any provision for bad and doubtful debt made by a scheduled bank or non-scheduled bank in relation to advances made by its rural branches, of a sum not exceeding a specified percentage of the aggregate average advances by such branches. 59. Having regard to the increasing social commitment, Section 36(1)(vii-a) has been amended to provide that in respect of provision for bad and doubtful debt made by a scheduled bank or a non- scheduled bank, an amount not exceeding a specified per cent of the total income or a specified per cent of the aggregate average advances made by rural branches, whichever is higher, shall be allowed as deduction in computing the taxable profits. Even Section 36(1)(vii) has been amended to provide that in the case of a bank to which Section 36(1 )(vii-a) applies, the amount of bad and doubtful debt shall be debited to the provision for bad and doubtful debt account and that the deduction shall be limited to the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be passed in the books of accounts for the claims. The ld. Authorised Representative demonstrated the legal aspect of provision for Bad debts and non performing assets and deductions claimed by the bank. Considering the activities of the bank and the provision of NPA and provisions of Bad debts, the judicial decisions and claim u/s.36(1)(viia) of the Act and the decision of Apex Court, the assessee claim of Bad debts in the books of accounts and Finance bill 2013, we are of the opinion the matter needs to be re-examined in the light of the decision of Catholic Syrian Bank (supra) and supporting judicial decisions. So, we remit the issue to the file of the Assessing Officer to verify the claim of the assessee and compliance of the conditions stipulated u/s.36(1)(viia) of the Act based on the decision of the Apex Court and allow the deduction after providing adequate opportunity of being heard to the assessee. However, we make it clear that the assessee is not entitled for deduction towards provision for Bad debts Rs. 60,00,000/- for assessment year 2008-09 and Rs. 1,06,63,566/- for assessment year 2007-08. The appeal of the assessee is partly allowed for statistical purpose. 9. To ..... X X X X Extracts X X X X X X X X Extracts X X X X
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