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2016 (5) TMI 620 - ITAT CHENNAI

2016 (5) TMI 620 - ITAT CHENNAI - TMI - Disallowance of deduction u/s.36(1)(viia) - Held that:- 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 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 (2012 (2) TMI 262 - SUPREME COURT OF INDIA ) and supporting j .....

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directed against common order of Commissioner of Income Tax (Appeals) VII, Chennai dated 03.6.2014 for the above assessment years passed u/s.143(3) r.w.s. 147 and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). Since the issue in these two appeals is common in nature, hence these appeals are combined, heard together, and disposed of by a common order for the sake of convenience. 2. The grounds of appeal raised by the assessee are under :- 2. The Learned Commissioner of In .....

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hat 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) .....

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4. The Brief facts of the case that the assessee is a Cooperative bank and is in the business of banking and providing credit facilities to its members filed Return of income for the assessment year 2008-09 on 29.09.2008 admitting total income of ₹ 26,38,40,723/-. The Return was processed u/s.143(1) of the Act and subsequently, the Assessing Officer on reason to believe that the assessee bank has claimed excess deduction u/s.36(1)(viia) of the Act and issued notice u/s.148 on 23.03.2011. .....

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6(1)(viia) of the Act being 7.5% of gross total income. The ld. Assessing Officer based on the submissions on the income tax adjustment statement, disallowance and compliance of stipulated conditions that assessee bank is eligible for adhoc deduction irrespective of amount of provision in profit and loss account and called for produced books of accounts, bank accounts statements, details of sundry debtors and ledger accounts. The ld. Assessing Officer relied on the decision of Punjab and Harayan .....

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ude that bank has debited ₹ 95,50,416/- as provision for Bad and doubtful debts in the books of accounts but at the time of filing of return of income made an disallowance of ₹ 35,50,416/- since the balance provision was not disallowed, the Assessing Officer made addition of ₹ 60,00,000/- to the retuned income alongwith ₹ 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 .....

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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 Taxmann.com 282. The .....

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ng Officer has not allowed claim of bad and doubtful debts to the extent of provision and directed the Assessing Officer to allow deduction of ₹ 95,50,416/- u/sec. 36(1)(viia) of the Act. The ld. Assessing Officer disallowed ₹ 2,13,92,491/- in the assessment with reference to the provisions as under:- To find out whether the claims of the assessee is correct or not, we have to read the relevant provisions of Income Tax Act which is reproduced as under:- Other deductions:- 36(1) The d .....

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nt not exceeding seven and onehalf percent of the total income computed before making any education under this clause and Chapter VIA and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner: 5.2 The Finance Act 2007 extended the benefit of deduction u/s. 36(1)(viia) of the Act to a co-operative bank. The assessee being a co- operative bank is therefore entitled for the deduction u/s 36( l)(viia) of the Ac .....

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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 ₹ 1,06,u3,566/- only in the Income and Expenditure ale under the head " .....

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provision of Rs. 1, 19,36,000/- for bad and doubtful debts, its claim for deduction uls 36(1)(viia) of the Act had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this Court. " The assessee s reliance on the decision of Catholic Syrian Bank vs. CIT 18 taxmann.com 282 is of no help and not applicable to the fact of t .....

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Before us, the ld. Authorised Representative of the assessee reiterated the submissions of the assessment proceedings and appellate proceedings. The ld. Authorised Representative main contention and arguments on the allowability of deduction u/s.36(1)(viia) of the Act and the grounds were the ld. Commissioner of Income Tax (Appeals) has dismissed the appeal without distinguishing the ratio relied in the case of Catholic Syrian Bank (supra) observed at para 29 of the order at page 16 of paper bo .....

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ot;how to write off. If an assessee debits an amount of doubtful debt to the P&L account and credits the asset account like sundry debtor's account, it would constitute a write-off of an actual debt. However, if an assessee debits "provision for doubtful debt" to the P&L account and makes a corresponding credit to the "current liabilities and provisions" on the liabilities side of the balance sheet, then it would constitute a provision for doubtful debt. In the la .....

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ranches. 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 provi .....

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e ceiling prescribed as stated above. Lastly, the provision for NP A created by a scheduled bank is added back and only thereafter deduction is made permissible under Section 36(1)(vii-a) as claimed.:' The deduction u/secs. 36(1)(vii) and 36(1)(viia) of the Act are distinct and separately allowed. The ld. Authorised Representative relied on the definition of deduction and paper book consists details of provision for nonperforming asset (NPA) and bad debts in the books of accounts. Further ar .....

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epresentative relied on the orders of the Commissioner of Income Tax (Appeals) and findings of the Assessing Officer. 8. We heard the rival submissions and perused the material on record and judicial decisions. The contention of the ld. Authorised Representative that the assessee is eligible for deduction u/s.36(1)(viia) of the Act as per ratio laid down in Catholic Syrian Bank (supra) and in assessee s own case the decisions has been considered. Basically Co-operative bank is eligible for deduc .....

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