Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Dy. Commissioner of Income Tax Versus M/s State Bank of Hyderabad

2016 (8) TMI 50 - ITAT HYDERABAD

Deduction u/s 36(1) - provision for bad and doubtful debt - Held that:- Considering the reasoning of the AO in confining the deduction claimed u/s 36(1)(viia) only to the provision made towards rural advances, in our view, is not in accordance with the statutory provision. On the other hand, the view expressed by ld. CIT(A) while allowing assessee’s claim of deduction is as per the statutory provision. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in allowing assessee’s cl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has raised the following grounds: 1. The ld. CIT(A) erred both in law and on facts of the case 2. The ld. CIT(A) erred in allowing separate deduction U/s 36(1)(vii) of ₹ 337,30,00,000/- when the provision U/s 36(1)(viia) is inclusive of urban advances, which amounts to double deduction and not permissible in law. 3. The ld. CIT(A) ought to have appreciated that the decision of Catholic Syrian Bank Vs. CIT is not applicable to the facts of the case of the assessee was inclusive of the urba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons made towards Rural and Non-rural advances U/s 36(1)(viia) of the Act amounting to ₹ 1067,04,71,985/- being bad and doubtful debts @ 7.5% of total income of ₹ 233,49,08,249/- and rural branch advances @ 10% of the aggregate of ₹ 833,55,63,736/-. The provisions created by the assessee in the books of account amounting to ₹ 1041.63 crores towards rural branches and also for nonrural branches. The ld A.O. after distinguishing the judgment of Hon ble Supreme Court in the c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Hon ble Supreme Court clearly held that clause (viia) in Sub Section 1 of Section 36 was inserted to promote the rural banking and to assist the scheduled commercial banks in making adequate provisions against the risks of their rural advances. The Hon ble Supreme Court expressly stated that the deduction is limited to a specific percentage of the aggregate average advances made by the rural branches computed in the manner prescribed by the IT Rules. Therefore, what follows is that the Hon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of deduction under section 36(1)(viia) is concerned the assessee has made a provision of ₹ 1041.63 crores in its books of account (page 107 of Annual accounts) towards bad debts. This provision includes ₹ 980.97 crores for non-rural branches and ₹ 60.66 crores for rural branches. As per the discussion in the preceding paras, the amount of urban bad debits written off in the books of account is not controlled or limited in any way by the proviso to clause (vii), which means the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 450/Hyd/2015 order dated 14/08/2015 has allowed the appeal of the assessee. Relevant paragraph of the order of ITAT relied upon by the ld CIT(A) is as under:- 39. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. On careful analysis of section u/s 36(1)(viia) of the Act, it is very much clear that assessee being a schedule bank can claim deduction in respect of provision for bad and doubtful debts made in its b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made a provision for bad and 22 ITA Nos. 450, 498 & 499 /Hyd/2015 State Bank of Hyderabad doubtful debts in its books of account and secondly the maximum deduction allowable is to the extent of 7.5% of the total income and 10% of the aggregate average advances made by rural branches of such bank. On a reading of the provisions of section 36(1)(viia), as it stands now, it is very much clear that there is no restriction imposed under the said provision to indicate that assessee cannot make a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ue import of section u/s 36(1)(viia) as it stands in the present form. For better clarity, we thought it proper to reproduce the observations of the ITAT Bangalore Bench in extenso, which are as under: 34. It can be seen from the history of Sec.36(1)(viia) of the Act that at stage-I the deduction was allowed in respect of any provision for bad and doubtful debts made by a scheduled bank in relation to the advances made by its rural branches. At this stage the PBDD had to be linked to the advance .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to advances made by Bank s rural branches and can be in relation to any debt. PBDD need not be in relation to rural advances but can be in relation to any advances both rural and non-rural advances. The two percent AAA made by rural branches of such banks had to be computed and the PBDD made in books has to be in relation to rural advances. The other eligible sum which can be considered for deduction u/s.36(1)(viia) of the Act viz., ten per cent of the total income (computed before making any d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowed earlier was enhanced. The enhancement of the deduction was consequent to representation to the Government that the existing ceiling in this regard i.e. 10% of the total income or 2% of the aggregate average advances made by the rural branches of Indian banks, whichever is higher, should be modified. Accordingly, by the Amending Act, the deduction presently available under cl. (viia) of sub-s. (1) of s. 36 of the IT Act has been split into two separate provisions. One of these limits the d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come was available to banks which did not have rural branches. 36. Therefore after 1.4.1987, scheduled or non-scheduled banks having rural branches were allowed deduction., (a) upto 2% (now 10%) of the aggregate average advances made by such branches and (b) Schedule or non-scheduled banks whether it had rural branches or not a deduction upto 5% of their total income in respect of provision for bad and doubtful debts. Even under the new provisions creating a PBDD in the books of accounts is nece .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the maximum deduction permissible u/s 36(1)(viia) of the Act had to be done. Firstly it has to be ascertained as to what is 10% of the aggregate average advances made by rural branches, if the Bank has rural branches, otherwise that part of the deduction u/s.36(1)(viia) of the Act will not be available to the bank. The second part of the deduction u/s.36(1)(viia) has to be ascertained viz., 7.5% seven and one-half per cent of the total income (computed before making any deduction under this c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vances) does not arise for consideration. As can be seen from the aforesaid observation of the Bangalore Bench, it has been held in clear terms that actual provision made by assessee on account of provision for bad and doubtful debt irrespective of the fact whether it is rural or non-rural, has to be seen while examining assessee s claim of deduction u/s 36(1)(viia). If the bank does not have rural branch, it will not get deduction relating to 10% of aggregate average advances made by rural bran .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version