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TMI Blog2017 (2) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and the same being added to the total income. (C) The learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the provision for bad debts reserve is created year to year by debiting the amount to the profit and loss account and crediting to the provision for bad and doubtful debts account. 2. The solitary issue raised in this appeal is with regard to the disallowance of claim of bad debt amounting to Rs. 5,50,44,192. 3. The brief facts as culled out from the order of the Assessing Officer are that during the course of assessment proceedings, the Assessing Officer noted that the assessee had debited Rs. 1,35,31,333 towards the bad debts reserve, whereas in the computation of income it had claimed bad debts of Rs. 5,50,44,192. The Assessing Officer therefore, disallowed the claim of the assessee on the grounds that bad debts have not been written off to the profit and loss account as required by the provisions of section 36(1)(vii). The reason of disallowance was also that the "bad debts provision account" had a credit balance of Rs. 8.62 crores, and as the amount of bad debts written off was less than the opening balance of the provision, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no question of any double claim, second claim, in the form of bad debts actually written off. Therefore, to my mind the finding of the Assessing Officer is not correct and the appellant is entitled to claim of bad debts. The ground of appeal is therefore allowed.' 1.3 I am in agreement with the decision of my predecessor that keeping in view the facts of the matter that the appellant had not claimed the provision under section 36(1)(viia), it was not required to debit the write off to the said provision. In this regard, I find that I am also supported by the decision of the Cochin Bench of the Tribunal in the case of Kannur District Co-op. Bank Ltd. v. Asst. CIT [2013] 1 ITR (Trib)-OL 212 (Cochin) ; [2012] 136 ITD 102 (Cochin)." 6. But with regard to the second limb of the objection made by the Assessing Officer that the amount should be debited in the profit and loss account which was not done by the assessee since the amount was debited to the account of the provisions only and not to the profit and loss account, the learned Commissioner of Income-tax (Appeals) did not agree with the submission of the assessee and on this ground, he rejected the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT [2012] 343 ITR 270 (SC) wherein it was held that the provisions of section 36(1)(vii) and section 36(1)(viia) of the Act are distinct and independent items of deduction and operate in their respective fields. Reliance was also placed upon the judgment of the Hon'ble Supreme Court in the case of Deputy CIT (Assessment) v. Karnataka Bank Ltd. [2012] 349 ITR 705 (SC) wherein it was held that scheduled commercial banks are entitled to benefit of write off of irrecoverable debts under section 36(1)(vii) in addition to deduction of provision for bad and doubtful debts under section 36(1)(viia). Following the judgments were also relied upon by the learned counsel in support of this proposition : 1. South Indian Bank Ltd. v. CIT [2003] 262 ITR 579 (Ker). 2. Bank of Baroda v. Asst. CIT (I. T. A. No. 2927/Mum/2011, dated July 25, 2014). 3. Andhra Pradesh State Co-operative Bank Ltd. v. Addl. CIT [2014] 36 ITR (Trib) 131 (Hyd). 4. Asst. CIT v. State Bank of Travancore [2008] 306 ITR (AT) 128 (Cochin); [2009] 121 TTJ (Cochin) 418. 5. CIT v. Bank of Rajasthan Ltd. [2002] 255 ITR 599 (Raj); [2002] 124 Taxman 781 (Raj). 8.1. It was also submitted by the learned counsel that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of provision for bad and doubtful debts under section 36(1)(viia). It was informed that since the assessee was not having any rural advances, it was not eligible for the benefit of deduction under section 36(1)(viia). Under these circumstances, the assessee made claim on account of bad debts under section 36(1)(vii) as normal assessee, i.e. an assessee other than a bank. But, the Assessing Officer denied the benefit of deduction, firstly for the reason that the assessee cannot claim double deduction. However, this objection was rightly removed by the learned Commissioner of Income-tax (Appeals) by observing that in case the assessee has not made claim under section 36(1)(viia), then the assessee was entitled to claim deduction under section 36(1)(vii). The assessee has furnished the following brief note in this regard before us : "With reference to our scrutiny assessment we have to state that we have claimed a sum of Rs. 5,50,44,192 as bad debts in the computation of total income. The statement showing the name of the parties, address, PAN No. (wherever available), account number and the amount written off being submitted. The bank makes a provision for bad and doubtful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of any bad debt or part thereof is written off as irrecoverable in the accounts of the assessee for the previous year. Thus, in the case before us, the bad debt has been written off in the account in the year before us as is evident from the fact that when the amount was credited in the respective debtors' account, the debtors were reduced to that extent. Further, the profit and loss account has already been debited with the corresponding amount as per the accounting procedure followed by the assessee as narrated above. Thus, both the conditions stand fulfilled. The second condition was fulfilled in the year before us. Thus, in our view, the assessee became eligible to claim deduction on account of bad debts in the year before us. Under these circumstances, we find that the assessee is principally eligible to claim bad debts in the year before us. 12. Having held so, let us now analyse further facts in this regard. It is noted that the assessee has submitted a party-wise list of debtors showing that an amount aggregating to Rs. 5,50,44,192 has been written off in respective debtors' accounts. But, as per the reconciliation submitted, the net amount credited in debto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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