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TMI Blog2017 (9) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The learned CIT was in error on facts as well as in law in directing disallowance under section 40(a)(ia) ignoring the well settled position of allowability of outstanding expenses under the mercantile system of accounting as laid down by the Supreme Court in CIT Vs. A. Krishnaswami Mudaliar 53 ITR 122 (SC). 2.2 The learned CIT in directing the disallowance ignored large number of judicial decisions relied upon by the assessee including the decision in assessee's own case on the same issue in IDBI v ITO 107 ITD 45 (Mum). 2.3 The learned CIT took the view contrary to CBDT circular No. 288 dated 22.12.1980 and Circular No. 03/2010 dated 02.03.2010 explaining the scope of the Explanation inserted in certain sections (Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book profit under section 115JB were computed at Rs. 3694,52,39,137/-. The assessment was completed under section 143(3) at a total income of Rs. 3313,47,80,150/- under the normal provisions of the I.T. Act while the books profit was computed under section 115JB at Rs. 3884,77,25,409/-. The CIT called for the records of assessment and noted that the assessee has not deducted any tax in respect of provision for expenses of Rs. 58,25,41,577/- for which bills were not required. The AO allowed the said expenditure while the said expenditure, in the opinion of the CIT, was in the nature of contingent liability. Ultimately the CIT was of the view that since the assessee failed to deduct TDS the AO should have disallowed the said expenditure und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the expenditure amounting to Rs. 58,25,41,577/- represents the liability crystallised during the year and therefore no disallowance can be made on the basis that the assessee had not made default under section 40(a)(ia). Our attention was drawn towards section 40(a)(ia) especially the proviso 1 thereto which provides that in case the assessee the assessee deducted TDS and paid the same before the due date for filing the return of income, no disallowance can be made. The learned A.R. before us submitted the details of all the expenses alongwith details of the tax deducted and the proof for payment of TDS. From the details filed before us it is apparent that the assessee had paid the tax deducted out of the sum of Rs. 58,25,41,577/- before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the provisions of Section 36(i)(vii) as well as provisions of Section 36(1)(viia). We noted that both the provisions have been elaborately interpreted by the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT 343 ITR 270 wherein the Hon'ble Supreme Court held that the provisions as envisaged under section 36(1)(viia) is meant for rural branches only. We also noted that by Finance Act 2013 w.e.f. 1st April, 2014. The said explanation read as under: - "Explanation 1.-For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee; Explanation 2.-For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of the decision of Hon'ble Supreme Court." Similarly, we noted that "B" Bench of this Tribunal in the case of Bank of India vs. ACIT in ITA No. 2966/Mum/2014 vide order dated 13.07.2016 took the same view following the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT 343 ITR 270. No contrary decision was brought to our knowledge. In view of this fact we set aside the order of the CIT and direct the AO not to make any disallowance on setting off of opening balance for bad and doubtful debts created in respect of advanced made by rural branches amounting to Rs. 103,68,55,666/-. Even otherwise since the assessment related to A.Y. 2012-13 and the return has been filed on 26.09.2012, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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