TMI Blog2018 (12) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... written off were not declined deduction, merely for the reason of the same having not been credited in the party's account; in which context alone, the decision of the Gujarat High Court applies. The learned Standing Counsel for Government of India (Taxes) alertly points out that Gujarat High Court decision as relied on by the assessee is no longer good law in view of the decision in Southern Technologies Ltd. v. Joint CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA]. The very same Section 36(1)(vii) and (viia) came up for consideration before the Hon'ble Supreme Court. The Hon'ble Supreme Court noticed the Explanation brought in by Finance Act, 2001 with retrospective effect from 01.04.1989. Here, the written off amounts have been granted de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises at all on a reading of the assessment order. We will have to compare the figures for both the years to understand the real controversy in the cases. Annexure-C produced in I.T.A.No.361 of 2009 is the assessment order for the year 1993-94. Therein, the assessee had made a claim for ₹ 2,18,56,250/- as amount written off by way of provision in the Profit and loss account in respect of advances considered as irrecoverable . The assessee also relied on the judgment of the Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala v . C.I.T. [ ( 1981) 130 ITR 95 (Guj.) ]. The Assessing Officer [for brevity AO ] found that the same is not applicable to Banks. The AO also found that in the financial year 1993-94, which is the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the subject assessment year. 5. The Tribunal was referring to the proviso inserted to Section 36(1)(viia) by Finance Act, 1999 with effect from 01.04.2000, which made possible deduction in respect of any provision made by a Bank for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by the RBI in this behalf. The assessee's contention is that there was absolutely no reason why the written off amounts be declined, since the same is made under clause (vii) of Section 36(1). In this context, we have to notice Section 36(1)(vii) as it existed then and as it exists now: S.36(1)(vii): ( vii) subject to the provisions of sub-section (2), the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in mind the fact that the AO, for the year 1993-94, had specifically said that a claim has been made in the financial year 1993-94 with respect to written off bad debts coming to ₹ 8,97,66,930/-, in which is included the major component which was claimed as a deduction, being provision made in the relevant previous year. Annexure-C, the assessment order for 1994-95, produced in I.T.A.No.264 of 2009, shows the consideration as below: Accordingly the admissible deduction for bad debts is worked out as under: Amount of bad debts written off - as mentioned above. Rs.8,97,66,930 Less : Provision outstanding in the balance sheet against rural branch advances u/s.36(1) (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97,66,930/-, which is the amount of bad debts of rural advances written off in the said year, the provision made under sub-clause (viia) of Section 36(1) of ₹ 4,63,64,000/- has been deducted. The excess amounts written off in excess of the provision for bad debts under Section 36(1)(viia) is allowed as deduction to the extent of ₹ 4,34,02,930/-. 7. In this context, we revert back to the assessment year 1993-94, where we found that the major portion of the claim made under Section 36(1)(viia) was included in the next assessment year. What remained was ₹ 13,96,250/-. There could be no deduction claimed because obviously even if the said amounts are written off in the said year, it would not exceed the provision under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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