TMI Blog2020 (11) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted addition - HELD THAT:- There is no dispute that the Assessee was an eligible entity and that to the extent of 20% of the profits derived from the eligible business, the Assessee was entitled to claim deduction u/s.36(1)(viii). A perusal of the CIT(A) order shows that the relief allowed by the CIT(A) to the assessee is based on the decision of Karnataka State Finance Corporation [ 1985 (10) TMI 5 - KARNATAKA HIGH COURT ] - CIT(A) has not given a factual finding as to how the deduction claimed by the Assessee is in accordance with the statutory provisions - since no finding has been given by the CIT(A) as to the basis on which the relief was given by the CIT(A), we deem it fit and proper to set aside the order of the CIT(A) and remand to the AO for fresh consideration the question of proper deduction to be allowed u/s 36(1)((viii) - Appeal by the revenue is allowed for statistical purposes. - ITA No.2054/Bang/2017 - - - Dated:- 10-9-2020 - Shri N.V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Appellant : Shri Pradeep Kumar, CIT(DR)(ITAT), Bengaluru. For the Respondent : Shri S.V. Ravishankar, Advocate ORDER P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king any deduction under clause (viia) of Sec.36(1) of the Act towards provisions for bad and doubtful debts; (ii) 10% of the Aggregate average advances made by rural branches of the bank computed in the manner prescribed. The Assessee claimed a sum of ₹ 13,34,67,416 towards provision for bad and doubtful debts @7.5% of the total income and a sum of ₹ 367,91,99,569/- towards provision for bad and doubtful debts in respect of aggregate average advances made by the Assessee s rural branches, in all an aggregate sum of ₹ 381,26,66,985/-. U/S.36(2)(v) of the Act the condition for claiming deduction u/s.36(1)(viia) of the Act is that the sum claimed as deduction should be debited to the provision for bad and doubtful debts account. There is no discussion in the order of assessment as to whether the sum claimed as deduction u/s.36(1)(viia) of the Act had been debited to the provision for bad and doubtful debts account. The question that the AO ought to have analysed is as to whether the assessee can claim deduction u/s.36(1)(viia) of the Act without debiting the same to the provision for bad and doubtful debts account. 5. The AO however proceeded to discuss the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the ITAT Bangalore in the case of Syndicate Bank Vs. DCIT (2014) 150 ITD 0103 (Bangalore), wherein the Hon ble ITAT Bangalore Bench preferred to follow the view taken by the Hon ble Punjab Haryana High Court in the case of State Bank of Patiala (supra) rather than the decision of the Syndicate Bank (supra) of the Bangalore Bench relied upon by the learned CIT(A) in giving relief to the Assessee on this issue. The ld. counsel for the assesses submitted that the decision of the Bangalore Bench of ITAT in the case of Syndicate Bank (Supra) should be followed by the Tribunal in preference to the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra)and in this regard submitted that the decision of co-ordinate Bench of the Tribunal should be followed in preference to the decision of non jurisdictional High Court decision. In this regard, the ld counsel for the assessee placed reliance on the decision of the Hon ble Karnataka High Court in the case of Patil Vijayakumar Others Vs. Union of India 151 ITR 48 (Kar). 8. We have considered the rival submission. The provisions of Section 36(1)(viia)(a) of the Act lays down as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Syndicate Bank (supra) 150 ITD 103 (Bang.) noticed that the ITAT Bangalore Bench in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered in the case of Canara Bank in ITA No.58/Bang/2004 dated 9.6.2006 considered the decision of the ITAT in the case of Syndicate Bank 78 ITD 103(Bang) and the decision of the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala (supra) and held that the decision rendered by the Hon ble High Court has to be followed. The above decision though of a non jurisdiction High Court was followed as the said decision of the Hon ble High Court was rendered after the decision in the case of Syndicate Bank 78 ITD 103 (Bang.). The Tribunal held that Judicial discipline demands that the Tribunal should follow the later decision which has considered both the decisions on the issue. The Tribunal following the said decision held deduction on account of Provision for Bad and Doubtful Debts u/s.36(1)(viia) of the Act has to be allowed only to the extent such provision is actually debited in the Profit Loss Account by the Assessee for the relevant previous year. We therefore respectfully following the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation.-In this clause,- ( a ) specified entity means,- ( i ) a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956)71; ( ii ) a financial corporation which is a public sector company; ( iii ) a banking company; ( iv ) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; ( v ) a housing finance company; and ( vi ) any other financial corporation including a public company; ( b ) eligible business means,- 72 [(i) in respect of the specified entity referred to in sub-clause (i) or subclause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for- ( A ) industrial or agricultural development; ( B ) development of infrastructure facility in India; or ( C ) development of housing in India;] ( ii ) in respect of the specified entity referred to in sub-clause (v) of clause (a), the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 36(i)(viia) ₹ 177.96 crores Add: Deduction created and claimed and Eligible under u/s 36(i)(viii) ₹ 11.52 crores Total income from business eligible for deduction Rs. 184.48 crores Total advance as on 31.03.2014 (before provision for NPA) ₹ 6481.52 crores Eligible advances as on 31.03.2014 as per list enclosed ₹ 2123.29 crores % of eligible advance to total advance 32.76% Total income as worked out above (20.00% of ₹ 189.48 crores) ₹ 37.90 crores Profit from eligible business, at 32.76% of above ₹ 12.41 crores Reserve created and deduction claimed ₹ 11.52 crores 12. But the learned assessing officer worked out the deduction u/s 36(i)(viii) of the Act in the following manner and allowed the claim of the appellant to extent of ₹ 4,54,37,000 :- Total Advances made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and percentage of eligible advances at 32.75%. but while arriving at the total income he has taken the figure at ₹ 962,35,48,000/- and deducted expenses of ₹ 89,30,00,59,000/- and net profit at ₹ 69,34,89,000/- whereas the assessee arrived at the total income at ₹ 37.90 cr and profit from eligible business at 32.76% i.e. ₹ 12.41 cr and deduction claimed u/s. 26(I)(viii) at ₹ 11.52 cr against ₹ 4,54,37,000/- arrived at by the AO. 21. The AO should have elaborated and given his conclusive findings as to how he has arrived at the deduction to be allowed u/s. 36(I)(viii) at ₹ 4,54,37,000/- as against ₹ 11,52,00,000/-. 22. The assessee, in the argument, states that, the method of calculation of deduction u/s.36(1)(viii) by the AO is neither as per section 36(1)(viii) nor as per the decision of Hon'ble High Court of Karnataka i.e. the jurisdictional High Court in the case of Karnataka State Finance Corporation Vs. CIT (1988) 174 ITR 206. The Karnataka High Court in this case has given the definition of total income based on section 2(45) of the Act. Total income as per section 2(45) means the total amount of income referred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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