TMI Blog2021 (7) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... essee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee would be entitled to deduction of the amount for which provision is made in the books of accounts. The assessee is therefore entitled to deduction subject to the limit mentioned in Section 36(1)(viia) of the Act. The substantial Questions of law Nos.1 and 3 framed by this Court, are substantially answered by this Court in I.T.A. [ 2020 (2) TMI 1020 - KARNATAKA HIGH COURT] and therefore, the said questions are answered in favour of the revenue and against the assessee. The Tribunal was right in holding that the deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forwards losses. Decided in favour of the revenue Deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forwards losses - a plain reading of section 36(1)(viia) of the Act, it is clear that the amount of deduction at the rate of 7.5% is to be calculated with reference to total income computed under the head profits and gains of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee was taken up for scrutiny and the assessing officer passed an order dated 26.12.2013 restricting the deduction in the same manner as done for the assessment year 2011-12. 4. Being aggrieved by the aforesaid orders of assessment, the assesse filed appeals before the Commissioner of Income Tax (Appeals), who, confirmed the orders of assessment passed by the Assessing Officer in terms of the order dated 30.12.2016. 5. Being aggrieved by the aforesaid, the assessee filed appeals before the Tribunal. The following grounds were urged before the Tribunal: i) The learned CIT (A) erred in upholding the disallowance to the extent of ₹ 92,14,87,404/- under Section 36 (1)(viia) of the Income Tax Act, 1961; ii) The learned CIT (A) erred in holding that the deduction should be restricted to the provision made in the books of accounts; iii) Without prejudice to the above, the learned CIT (A) erred in holding that the provision made in the subsequent years cannot be considered for allowing deduction under Section 36 (1)(viia) during the relevant assessment year under Appeal; iv) The learned CIT(A) erred in holding that the brought forward l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be limited to the amount actually provided for in the books; ii) the Tribunal was right in holding that the deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forwards losses; and iii) the Tribunal was right in not adjudicating on the Appellant s alternate contention that the shortfall in the present years between the upper limit allowable under Section 36(1)(viia) of the Act and the actual amount created as a provision in its books in the present years ought to nevertheless be allowed as a deduction in the present years on account of the provision created in the subsequent years that was in excess of such alleged shortfall and as such deemed to have been made good? 11. In so far as question Nos.1 and 3 are concerned, it is relevant to note Section 36(1) (viia) of the Act, 1961, which is extracted below: (viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the provision relating to deduction in respect of provisions made by scheduled commercial banks for bad and doubtful debts relating to advances by rural branches to non-scheduled commercial banks as well. For this purpose, the expression non-scheduled Bank means a banking company as defined incl. (c) of S.5 of the Banking Regulation Act, 1949 but which is not a scheduled bank. 13. Thus, a conjoint reading of provision contained in Section 36(1)(viia) and explanatory note dated 30.06.1982, it is evident that deduction provided in Section 36(1)(viia) shall be allowed in respect of the matters dealt therein, in computing the income. The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the accounts of the assessee. The aforesaid Section mentions the maximum amount for which such a provision should be made. If a provision is made in excess of the limits prescribed under the Section, the assessee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee would be entitled to d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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