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TMI Blog2008 (3) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... ang/1997 and I. T. A. No. 127/Bang/1997 for the assessment years 1993-94 and 1994-95, respectively. The appeals were also admitted on the substantial questions of law which have been formulated by the Revenue in its appeal, but after having heard learned counsel for the parties and after perusal of the records, we are of the opinion that only the following substantial questions of law would arise in these appeals : "1. Whether the Appellate Tribunal was correct in holding that deduction under section 36(1)(vii) are allowable independently and irrespective of the provision for bad and doubtful debts created by the assessee in relation to the advances of the rural branches subject to the limitation that an amount should not be deducted twice under sections 36(1)(vii) and 36(1)(viia) simultaneously ? 2. Whether the Tribunal was correct in applying Circular No. 258, dated June 14, 1979, to the assessment year 1993-94 though section 36(2) stood amended by the Finance Act, 1985, with effect from April 1, 1985 ?" 3. For the sake of convenience, facts appearing in I. T. A. No. 480 of 2003 are being taken into consideration. 4. The facts shorn of unnecessary details are mentioned herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (2), the amount of any debt, or part thereof, which is established to have become a bad debt in the previous year : Provided that in the case of bank to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause; (viia) in respect of any provision for bad and doubtful debts made by a scheduled bank not being a bank approved by the Central Government for the purposes of clause (viiia) or a bank incorporated by or under the laws of a country outside India or a non-scheduled bank, an amount not exceeding ten per cent. of the total income (computed before making any deduction under this clause and Chapter VI-A) or an amount not exceeding two per cent. of the aggregate average advances made by the rural branches of such bank, computed in the prescribed manner, whichever is higher." 7. Clause (viia) had again undergone a change by the Income-tax (Amendment) Act, 1986, from April 1, 1987, the relevant portion of which reads as follows: "(viia) in respect of any provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s particularly to agriculturists, certainly the assessee-bank will prefer to make provision for bad debt in respect of advances made in the rural branches. If an assessee makes a provision under clause (viia) in respect of bad debts relating to rural advances only, to deny such an assessee the benefit provided under clause (vii) which is available to all other assessees who are engaged in money-lending business will result in discrimination without reason. The Legislature cannot be presumed to have intended such a result in the case of scheduled banks. The intention of the Legislature in enacting the proviso to clause (vii) of section 36(1) and clause (v) to section 36(2) simultaneously is only to see that a double benefit in respect of the same bad debt is not being given to a scheduled bank, It is only for the said purpose, the proviso and clause (v) were introduced simultaneously by the Amendment Act, 1985, with effect from April 1, 1985. According to us, the scope of the proviso to clause (vii) of section 36(1) of the Act is only to deny the deduction to the extent of bad debt written off in the books with respect to which the provision was made under clause (viia) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the matter, we have no doubt that questions projected are to be answered in favour of the assessee and against the Revenue. 12. However, on account of lack of evidence we are not able to grant full relief to the assessee as the amount of Rs. 38,28,836 does not categorically reflect whether this amount was pertaining to rural debts or urban debts, even though before the Tribunal, it was contended by learned counsel for the assessee that the aforesaid amount pertained to other than rural debts, but the same was not substantiated by any other evidence in this regard. In the absence of evidence, it could not be recorded by the Tribunal or by other authorities below whether the amount of Rs. 38,28,836 reflected as other than the rural debts. 13. Confronted with this situation, learned counsel for the assessee contended that let the matter be remanded to the Tribunal to examine this aspect of the matter, where the assessee would also be able to substantiate whether the aforesaid amount pertains to other than rural debts. 14. In this view of the matter, as mentioned hereinabove, the questions of law referred to above are answered in favour of the assessee and against the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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