TMI Blog2008 (3) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the appellants and Sri G. Sarangan, learned senior counsel for the respondent. This order shall also govern disposal of I. T. A. No. 481 of 2003, which is between the same parties. The factual aspect and legal scenario in both the appeals being similar, we have heard learned counsel for the parties in these appeals, analogously and dispose of both the appeals by this common order. 2. The Revenue is before us by filing these appeals under section 260A of the Income-tax Act, 1961 (hereinafter shall be referred to in short as "the Act"), against the order dated July 29, 2003, passed by the Income-tax Appellate Tribunal, Bangalore "A" Bench, in the assessee's appeals I. T. A. No. 50/Bang/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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is established to have become a bad debt in the previous year; (viia) in respect of any provision for bad and doubtful debts made by a scheduled bank or a non-scheduled bank in relation to advances made by its rural branches, an amount not exceeding one and a half per cent, of the aggregate average advances made by such branches, computed in the prescribed manner." 6. Section 36(1)(vii) and (viia), as it stood after the amendment made by the Finance Act, 1985, read as follows : "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28. - (vii) subject to the provisions of sub-section (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 doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeals stand answered by two judgments of the Kerala and Madras High Courts in South Indian Bank Ltd. v. CIT [2003] 262 ITR 579 and CIT v. City Union Bank Ltd. [2007] 291 ITR 144. In the judgment of the Madras High Court the earlier judgment of the Kerala High Court has been elaborately considered. Thus, we would consider the ratio decidendi of the case of the Kerala High Court. After considering the provisions of section 36(1)(vii) and (viia), the following finding has been recorded (page 586): "In other words, as already pointed out, a scheduled bank may be having both urban and rural branches and advances are given from both branches. Having regard to the hazards involved in realising the advances made by rural branches 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so to clause (vii) of section 36(1) of the Act, we are of the view that the matter requires fresh consideration in the light of the said interpretation. Accordingly, we are of the view that the matter must go back to the Assessing Officer for consideration with reference to the interpretation placed by us in this judgment in the first instance. For the said limited purpose, we set aside the orders of the Tribunal and the first appellate authority on this point and direct the Assessing Officer to recompute the deduction available under clause (vii) of section 36(1) of the Act in the light of the interpretation placed by us on the proviso to the said clause under the section. These appeals are disposed of as above." 11. In the aforesaid 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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