Assessee's Appeal Partially Allowed: Disallowance Deleted, Deductions Granted

The assessee's legal challenge on the reopening of assessment u/s. 147 was dismissed as not pressed. The Tribunal directed the AO to delete the disallowance u/s. 36(1)(vii) for certain assessment years. Additionally, the Tribunal instructed the AO to allow the deduction claimed u/s. 36(1)(viia) for specific assessment years, contrary to the CIT(A)'s decision. The issue of the applicability of section 115JB was sent back to the CIT(A) for further review. Overall, the appeals were partially allowed, with the stay petitions being deemed infructuous.

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Issues Involved:

1. Reopening of assessment u/s. 147 of the Income-tax Act, 1961.
2. Disallowance u/s. 36(1)(vii) of the Income-tax Act.
3. Disallowance of deduction u/s. 36(1)(viia) of the Income-tax Act.
4. Applicability of the provisions of section 115JB of the Income-tax Act.

Summary:

Reopening of Assessment u/s. 147:
The legal issue regarding the reopening of assessment u/s. 147 was not pressed by the assessee at the time of hearing; hence, it was dismissed as not pressed for all the assessment years under consideration.

Disallowance u/s. 36(1)(vii):
The AO disallowed the deduction of bad debts claimed u/s. 36(1)(vii) on the grounds that the assessee did not actually write off the debts in the individual loan accounts and did not charge the amount of bad debts written off to the provision for bad and doubtful debts account. The CIT(A) upheld the AO's decision, citing that the provisions of section 36(1)(viia) apply to the assessee bank and the deduction has to be considered in terms of the proviso to section 36(1)(vii) r.w.s. 36(2). However, the Tribunal, following the coordinate bench's decisions in the assessee's own case, directed the AO to delete the disallowance made u/s. 36(1)(vii) for AYs 2011-12 and 2012-13.

Disallowance of Deduction u/s. 36(1)(viia):
The AO disallowed the deduction claimed u/s. 36(1)(viia) by considering only the fresh advances made during the month by the rural branches for computing the aggregate average advances as per Rule 6ABA. The CIT(A) upheld the AO's view, stating that only fresh advances should be considered to avoid double deduction. The Tribunal, however, following the Karnataka High Court's judgment in the case of Canara Bank, held that the computation of aggregate average advances should include the outstanding loans at the end of each month and directed the AO to allow the deduction claimed by the assessee for AYs 2011-12 to 2013-14.

Applicability of Section 115JB:
The AO held that the provisions of section 115JB are applicable to the assessee bank, making it liable for payment of MAT on its book profits. The CIT(A) upheld this view, noting that the explanation inserted by the Finance Act 2012 applied retrospectively and that the assessee bank, being an Indian company, is liable to pay MAT. The Tribunal, following its decision in the assessee's own case for AY 2014-15, restored the issue to the file of the CIT(A) for fresh examination and decision, considering the effect of section 51 of the Banking Regulation Act and other relevant provisions.

Conclusion:
The appeals were partly allowed for statistical purposes, with the Tribunal directing the AO to delete the disallowance made u/s. 36(1)(vii) and to allow the deduction claimed u/s. 36(1)(viia). The issue of applicability of section 115JB was restored to the file of the CIT(A) for fresh examination. The stay petitions were dismissed as infructuous.

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