TaxTMI 
TaxTMI 
2014 (1) TMI 945
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....he Assessment Year (AY) 2008-09 on 20-10-2008 declaring loss Rs. 28,52,33,360/-. The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued to the assessee on 19-08-2009. The assessment order u/s. 143(3) was passed on 09-09-2010 determining loss at Rs. 15,48,29,520/- as against the loss returned at Rs. 28,52,33,360/-. 3. Revision proceedings u/s. 263 of the Act were initiated against the assessee and show cause notice dated 29-01-2013 was issued to the assessee. The CIT passed order u/s. 263 with the following observations: "After careful consideration of the facts of the case, submissions of the assessee, it is to be pointed out that the assessee had not created reverse/provision tow....
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....ion (ia) to section 36(1)(viia) includes only scheduled and non-scheduled banks and not the co-operative banks. The AR further submitted that the CIT has erred in holding that the assessee has not created any reserve/provision for bad and doubtful debts and hence the deduction claimed u/s. 36(1)(viia) is not allowable. The AR pointed out that vide amendment brought by Finance Act 2007 w.e.f. 01-04-2007, co-operative banks other than Primary Agricultural Credit Society or Primary Co-operative Agricultural and Rural Development Banks have been included in sub-clause(a) of Section 36(1)(viia). Thus, the co-operative banks are also entitled at par with scheduled banks and non-scheduled banks for availing deduction u/s. 36(1)(viia)(a). The ld. A....
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....the Revenue has strongly supported the order of the CIT and submitted that the assessee has not created any provision for bad and doubtful debts. Unless provision is created for bad and doubtful debts, benefit u/s. 36(1)(viia) cannot be granted to the assessee. In order to support his contentions, the ld. DR relied on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Eastern Medikit Ltd., reported as 337 ITR 56. 6. We have heard the submissions made by the representatives of both the sides. We have also perused the impugned order as well as the decisions relied upon by the representatives of both the sides. From the submissions made by both the sides and impugned order, two questions have emerged for adjudication : &n....
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.... Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: xxxxxxxxxxxxxxxxxxxxx A perusal of the provisions of Section 36(1)(viia), clearly show that the benefit of deduction under sub-clause(a) is available to ....
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....e) as: "'Scheduled Bank' means a bank included in the second schedule." Hence, the Scheduled Banks in India are those banks, which are included in the second schedule of RBI Act. The RBI includes only those banks in second schedule which satisfy the criteria laid down in section 42(6)(a) of the Act. Thus, all other companies which are carrying on banking business and fall within the ambit of Section 5(c) of the Banking Regulation Act but are not included in the second schedule of RBI Act are non-Scheduled Banks. In view of the above, we are of the considered opinion that the assessee is a Non-Scheduled Bank and is thus entitled to claim benefit of provisions of Section 36(1)(viia)(a....