TaxTMI 
TaxTMI 
2017 (4) TMI 1337
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.... crores 04.02.2013 2010-11 29.09.2010 869.04 crores 26.03.2012 917.48 crores 04.02.2013 2011-12 29.11.2012 997.80 crores 14.032013 1154.06 crores 20.08.2013 1657/Mum/2012(AY.2008-09): 3.Effective Ground of Appeal,raised by the AO,deals with disallowance of bad debts,,amounting to Rs. 22.77crores.It was brought to our notice,that while deciding the appeals for the AY.s. 2003 -04 to2006-07,(ITA/8523/Mum/2011& others,dtd.16.03.2017),the Tribunal has deliberated upon the issue in length.We are reproducing the relevant portion of the said order and it reads as under: "3.First Ground of Appeal deals with disallowance of bad debts.While completing the assessment u/s. 143(3) r.w.s.147/263 of the Act,the AO reduced the bad debts, amounting to Rs. 2. 84 crores from the provision of bad debts of Rs. 7.12 crores and accordingly allowed no bad debts.He held that bad debts were allowable to the extent they were in excess of provision for bad debts,that provisions had already been allowed,that the provisions of sec.36(ii), 36(1)(vii)(a) and 36(1)(viii) of the Act were clear in that regard. The assessee had claimed that it had no opening balance or provision for bad and doubtful ....
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....lment of certain conditions is available in respect of any provision for bad and doubtful debts. One of the restrictions is of limiting such deduction to a maximum of a specified percentage of total income of the assessee computed before making any deduction under this clause and not exceeding prescribed percentage of aggregate average advance made by the rural branches of such bank. From the decision of the Apex Court in the case of Catholic Syrian Bank Ltd. (supra), it can be gathered that under clause (vii) of sub-section (1) of section 36, deduction is made available in computation of taxable profits of all scheduled commercial banks in respect of provisions made by them for bad and doubtful debts relating to advances made by them in the rural branches. Such deduction is limited to a specified percentage of the aggregate average advances made by the rural branches. The Apex Court held that the deduction on the account of provision for bad and doubtful debts is distinct and independent of the provisions of section 36(1)(vii) relating to allowance of the bad debts. Contention of the Revenue that the Banks covered by clause (viia) were not entitled to deduction under section 36(1)....
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.... the provision for bad and doubtful debt account under section 36(1)(viia) of the Act, as required by section 36(2)(v) of the Act. (ii) While considering the claim for bad debts u/s 36(1)(vii), the assessing officer should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad & doubtful debt account created u/s 36(1)(viia) of the Act. The credit balance for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year." 17. As already noted, in absence of such clarification byCBDT, we would have been inclined to admit the appeals. However, when such circular issued under section 119(2) of the Act clarifies the position beyond any doubt, we have no reason to entertain the revenue's appeals. As already noted, the statutory provision is silent on the precise method of working out the deduction. It is by now well-settled that such circulars issued by the Board in exercise of its statutory powers under section 119(2) of the Act, may have the effect of relaxing the rigours of a statutory provision. In the case of Catholic Syrian Bank Ltd. (supra) itself....
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....the benefit of relaxation of law by issuing circulars binding on the taxing authorities."" Respectfully following the above judgment and the other judgments referred to by the AR,we hold that there is no legal or actual infirmity in the order of the FAA.Therefore, confirming his order,we decide Ground No.1 against the AO." Considering the above,effective ground of appeal,raised by the AO,stands dismissed. 1929/Mum/2012(AY.2008-09): 4.First ground of appal,raised by the assessee,is about disallowance of interest of Rs. 17.30 crores u/s.14A r.w.r.8D(2)(ii)of the Act.The Authorised Representative(AR)relied upon the case of HDFC Bank Ltd.(383ITR529.The Departmental Representative(DR)supported the order of the First Appellate Authority(FAA).We find that similar issue was deliberated by the Tribunal in the cases of Premier Finance & Trading Co.Ltd.(ITA./1655/Mum/2013, AY. 2008-09 & others, dtd. 25.05.2016) and Aditya Birla Nuvo Ltd.(ITA/8427/8483/Mum/2010- dtd. 17. 09. 2014), referred to by the AR.We are reproducing the relevant portion of the order of the case of Premier Finance & Trading Co.Ltd.(supra) and that reads as under: 9.The effective ground of appeal,raised by the as....
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....as earned by the assessee in the relevant assessment years and since the genuineness of expenditure is not in doubt, there is no question of disallowance u/s 14A of the Act. While coming to this conclusion, the Hon'ble High Court relied upon following decisions:- i. Cheminvest Ltd. v. CIT [2009] 317 ITR (AT) 86 (Delhi) [SB] (para 15) ii. CIT v. Chugandas and Co. [1964] 55 ITR 17 (SC) (para 14) iii. CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC) (para 14) iv. CIT v. Corrtech Energy (P.) Ltd. [2015] 372 ITR 97 (Guj) (para 15) v. CIT v.Holcim India (P.) Ltd.(I.T.A.No.486 of 2014 decided on 5- 9-2014) (para 15) vi. CIT v. Hero Cycles Ltd. [2010] 323 ITR 518 (P&H) (para 15) vii. CIT v. Lakhani Marketing Incl. [2015] 4 ITR-OL 246 (P&H) (para 15) viii. CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) (para 10) ix.CIT v.Shivam Motors (P.) Ltd. (ITA No. 88 of 2014 decided on 5-5-2014) (para 15) x. IT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (P&H) (para 15) , xi. Eicher Goodearth Ltd. vs. CIT [2015] 378 ITR 28 (Delhi) (para 14) xii. Harish Krishnakant Bhatt v. ITA [2005] 278 ITR (AT) 1 (Ahd) (para 10) " xiii. Maxopp Investm....
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..... 2.1.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submission of the assessee and the assessment order, FAA held that his predecessor,in the AY.s.2004-05 and 2005-06,had held that 0.5% of average investment only in non-strategic investment had to be disallowed.On the basis of that,he restricted the disallowance to Rs. 85.47 Lakhs and partly allowed the appeal filed by the assessee. 2.2.Before us, AR stated that similar issue had arisen in the earlier years and was decided in favour of the assessee,that the assessee itself had made a disallowance of Rs. 31.11 Lakhs u/s 14A of the Act.Departmental Representative (DR) argued that disallowance u/s 14A had to be made on the basis of facts of each year. 2.3.We have heard the rival submissions and perused the material before us. We find that the issue had arisen in the AY.s.2002-03 and 2005-06 also.Deciding the appeal for the AY 2005-06 (ITA No. 662/Mum/2009),the Tribunal at paragraph no.21 of the order (dt. 01.08.2014) has dealt the issue as under: "21.Ground no.3 is about disallowance u/s 14A of the Act,amounting to Rs. 1.69 lakhs. Before....
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....o.3 is decided against the AO." Respectfully,following the order for the earlier years,ground no. 1 is decided in favour of the assessee." Considering the above,we direct the AO to restrict the disallowance under rule 8D(2)(iii)of the Rules @ of 0.05% of the average investment.But,strategic investment should not be considered for computing the disallowance.Second ground is allowed in favour of the assessee,in part. 6.Disallowance of bad debts of Rs. 45.74 crores is the subject matter of ground no.3.During the course of hearing the AR stated that the issue stands finally decided by the order of the Hon'ble Apex Court,delivered in the case of Catholic Syrian Bank Ltd.(343ITR270).He also referred to the matter of Karnataka Bank Ltd. (349 ITR705).The DR stated that matter could be decided on merits.We have heard the rival submissions .We find that the Hon'ble Supreme Court has dealt with the issue,in the case of Catholic Syrian Bank Ltd.(supra),as under: "The provisions of sections 36(1)(vii) and (viia) of the Income-tax Act, 1961,are distinct and independent items of deduction and operate in their respective fields. Bad debts written off, other than those for which provision is ....
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....e deductions permissible under section 36(1)(vii) should not be negated by reading into this provision, limitations of section 36(1)(viia) on the reasoning that it will form a check against double deduction. The language of section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It gives a benefit to all banks, commercial or rural, scheduled or unscheduled, to claim a deduction of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. This benefit is subject only to section 36(2) of the Act. The proviso to section 36(1)(vii) does not, in absolute terms, control the application of this provision as it comes into operation only when the case of the assessee is one which falls squarely under section 36(1)(viia) of the Act. The Explanation to section 36(1)(vii) , introduced by the Finance Act, 2001, specifically excluded any provision for bad and doubtful debts made in the account of the assessee from the ambit and scope of "any bad debt, or part thereof, written off as irrecoverable in the accounts of the assessee". Thus, the concept of making a provision for bad and doubtful debts w....
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....e. In the first place, the ad hoc deduction under section 36(1)(viia)(b) being the last item on the computation of taxable business profits it cannot be taken into account at the time of allowing deduction under section 36(1)(vii), and, to that extent, the actual deduction attributable to bad debts [i.e. section 36(1)(vii) plus section 36(1)(viia)(b)] will indeed be more than the actual bad debts in that year. However, since the provision so allowed under section 36(1)(viia)(b) is to be taken into account while allowing deduction for actual bad debts in the subsequent year, the effect of excess deduction, if any, will be squared up in that subsequent year. Secondly, a view seems perfectly acceptable that the provision for bad debts allowable under section 36(1)(viia)(b) being inherently attributable to the debts outstanding at the end of the year, provision allowable as such is against future bad debts out of debts outstanding at the year end, and, therefore, it need not be mixed up with actual bad debts incurred during the year. Viewed from these points of view, there is no such incongruity as perceived by the learned Departmental Representative. Accordingly, we are not incline....
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....no.1 is allowed and ground no.2 is allowed,in part.AO would follow our directions with regard to GOA 2. 17.Third ground stands dismissed,as not pressed. 18.Last ground is consequential in nature. AO is directed to follow the directions of the Tribunal passed with regard to depreciation of various assets,while adjudicating the issue under considera -tion,for the earlier years. ITA/6394/Mum/2013(AY.2011-12): 19.Both the grounds raised by the AO are identical to the ground raised by him in the earlier year i.e.bad debts.Following our order for the earlier AY.s. i.e. orders for the AY.s.2008-09 to 2010- 11,we decide both the grounds against the AO. ITA/6217/Mum/2013(AY.2011-12): 20.First two grounds are about disallowances made u/s.14A r.w.r.8D(2)(ii)and 8D(2)(iii). The AO is directed to follow our orders for the earlier AY.s.First ground stands allowed whereas the second ground is allowed partly. 21.Ground no.4 is dismissed,as not pressed. 22.Grounds 5,6,7 and 10 deal with depreciation of various assets.We have held,in the earlier AY.s.,that these grounds are consequential in nature and the AO has to adopt the WDV of the assets of earlier years.AO will follow the same direct....