2020 (2) TMI 1020

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....n the circumstances of the case the tribunal's order can be considered as perverse in nature since tribunal has allowed the assessee's appeal by over-looking the provisions of I.T. Act?". 3) "Whether on the facts and in the circumstances of the case the tribunal erred in law in deleting the addition representing excess claim of bad debts written off under section 36(1)(vii) of the I.T. Act, exceeding the credit balance of the provision made under section 36(1)(viia) of the I.T. Act when the provisions of the said section do not permit such an action?". ITA No.258/2011 has been filed by the revenue, which was admitted on 04.06.2012 by a bench of this court on the following substantial questions of law: 1) "Whether on the facts and in the circumstances of the case, the tribunal was right in law in allowing deduction claimed towards bad and doubtful debts without making provision and without considering that section 36(1)(vii) and 36(1)(viia) are separate and independent, apart from that assesses's claim under section 36(1)(vii) of the I.T. Act is limited to the amount which exceeds the credit balance of the provisions made under section 36(1)(viia) of the I.T. Act?". 2) "Wheth....

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....missioner of Income Tax (Appeals) by an order dated 14.11.2007 partly allowed the appeals and held that since, no interest accrued on zero coupon bonds, therefore, making addition in respect of book profit under Section 115JB of the Act, is not called for. The Commissioner of Income Tax (Appeals) also granted relief to the appellant in respect of doubtful debts. Being aggrieved, the assessee as well as revenue filed the appeals against order of Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal vide order dated 16.03.2011, allowed the appeal of the assessee and dismissed the appeal preferred by revenue. In this background, the revenue has filed these appeals. 4. Learned counsel for the Revenue has invited our attention to budget speech of Finance Minister and has pointed out the provision to promote the rural banking was incorporated to grant deduction in respect of provision made for bad and doubtful debts. While referring to Memorandum explaining the provisions in Finance Bill, 1979 and the Circular dated 30.06.1982 it is contended that deduction under Section 36(1)(viia) of the Act is made in respect of provisions made by them for bad and doubtful debts re....

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....ociety or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner: 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 Reserved 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: Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five per cent", the words "ten per cent" had been substituted: Provided also that ....

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.... provision relating to deduction in respect of provisions made by scheduled commercial banks for bad and doubtful debts relating to advances by rural branches to non-scheduled commercial banks as well. For this purpose, the expression "non-scheduled Bank" means a banking company as defined incl. (c) of S.5 of the Banking Regulation Act, 1949 but which is not a scheduled bank. 8. Thus, a conjoint reading of provision contained in Section 36(1)(viia) and explanatory note dated 30.06.1982 it is evident that deduction provided in Section 36(1)(viia) shall be allowed in respect of the matters dealt therein in computing the income. The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the accounts of the assessee. The aforesaid Section mentions the maximum amount for which such a provision should be made. If a provision is made in excess of the limits prescribed under the Section, the assessee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee would be entitled to deduction of t....