TaxTMI 
TaxTMI 
2020 (8) TMI 195
X X X X Extracts X X X X
X X X X Extracts X X X X
....n deleting the disallowance made by the AO on account of Principal NPA of Rs. 32,42,000/-. 2. On the facts and in the circumstances of the case the ld. LD. CIT (A) has erred in deleting the disallowance made by the AO on account of Time Barred Interest RES of Rs. 3,58,96,329/-. 3. The appellant craves liberty to raise additional ground/s and to modify/amend the ground of appeal at the time of hearing." The hearing of the appeal is concluded through Video Conference due to prevailing condition of COVID 19 pandemic. 2. The assessee is a Cooperative Land Development Bank filed its return of income for the year under consideration on 13.10.2010 declaring loss of Rs. 16,89,180/- which was processed under section 143(1) on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontended that since provisions of section 36(1)(viia) are not applicable in assessee's case being a primary Cooperative Agricultural and Rural Development Bank, then the order of the LD. CIT (A) is contrary to section 36(1)(viia) of the Act. He has referred to the assessment order and submitted that the AO has given a clear finding that the assessee is not covered under section 36(1)(viia) of the Act. Thus the ld. D/R has contended that the addition deleted by the LD. CIT (A) based on misunderstanding of the provision is not sustainable in law. He has relied upon the judgment of the Hon'ble Kerala High Court in case of Art Leasing Ltd. vs. CIT, 187 Taxman 29 (Ker.). He has relied upon the order of the AO. 4. On the other hand, the ld....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount ^22[not exceeding ^23[eight 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 ^24[ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : ^25[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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... As per the AO, since these amounts could not be deducted unless such amounts had been written off in the books & deduction claimed u/s 36(1)(vii), it was a case of provisions for bad & doubtful debts which were not allowable. Accordingly she has made an addition of total amount of Rs. 3,91,38,329/- in the case. From a perusal of the details available and filed in the course of the appellate proceedings, it is observed that the appellant is a primary cooperative agricultural & Rural Development Bank which is covered under provisions of section 36(1)(viia) of the I.T. Act, 1961. The bank follows a double entry system where while on the one hand the provision for NPA accounts & time barred loans on NPA account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and advances made during the year only by the rural branches of the bank in the prescribed manner as envisaged under Clause (viia)(a) of section 36(1), not on the cumulative balance of loans and advance of the bank over the years. Bad debt, if any, arises out of advances made in the earlier years would be covered under clause (viia) of section 36(1) of the I.T. Act." Thus the LD. CIT (A) has held that the assessee a primary Cooperative Agricultural & Rural Development Bank is covered under the provisions of section 36(1)(viia) of the Act. After giving a finding, the LD. CIT (A) held that the assessee is entitled for deduction. The LD. CIT (A) has discussed the quantum of deduction. Thus the finding of the LD. CIT (A) is based on misund....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt and hence the said amount was treated as actually written off in the books of account. We note that even from the details filed by the assessee, it is not clear whether this whole amount was part of the Interest income shown in the Profit & Loss account. Further, the details filed by the assessee are not part of the audited books of account being Schedule to the Balance Sheet but it is prepared subsequently without certified by the Auditors. Even otherwise, the possibility of over-lapping between the deduction under section 36(1)(vii) and 36(1)(viia) is not ruled out when it comes to the cases of bank. It is settled proposition of law that deduction under section 36(1)(vii) is allowable in respect of any bad debts written off as irrecov....