2020 (12) TMI 349

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....,27,095/- and book profit of Rs. 973,05,87,429/-. The revised return of income was filed by the assessee on 25/03/2017 revising the total income to Rs. 1149,86,91,658/- and book profit of Rs. 937,00,35,558/-. In the revised return of income the assessee bank has claimed deduction u/s.36(1)(viia) of the Act to the tune of Rs. 2926,41,40,303/-. We find that assessee had filed detailed notes to the computation of total income alongwith return of income wherein in para 1.1, a detailed note was given with regard to deduction in respect of bad debts written off u/s.36(1)(vii) of the Act which also contained a tabulation stating the details of opening balance claimed u/s.36(1)(viia), bad debts written off and closing balance of provision for bad and doubtful debts for the period from A.Y.1995-96 to A.Y.2015-16. Apart from that the assessee had also filed a separate note justifying its claim of deduction u/s.36(1)(viia) of the Act alongwith return of income. These details are enclosed in pages 14 & 15 of the paper book filed before us. We also find that the ld. AO vide notice u/s.142(1) of the Act had issued a questionnaire dated 16/11/2017 to the assessee during the course of assessment p....

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....r the assessee's own calculation the bad debt written off amount for A.Y. 2013-14, 2014-15 and 2015-16 is (Rs.in Crs.) 2013-14 4550.50 2014-15 3834.29 2015-16 2,619.63 Total write off claims  11004.42 The assessee would have been allowed following deduction u/s 36(1)(viia) and 36(1)(vii), as per Its calculation given in its submission reproduced In para 4 above. (Rs.in Crs.) AY 36(i)(vii)(a) 36(i)(vii) Total 2013-14 2039.28 4550.50 6589.78 2014-15 2,078.70 3834.29 5912.99 2015-16 2,926.41 2619.63 5546.04 Total 7044.39 11004.42 18048.81 Therefore, against the bad debt written off of Rs. 11004.42 crore, the assessee claims Rs. 18048.81 crore, that is nothing but the same amount of bad debt written off is being claimed twice under section 36(i) (vii) as well as 36(1)(viia). In contrast, as per the correct computation proposed by the Department, the allowable deduction under section 36(1)(vii) shall change, taking the figures given in Table incorporated in para 5.3 above. (Rs.in Crs.) AY 36(l)(vii)(a) 36(i)(vii) Total 2013-14 2039.28 3409.....

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.... Provision for Bad and Doubtful Debts (in short 'PBDD') account under Section 36(1)(viia) of the Act. The deduction in respect of PBDD allowed under Section 36(1)(viia) of the Act is required to be credited to this account. Section 36(1)(vii) of the Act requires bad debts written off to be debited to this account. The proviso to Section 36(1)(vii) of the Act states that opening credit balance in this account as on 1st day of previous year should be reduced from the amount of bad debts written off during the previous year and excess of bad debts written off, if any, shall be allowed as deduction under Section 36(1)(vii) of the Act. The ld. PCIT observed that assessee has claimed that the opening balance of PBDD is negative and has given the computation of opening balance as on 31.03.2013, which is the opening balance for the assessment year under consideration. It is further observed that the computation given by the assessee is not correct. In the assessment year 2013-14, the PBDD is required to be debited to opening balance only and the remaining PBDD is allowed under Section 36(1)(vii) of the Act. He observed that the amount of PBDD claimed under Section 36(1)(viia) of th....

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....ion in respect of the claim. He submitted that merely because the Commissioner has a different opinion in the matter, it cannot render the order of Assessing Officer erroneous and prejudicial to the interests of the Revenue. In this regard, he relied on the following case laws :- A) CIT vs Gabriel India Ltd., 203 ITR 108(Bom.) B) Anil Shah vs ACIT, (2007) 162 taxman 39 (Mum.) C) Reliance Money Inf Ltd. vs PCIT, [2017] 88 taxmann.com 871 (Mumbai Trib.) 19. With regard to the third issue of disallowance under Section 14A of the Act in computing book profits, he submitted that the ld. PCIT in his order under Section 263 of the Act had not directed any revision in respect of this issue, therefore, the order of Assessing Officer is neither erroneous and prejudicial to the interests of the Revenue. Further, he submitted that even on merits, the directions of ld. PCIT to make reference/additions in order under Section 263 of the Act is not valid for the above reasons. He submitted that subsequently during the revision proceedings, ld. PCIT issued a show cause notice on the issue of reference to the TPO. He submitted that an issue which does not form part of s....

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....ion 36(1)(viia) of the Act, the entire bad debts written off has to be allowed as deduction. 24. Considered the rival submissions and material placed on record, we notice that ld. PCIT initiated the proceedings under Section 263 of the Act by issuing show cause notice and the reasons mentioned in the show cause notice was that in computing the book profits under Section 115JB of the Act, the profits of foreign branches was wrongly excluded and certain provisions were omitted to be added back, deduction under Section 36(1)(vii) of the Act in respect of bad debts written off was incorrectly allowed and disallowance made as per Rule 8D was not considered in computing the book profits. After careful consideration of the submissions of both the parties, we observe that the issue of applicability of book profits to the nationalised banks was agitated by the assessee before the ld. CIT(A) and the ld. CIT(A) has already passed an order on 21.06.2017 in favour of the assessee that the provisions of Section 115JB of the Act does not apply to the assessee. Now, in the show cause notice, similar issue was raised by ld. PCIT and passed an order on 27.03.2018, therefore, in our consider....