TaxTMI 
TaxTMI 
2021 (8) TMI 747
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid provision during the year? 2. Whether in the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) has erred in law and fact, by ignoring the findings of the AO that the accumulation of Provision for Bad & Doubtful Debts by the assessee every year, without actual requirement and without considering the opening balance for Bad & Doubtful Debts will go higher than the outstanding balance of loans. 3. That in the facts and circumstances of the case, the order of the ld. Commissioner of Income Tax (A), Meerut may be set aside and that of the AO be restored. 4. That the appellant craves leave to add, modify and / or delete any ground(s) of appeal." (B) The only issue in dispute in this appeal filed by Revenue is regarding allowability of assessee's claim amounting to Rs. 24,01,00,000/- under Section 36(1)(viia) of Income Tax Act, 1961 ("IT Act", for short) on account of provision for Bad & Doubtful Debts claimed by the assessee. Vide Assessment Order dated 20.12.2017, the Assessing Officer ("AO", for short) disallowed the aforesaid claim. The Assessee filed an appeal before the Ld. CIT(A). Vide impugned appellate order dated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the facts of the case and in law, after the decision of Hon'ble Supreme Court in the case of Catholic Syrian Bank Vs CIT Thrissur 206 Taxman 182(SC) there is no ambiguity left in the interpretation of provision of sec 36 (1) (viia). The appellant is a Regional Rural Bank sponsored by Punjab National Bank. The appellant has made advances from its rural branches which are not questioned. The provisions of sec 36(l)(viia) are clearly interpreted by Supreme Court in the case of Catholic Syrian Bank. The appellant has claimed deduction of Rs. 24.01 Crores against it's entitlement of Rs. 171.72 Crores in the books it has made provision for Bad Debts of rural branches for Rs. 10.50 crores over and above the provision made for NPA's as per RBI norms. This fact has been stated in the audited balance sheet of the bank in Schedule 16: in operating Expenses Schedule. The Hon'ble ITAT Bangalore in the case of DEPUTY COMMISSIONER OF INCOME TAX vs. ING VYSYA BANK LTD - (2014) 62 SOT 0026 (Banglore) has held that the actual provision made in the books by the Assessee on account of PBDD (irrespective of whether it is rural or non- rural) has to be seen. To the extent PB....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion has been done by the assessee to keep it in line with the RBI and NABARD guidelines. We are satisfied that the assessee has made provision and claimed deduction in accordance with the provisions of section 36(l)(viia). The assessee is entitled to the benefit of same. Similarly the Hon'ble ITAT Chennai in the case of VELLORE DIST. CENTRAL COOPERATIVE BANK LTD. vs. COMMISSIONER OF INCOME TAX - (2013) 145 IDT 0129 (Chennai) has held that the question which arises for determination before us is whether the assessee has created any reserve / provision for bad and doubtful debts? The AR has contended that the assessee has created provisions for bad and doubtful debts under the nomenclature 'Reserve for NPA'. The terminology 'Reserve for NPA' has been used by the assessee in accordance with the RBI directions. As is evident from the assessment order, the assessee has indeed created 'Reserve for NPA'. For claiming benefit under the provisions of Section 36(l)(viia)(a) the conditions to be satisfied is: that provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Cooperative Banks do ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produced as under: "5. The case of the assessee for the assessment year 2012-13 has been adjudicated by the ITAT in ITA No. 1937/Del/2016 in assessee's own case wherein the deduction was allowed taking into consideration, the CBDT Circular No. 421 dated 12.06.1985, UCO Bank Ltd. 237 ITR 889 (SC), Catholic Syrian Bank 88 ITD 185, South Indian Bank 233 CTR 214. Since, the factual matter remains unchanged, in the absence of any other judgment contrary to the facts available on record, the addition made by the revenue is hereby ordered to be deleted. 6. For the sake of brevity, the operative portion of the order of the ITAT in the case of the assessee for the assessment year 2012-13 is reproduced as under: "8. Heard the arguments of the parties and perused the material available on record. We find that the judgment dated 21st May, 2004 pertains to AY 1985-86. The board has issued directions verifying the benefit of deduction allowable to banks vide CBDT Circular 421 dt. 12.06.1985 which has been mentioned above. After considering the facts and the entire submissions of both the parties, we find that (ii) U/s 119, the CBDT is entitled to issue Circulars to exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a distinct business, though ultimately these advances would form part of the books of accounts of the head office. An interpretation which serves the legislative object and intent is to be preferred rather than one which subverts the same. The deduction u/s 36(1)(vii) cannot be negated by reading into it the limitations of s. 36(1)(viia) as it would frustrate the object of granting such deductions. The Revenue's argument that this would lead to double deduction is not correct in view of the Proviso to s. 36(1)(vii) which provides that in respect of rural advances, the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the amount of the provision which had already been allowed u/s 36(1) (viia) (Southern Technologies 320 ITR 577 (SC) & Vijaya Bank 323 ITR 166 (SC) referred) 10. In the instant case, we endorse the decision of Ld .CIT(A) which held that the assessee has admitted in its submissions as well as before AO regarding the entitlement o f deduction u/s 36(1)(viia) o f Rs . 114.76 crores . There is no dispute as to the correctness o f the calculation o f the entitlement of deduction u/s 36(1)(viia) o f t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd above the provision for bad & doubt debts required to be made in accordance with the Prudential norms suggested by RBI. The bank has reduced Rs . 210.36 lacs (previous year Rs. 363 .05 lacs) for write off of the rural advances not recoverable and are bad and doubtful debts from the provision made in earlier years and net provision for rural branches advances is Rs. 2844.03 lacs (Rs. 3054.39 lacs - Rs . 210.36 lags) . . included in other provisions in Schedule -5 ' . The ITAT Banglore in the case of DEPUTY COMMISSIONER OF INCOME TAX vs . ING VYSYA BANK LTD - (2014) 62 SOT 0026 (Banglore) and ITAT Chennai in the case o f TAMILNADU STATE APEX COOPERATIVE BANK LTD . vs. ASSISTANT COMMISSIONER OF INCOME TAX - (2014) 62 SOT 0113 (Chennai) (URO) has held that the actual provision made in the books by the Assessee on account o f PBDD (irrespective of whether it is rural or non- rural) has to be seen. 13. In the present case, the assessee has admittedly made provision for non performing assets (NPA) in respect o f its urban branches. The assessee has debited Rs. 2.52 Crores (approximately) (i .e. , 7.5% of the gross total income) in P&L A/c creating provision for non-pe....