TaxTMI 
TaxTMI 
2025 (3) TMI 2099
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....ar of the assessee co-operative bank was not well and undergone medical treatment during the relevant period, hence there was delay in filing these appeals. 3. On perusal of the aforesaid reasons in the condonation applications, we are of the view that there is sufficient cause for belated filing of these appeals and no latches can be attributed to the assessee. Hence, we condone the delay in filing these appeals and proceed to dispose off the appeals on merits. 4. Common issues are raised in these appeals, hence, they were heard together and are being disposed off by this consolidated order. The solitary issue that is raised is whether deduction u/s.36(1)(viia) is to be allowed to the extent of 7.5% of total income and 10% of aggregate average rural advances of assessee bank irrespective of amount of provision debited to profit & loss account as per RBI norms. 5. Brief facts of the case are as follows:- The assessee is a co-operative bank engaged in the business of banking. For the assessment years 2009-10 to 2012-13 and 2014-15, the assessments were reopened by issuance of notice u/s.148 of the Act. The reason for issuance of notice u/s.148 of the Act was that assesse....
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....s they are related to each other. The reliance of the Appellant on Southern Technologies Vs JCIT 228 ITR 440 (Supreme Court) is misplaced. The issue in this case was whether the benefit of section 36(i)(viia) can be extended to NBFCs. The appellant is selectively quoting a paragraph from the order to reinforce its point. The paragraph being relied upon by the Appellant is as follows: "Lastly, as stated above, even in the case of banks the provision for NPA has to be added back and only after such add back that deduction under Section 36(1)(viia) can be claimed by the banks." Vide submission dated 03/02/2021 and 03/07/2023 Appellant maintains the fact that the Hon'ble Supreme Court has said that the amount needs to be added back and then deduction u/s 36(1)(viia) claimed. The relevant paragraph of the submission is quoted below "The point to be highlighted is that in the case of banks, by way of incentive, a provision for bad and doubtful debt is given the benefit of deduction, however, subject to the ceiling prescribed as stated above. Lastly, the provision for NPA created by scheduled bank is added back and only thereafter deduction is made ....
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.... Bank Vs Deputy Commissioner of Income tax 78 ITD(BANG). However as quoted above the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala vs CIT[2005] 272 ITR 54 has clearly held that "9. We are, therefore, satisfied that the Tribunal was right in holding that since the assessee had made a provision of Rs. 1,19,36,000 for bad and doubtful debts, its claim for deduction under Section 36(1)(viia) of the Act had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we are satisfied that no substantial question of law arises in this appeal for consideration by this court." The Hon'ble ITAT at Mumbai had an occasion to deal with this issue in the case of Yes Bank Vs DCIT for AY 2014-15. The relevant portion of the order dated 30/06/2023 is quoted below 17. The ground Nos. 9 to 14 of the appeal of the assessee and ground No. 3 of the appeal of the Revenue are connected with the issue of deduction u/s 36(1)(1)(viia) of the Act. 17.1 Briefly stated facts qua the issue in dispute are that the ground pertains to disallowance of provision of bad and doub....
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....uch banks, whichever is higher. At this stage also the PBDD had to be created and debited to the profit and loss account but it was not required to be done in relation to advances made by Bank's rural branches and can be in relation to any debt. PBDD need not be in relation to rural advances but can be in relation to any advances both rural and non-rural advances. The two percent AAA made by rural branches of such banks had to be computed and the PBDD made in books has to be in relation to rural advances. The other eligible sum which can be considered for deduction u/s.36(1)(viia) of the Act viz., ten per cent of the total income (computed before making any deduction under the proposed new provision) does not require computation in relation to rural advances. Nevertheless the debit of PBDD to Profit and Loss account is necessary of the higher of the two sums to claim deduction u/s.36(1)(viia) of the Act. If the concerned bank does not have rural branches then they could not claim the deduction. Therefore the deduction was confined only to banks that had rural branches. 35. At Stage-III of the provisions of Sec.36(1)(viia) of the Act, the deduction allowed earlier was e....
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.... seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VI-A). The above are the permissible upper limits of deductions u/s.36(1)(via) of the Act. The actual provision made in the books by the Assessee on account of PBDD (irrespective of whether it is rural or non murath has to be seen. To the extent PBDD is so created, then subject to the permissible upper limits referred to above, the deduction has to be allowed to the Assessee. The question of bifurcating the PBDD as one relating to rural advances and other advances (Non-rural advances) does not arise for consideration." In view of the above I agree with the decision of the AO that deduction u/s 36(1)(viia) is restricted to the actual provisions created by the assessee for bad & doubtful debts subject to the limit prescribed u/s 36(1)(viia). These grounds are decided against the appellant." 7. Aggrieved by the order of the CIT(A), the assessee has filed present appeals before the Tribunal. The learned AR has filed paper book enclosing therein the memorandum explaining provision of introduction of section 36(1)(viia) of the Act and various amendments made to....
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....s and there is no need to go into intention or object behind said section. It was concluded by the Hon'ble Court that in absence of any "provision" made, deduction u/s.36(1)(viia) of the Act cannot be allowed. The relevant finding of the Hon'ble Karnataka High Court reads as follows:- "8. Thus, a conjoint reading of provision contained in section 36(1)(viia) and explanatory note dated 30-6-1982 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 the amount for which provision is made in the books of accounts. 9. The langu....
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....scribed under the section, the assessee would not be entitled to deduction of the excess amount. At the same time, when the section speaks about the deductions in respect of any provision for bad and doubtful debts made unless such a provision is made, the assessee would not be entitled to the deduction. Once such a provision is made and the said amount is within the limit prescribed under statute, the assessee would be entitled to the amount that is provided for in the accounts. The argument is that when the provision made is less than the amount prescribed under the law, the assessee is entitled to the maximum as prescribed cannot be accepted. The language employed is clear and unambiguous. This is a provision in any fiscal legislation. Therefore, the question of going into the intention or object behind the provision in the light of those clear words would not arise. Therefore, when once a provision is made for bad and doubtful debts and such a provision is less than the limit prescribed under the section what the assessee would be entitled to deduct would be the amount mentioned in the said provision and not the amount prescribed in the section. In that view of the matter, the ....