TaxTMI 
TaxTMI 
2026 (8) TMI 871
X X X X Extracts X X X X
X X X X Extracts X X X X
....010-11 2011-12 1668/2017 1669/2017 Department Department 2. NPA Reserve release 2010-11 2011-12 2012-13 1559/2017 1560/2017 1561/2017 Assessee Assessee Assessee 3 Enhancement Power of CIT(Appeals) 2012-13 2873/2017 Assessee 4. Penalty u/s. 271(1)(c) on NPA Reserve (on enhancement) 2012-13 2873/2017 Assessee 5. Deduction u/s. 36(1)(viia) 2010-11 1559/2017 Assessee 2011-12 1560/2017 Assessee 2012-13 1561/2017 Assessee 2013-14 2069/2018 Department 6. Penalty u/s. 271(1)(c) on disallowance u/s. 36(1)(viia) 2008-09 748/2019 Assessee ITA No.1668/Chny/2017 & ITA No.1559/chny/2017 - AY 2010-11: 2. The facts pertaining to AY 2010-11 which is considered as the lead case is stated hereunder. The assessee is a cooperative bank headquartered in Tiruchi and having 58 branches across Tiruchirapalli, Karur and Ariyalur Districts. The assessee filed a return of income for AY 2010-11 on 21.09.2010 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fit similar to that under section 43D of the Act, requires to be discussed. In this regard, it may be noted that the benefit claimed by the assessee is not under any provision of the Act. The assessee being bound by the RBI Guidelines which are issued under the provisions of the 1934 Act has not shown the interest on NPA as income. By virtue of the provisions of section 45Q of the 1934 Act, the provisions of Chapter IIIB thereof have an overriding effect over other laws. Therefore, notwithstanding the provisions of section 43D of the Act, since the provisions of section 45Q of the 1934 Act have an overriding effect vis-à-vis income recognition principles in the Companies Act, the Assessing Officer is bound to follow the RBI Directions so far as income recognition is concerned. The interest on principal loan amount which has been classified as NPA cannot be held to have "accrued" so as to tax them under the Act. The contention that the assessee cannot indirectly claim the benefit which would amount to a benefit similar to that under section 43D of the Act, therefore, does not merit acceptance. 31. The similar issue was considered in Shri Mahila Sewa Sahakari Bank Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court and after taking note of the decisions in the case of (i) CIT v. Vasisth Chay Vyapar Ltd. [2011] 330 ITR 440/196 Taxman 169/[2010] 8 taxmann.com 145 (Delhi), (ii) CIT v. Deogiri Nagar Sahakari Bank Ltd. [2015] 379 ITR 24/[2017] 79 taxmann.com 396 (Bom.) and (iii) Pr. CIT v. Mahila Sewan Sahakari Bank Ltd. [2016] 72 taxmann.com 117/242 Taxman 60/395 ITR 324 (Guj.), the Court answered the substantial question of law in favour of the assessee. In fact, in the said decision, the Court also pointed out that the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd. v. Jt. CIT [2010] 320 ITR 577/187 Taxman 346 was also taken note of in the decision of the Delhi High Court in the case of Vasisth Chay Vyapar Ltd (supra). 12. In fact, before us, the learned Junior Standing Counsel appearing for the Revenue has referred to the decision in the case of Southern Technologies Ltd. (supra), and this decision is an answer to the said submission. 13. A similar question was decided in favour of the assessee in the decision of the Madhya Pradesh in the case of Bhind District Cooperative Central Bank Ltd. v. ITD [2019] 109 taxmann.com 396 wherein th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR 324 had undertaken the detailed exercises to examine an identical situation. The Court held that, the Cooperative Banks were acting under the directives of the Reserve Bank of India with regard to the prudential norms set out. The Court was of the opinion that, taxing interest on NPA cannot be justified on the real income theory. The decision of the Gujarat High Court in Shri Mahila Sewa Sahakari Bank Ltd. (supra) was carried in Appeal by the Revenue to the Supreme Court and such appeal was dismissed. Later on, similar issue came up before Gujarat High Court in case of Pr. CIT v. Sarangpur Cooperative Bank Ltd. 406 ITR 302, the Court followed the earlier decision in case of Shri Mahila Sewa Sahakari Bank Ltd. (supra) and dismissed the Revenue's appeal. Once again, the issue was carried to the Supreme Court by the Revenue. The Appeal was dismissed by an order dated 28th April, 2018. 6 Identical issue was also examined by the Punjab & Haryana High Court in case of Pr. CIT v. Ludhiana Central Coop. Bank Ltd. 410 ITR 72. The decision of the Gujarat High Court in Shri Mahila Sewa Sahakari Bank Ltd. (supra) was cited before the Court. The Court noted that appeal against such judgm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the Karnataka High Court and the matter was decided in favour of the assessee in the following terms : "4. In order to appreciate this contention, it is necessary to look into the said section as it stands today. '145. Method of accounting.-(1) Income chargeable under the head "Profits and gains of business or profession" or 'Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified, under sub-section (2), have not been regularly followed by the assessee the Assessing Officer may make an assessment in the manner provided in section 144.' 5. A reading of the aforesaid provision makes it very clear th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; when it remains unpaid for 30 days beyond the due date. Interest on NPAs should not be booked as income if such interest has remained outstanding for more than six months on and from March 31, 1995. In fact this question arose for consideration before the Apex Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102/24 Taxman 337 where it has been held that, the concept of reality of the income and 7-10-2020 www.taxmann.com 4/4 the actuality of the situation are relevant factors which go to the making up of accrual of income but once accrual takes place and income accrues, the same cannot be defeated by any theory of real income. The concept of real income cannot be so used as to make accrued income non-income simply because after the event of accrual, the assessee neither decides to treat it as a bad debt nor claims deduction under section 36(2) of the Act, but still enters the same with a diminished hope of recovery in the suspense account. Extension of the concept of real income to this field to negate accrual after the amount had become payable is contrary to the postulates of the Act. 7. Again the Apex Court in the case of UCO Bank v. CIT [1999] 237 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, the contention of the revenue that in respect, of non-performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In that view of the matter, the second substantial question framed is answered against, the revenue and in favour of the assessee. 9. For the aforesaid reasons we do not see any merit in the appeal. Accordingly, the appeals is dismissed." In the aforementioned decision, the Court aptly pointed out that the contention of the Revenue that in respect of the non performing assets, even though it does not yield any income, as the assessee adopted a mercantile system of accounting, he has to pay tax on the Revenue, which accrued notionally, was without any basis. 15. In the decision of the Delhi High Court in the case of Vasisth Chay Vyapar Ltd. (supra), the following was the substantial question of law, which was answered : "Whether the ITAT erred in law and on merits by deleting the additions of income made as interest earned/acquired on the loan advanced to M/s Shaw Wallace by considerin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equent to the time of sale or the rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. 9.4 An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use of others of enterprise resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized." 17. In this scenario, we have to examine the strength in the submission of learned counsel for the Revenue that whether it can still be held that income in the form of interest though not received had still accrued to the assessee under the provisions of Income-tax Act and was, therefore, exigible to tax. Our answer is in the negative and we give the following reasons in support :- First of all we would discuss the matter in the light of the provisions of Income-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t gives an indication that the Court has held that RBI Act does not override 7-11-2020 www. Taxmann.com 7/8 the provisions of the Income-tax Act. However, when we examine the issue involved therein minutely and deeply in the context in which that had arisen and certain observations of the Apex Court contained in that very judgment, we find that the proposition advanced by Mr. Sabharwal may not be entirely correct. In the case before the Supreme Court, the assessee a NBFC debited Rs. 81,68,516 as provision against NPA in the profit and loss account, which was claimed as deduction in terms of section 36(1)(vii) of the Act. The Assessing Officer did not allow the deduction claimed as aforesaid on the ground that the provision of NPA was not in the nature of expenditure or loss but more in the nature of a reserve, and thus not deductible under section 36(1)(vii) of the Act. The Assessing Officer, however, did not bring to tax Rs. 20,34,605 as income (being income accrued under the mercantile system of accounting). The dispute before the Apex Court centered around deductibility of provision for NPA. After analyzing the provisions of the RBI Act, their Lordships of the Apex Court observe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 36(1)(vii) a provision for doubtful debt is kept out of the ambit of the bad debt which is written off then, one has to take into account the said Explanation in computation of total income under the Income-tax Act failing which one cannot ascertain the real profits. This is where the concept of "add back" comes in. In our view, a provision for NPA debited to Profit and Loss Account under the 1998 Directions is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the IT Act. 39. One of the contentions raised on behalf of NBFC before us was that in this case there is no scope for "add back" of the Provision against NPA to the taxable income of the assessee. We find no merit in this contention. Under the IT Act, the charge is on Profits and Gains, not on gross receipts (which, however, has Profits embedded in it). Therefore, subject to the requirements of the Income-tax Act, profits to be assessed under the Income-tax Act have got to be Real Profits which have to be computed on ordinary principles of commercial accounting. In other words, profits have got to be computed after deducting Losses/Expenses incurr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....noticed the other line of cases wherein the Supreme Court itself has held that when there is a provision in other enactment which contains a non obstante clause, that would override the provisions of Income-tax Act. Custodian appointed under the Special Court Act, 1992's case (supra) is one such case apart from other cases of different High Courts. When the judgment of the Supreme Court in Southern Technologies Ltd.'s case (supra) is read in manner we have read, it becomes easy to reconcile the ratio of Southern Technologies Ltd. (supra) with Custodian appointed under the Special Court Act, 1992 (supra). 20. Thus viewed from any angle, the decision of the Tribunal appears to be correct in law. The question of law is thus decided against the revenue and in favour of the assessee. As a result, all these appeals are dismissed." 16. The Revenue, in the said case, raised identical contentions as raised before us stating that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not as per the provisions of the RBI Act, which was the accounting method that the assessee was supposed to follow. The content....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions of section 36(1)(viia) of the Act on notional basis and therefore the release does not have any tax effect. The Ld. AR also submitted that the contention that the assessee has claimed deduction towards the NPA reserve in the earlier years is factually incorrect and that since the assessee's income was deductible u/s. 80P in the earlier years no deduction was claimed towards provision for NPA. The Ld. AR further submitted that the reversal of provision cannot be brought to tax under section 41(1) since the reversal does not fall within the provisions of section 41(1). 7. The ld DR on the other hand relied on the orders of the lower authorities. 8. We have heard the parties, and perused the material available on record. From the perusal of CIT(A)'s order, we notice that the recovery has been brought to tax under section 41(1) stating that the assessee has claimed deduction in the earlier years and therefore would fall within the provisions of section 41(1). During the course of hearing our attention was drawn to the below table with regard to provision and the reversals made towards NPA from AY 2006-07: Assessment year Balance as on the beginning of the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r deduction under towards provision towards provision for bad and doubtful debts under section 36(1)(viia) which allows the assessee to claim deduction towards provision made for bad and doubtful debts subject to limits as provided in the said section and bad debts actually written of under section 36(1)(vii). In a particular year if an asset is considered as a non-performing asset, the assessee is required to make a provision towards the same. Similarly when the asset moves from being a non-performing asset to a performing asset, the assessee reverses the provisions. The deduction u/s. 36(1)(viia) is allowed subject to the limitation computed on a notional basis i.e. 7.5% of the total income (computed before making any deduction under this clause and Chapter VIA) plus 10% of the aggregate average advances made by the rural branches. The assessee besides the deduction under section 36(1)(via) is also entitled for deduction under section 36(1)(vii) towards actual write off. The legislature restricts double deduction by proviso to section 36(1)(vii) where it is stated that the deduction under section 36(1)(vii) cannot exceed the credit balance in the provision under section 36(1)(vii....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee submitted that the assessee has made provision towards standard assets during the year to the tune of Rs. 23,40,51,102/-. The CIT(A) held that the provision includes the provision for standard assets cannot be considered as provision for bad and doubtful debts and accordingly upheld the decision of AO. 12. The Ld. AR submitted that the impugned issue is covered by the decision of the Ahmadabad Bench of the Tribunal in the case of DCIT vs. Sarvodaya Sahakari Bank Ltd. [2014] 48 taxmann.com 82 (Ahd.), where it has been held that that the provisions for bad and doubtful debts should be allowed u/s. 36(1)(viia), to the extent of provision made and available in the books of account, whether made in the current previous year or in the preceding previous years. The ld AR further submitted that the assessee has in any case made provision for standard assets which need to be considered for the purpose deduction u/s. 36(1)(viia). Accordingly the ld AR argued that the lower authorities are not correct in not allowing the deduction on these grounds. 13. We heard the parties and perused the material on record. We notice that the deduction u/s. 36(1)(viia) is denied to the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce of Provision for bad and doubtful debts. The assessee claimed a sum of Rs. 35.27 crores under section 36(1)(viia) of the Act. However the AO took the view that the net amount of Provision for bad and doubtful debts debited to the Profit and Loss account, i.e. Rs. 7.35 crores (Rs.35.27 crores less Rs. 27.92 crores) should be treated as the provision for bad and doubtful debts, for the purpose of sec. 36(1) (viia) of the Act. The said view of the AO was upheld by Ld CIT(A). 9.1 Both the parties have failed to furnish the break up details or the modalities followed for creating the "Provision for bad and doubtful debts". Prima facie, in our view, there is merit in the contention of the assessee. The decision to create a Provision for bad and doubtful debts is taken on the basis of the quality of "Advances and debts" as are available at the end of a particular year. Similarly the decision to write back the provision or reverse the provision that were created in earlier years is taken on the basis of the recovery pattern of the "Advances and debts", against which the provision was created in earlier years. Thus both the decisions are taken on the basis of different set of fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduced by The Finance Act, 1979 and the provisions initially provided for a deduction in respect of any provisions made by eligible assessee-bank towards bad and doubtful debts in relation to advances made by its rural branches subject to the maximum limit of one and half percent of the aggregate average advances made by such branches, computed in the prescribed manner. The rational to introduce the same (as contained in Memorandum explaining the provisions in the Finance Bill, 1979) was to encourage commercial banks particularly public sector banks to reach out in rural areas and to expand the rural credit. In order to promote rural banking and assist the scheduled commercial banks in making adequate provisions from their current income to provide for risks in relation to the rural advances, these new provisions were inserted in the Act. The proposed deduction was to be limited to 1 ½ percent of the aggregate average advances made by rural branches as defined. This deduction was available from AY 1980-81 onwards. Thus, the whole objective was to encourage commercial banks, especially public sector banks, to expand rural credit and make adequate provisions for risks associa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A); (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) : Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bare reading of these provisions would show that an eligible assessee is entitled for such deduction of PBDD subject to maximum ceiling of 8 ½% (at present) of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding 10% (at present) of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. This new methodology of computation was brought into effect by Finance Act, 1986. The effect of amendment, as explained in CBDT Circular No.464 dated 18-07-1986, was under: - Modification in respect of deduction on provision for bad and doubtful debts made by the banks. 5.1 Under the existing provisions of clause (viia) of sub-section (1) of section 36 of the Income-tax Act inserted by the Finance Act, 1979, provision for bad and doubtful debts made by scheduled or a non-scheduled Indian bank is allowed as deduction within the prescribed limits. The limit prescribed is 10 per cent of the total income or 2 per cent of the aggregate average advances made by the rural branches of such banks, whichever is higher. It had been represented to the Government that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reasoning was that the banks were required to follow Reserve Bank of India (RBI) guidelines for provisioning. However, in terms of Sec.36(1)(vii), only actual bad debts could be deducted by the assessee in computing its income. This mismatch led to denial of deductions of PBDD. Accordingly, these provisions were introduced and after various amendments to Sec.36(1)(viia), the scheduled banks (not being foreign banks) and cooperative banks (excluding primary agricultural credit societies or primary co-operative agricultural and rural development banks) were allowed deduction subject to overall ceiling of 8.5% of total income (before deductions under Chapter VI-A and this section) and 10% of aggregate average advances made by rural branches of the bank. The provisions of Sec. 36(1)(viia) thus supports banks in maintaining prudential provisioning norms and provide a tax incentive for provisioning which is essential in managing credit risk. It also helps bank align the financial reporting with RBI regulations without adverse tax consequences. The first proviso to Sec. 36(1)(viia) provide an option to the assessee to claim deduction in respect of any provisions made by it for any assets....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provisioning norms on its loans and advances portfolio. The main sponsor of the assessee bank is State Bank of Patiala. In terms of SBOP Circular No. GMO/REC/ADV/2 of 2005-06 dated 20-04-2006 relating to provisioning requirements pertaining to advances, the assessee is required to classify its loan & advances into 'Standard Assets' and non-performing assets (NPA). The 'standard assets' are performing assets for the bank. The remaining loans, on the other hand, are considered as nonperforming assets (in short 'NPA'), The NPAs are further classified into sub-standard assets, doubtful assets and loss assets. 'Standard Assets' are those assets which do not disclose any problem and the recovery of the same do not carry more than normal risk attached to assessee's business. The NPAs carry more than normal business risk for the assessee and accordingly, require adequate provisions against them. The sub-standard assets are those assets which have remained NPA for a period of less than 12 months. The doubtful assets are those assets which have remained NPA for a period of more than 12 months whereas loss assets are those assets which have been identified to be not recoverable at all. Agains....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... guidelines is to ensure that provisions for all losses that may even be remote, is still made by the banks so as to ensure that sufficient capital adequacy is maintained by the bank. The expression used is 'provision for bad and doubtful debts' and the prudential norms of RBI require the assessee to mitigate potential losses though the same may be remote one and may arise on 'standard assets' also. The said observation is fortified by the fact that an account continues to be classified as 'standard asset' even if the amount is overdue until such overdue exceeds 90 days. Even this period is not uniform for crop loans. The classification as standard asset merely indicates that either the advances are regular or the period of default has not yet crossed the regulatory threshold period as prescribed by RBI. Therefore, all the 'standard assets' are not inherently completely free from credit risk and always bear risk of going bad in future which necessitate provisioning against these assets also to safeguard the bank from potential losses. Recognizing the inherent and continuing credit risk, RBI mandate banks to create provision on 'standard assets' at prescribed rates ranging from 0.25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n'ble Court observed that the assessee was bound by the guidelines issue by RBI and any contrary view as taken by lower authorities would disentitle the assessee to claim the said deduction which was unjustified. This case law clearly supports the case of the assessee. The decision of Southern Technologies Ltd. (supra), as referred to by Ld. CIT-DR is in the context of claim of deduction u/s. 36(1)(vii) by NBFC and the same does not address the controversy before us. The decision in New India Industries Ltd. [18 SOT 51 (Delhi) (SB)], as quoted before us, is also in the context of deduction u/s. 36(1)(vii) for NBFC. The same, therefore, is not of much relevance. Another decision quote before us is the decision of Hon'ble High Court of Punjab & Haryana in State Bank of Patiala vs. CIT (143 Taxman 196). In this decision, the assessee claimed higher deduction u/s. 36(1)(viia) in its computation of income but made a lessor provision in the books of accounts. The Hon'ble Court held that making of provision in the books of accounts was necessary for claiming deduction u/s. 36(1)(viia) and therefore, the deduction was allowed up-to the provisions made by the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given case is considered as 12 months by the assessee. The revenue is further contending that if opening balance is considered then applying 12 months for arriving at average is not correct and therefore it is argued that opening balance cannot be included. The assessee however is contending that the language used in Rule 6ABA is that the amount of advance as outstanding at the end of the last day of each month which includes the opening balance accordingly the computation of the assessee is in accordance with what is provided in the Rule. We in this regard notice that the coordinate bench in the case of Citi Union Bank vs ACIT (2024) 161 taxmann.com 118 (Chennai-Trib) has considered an identical issue where it is held that - 12.3 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per Rules 6ABA of I.T. Rules, 1962, for the purpose of clause (viia) of sub-section (1) of section 36, an aggregate average advance made by the rural branches of a scheduled bank shall be computed by taking into account the amount of advances made by each rural branch as outstanding at the end of the last day of each month c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct on the revenues of the State." 7. Mr.Khaitan, learned senior Advocate appeared on behalf of the assessee and submitted that the computation to be made as prescribed by Rule 6ABA is for the purpose of fixing the limit of the deduction available under section 36(1)(viia). Clause (a) and (b) in Rule 6ABA cannot be given the restricted interpretation. The amount of advances as outstanding at the last day of each month would be a fluctuating figure depending on the outstanding as increased or reduced respectively by advances made and repayments received. The assessee might provide for bad and doubtful doubts but the deduction would only be allowed at the percentage of aggregate average advance, computation of which is prescribed by Rule 6ABA. 8. We find from the amended direction made by the Tribunal that such direction is in terms of Rule 6ABA. The ITO has made the computation of aggregate monthly advances taking loans and advances made during only the previous year relevant to assessment year 2009-10 as confirmed by CIT (A). The Tribunal amended such direction, in our view, correctly applying the rule. 9. For the reasons aforesaid we do not find the quest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t provision for bad and doubtful debts. Though the provisions of section 36(1)(viia) may be understood as a beneficial provision to the assessee company to claim deduction even in respect of reserve created by it to meet certain anticipated loss or contingency due to default of its debtors whom the assessee may not be able to easily identify at the end of the previous year, yet the computation machinery for determining the deduction admissible in the matter of write off bad and doubtful debts of rural or non-rural advance u/s. 36(1)(v) read with the proviso thereunder and section 36(2)(v) of the Act would fail." Thus, it is evident from the above extract that the quantum of deduction arrived at by the assessing officer was not based on the documents produced by the respondent / assessee. The CIT(A) as well as the Tribunal also, did not look into those aspect, while allowing the deduction claimed by the respondent / assessee. Therefore, this court is of the opinion that for that limited purpose, the matter has to be re-examined by the assessing officer and the same has also been agreed upon by the learned counsel appearing for both sides. 12. In such view of the ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the above judicial proceedings, we hold that the deduction under section 36(1)(viia) r.w.s. 6ABA is to be allowed on the total outstanding advances at the end of each month including the opening balance. Accordingly re-computing the amount eligible for deduction u/s. 36(1)(viia) by the AO is not sustainable. 19. We have in the earlier part of this order have given a finding that the lower authorities have not called for the breakup of the amount stated as provision reverse in the books of the assessee and it is not coming out clearly from the records as to whether the said amount is the net of provision created and released or the gross amount released. Since the decision of the lower authorities to deny the deduction u/s. 36(1)(viia) primary emanate from the contention that the assessee has not created any provision during the year, we are of the view that examining the breakup of the provision released during the year under consideration is critical more so when the assessee has submitted before the CIT(A) appeals that provision for standard asset is made during the year under consideration. Further the amount eligible for deduction u/s. 36(1)(viia) has to be recomputed in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contention with regard to enhancement powers of CIT(A) have become academic and is left open accordingly. The assessee is also contending the levy of penalty u/s. 271(1)(c) on the addition made towards CIT(A)'s enhancement towards NPA reserve release. Considering our decision with regard to the impugned addition, the contentions against the levy of penalty have become infructuous and dismissed accordingly. ITA No.2069/Chny/2018 - AY 2013-14: 23. From the perusal of the table containing the issues contended by the assessee and the revenue across AYs under consideration (as extracted at the beginning of this order), we notice that the issues contended in the present appeal is identical to that of AY 2010-11. Therefore in our considered view, our decision on the impugned issue contended for AY 2010-11 is mutatis mutandis applicable to the present appeal also. Accordingly the ground with respect to deduction u/s. 36(1)(viia) of the Act is by the revenue is allowed for statistical purposes. ITA No.748/Chny/2019 - AY 2008-09 24. The assessee in the present appeal has contended the levy of penalty u/s. 271(1)(c) towards disallowance made u/s. 36(1)(viia) of the Act. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ading to the subject addition to the returned income. In the absence of this finding, the order of penalty cannot be sustained in the eyes of law as held by the following catena of decisions :- i) CIT Vs. Balbir Singh (2008) 304 ITR 125. ii) National Textiles Vs. CIT (2001) 249 ITR 124. iii) Nainu Mal Het Chand Vs. CIT (2007) 294 ITR 185. iv) CIT Vs. Super Metal Re-Rollers Pvt. Ltd. (2004) 265 ITR 82. v) Diwas Enterprise Vs. CIT (2000) 246 ITR 571 Delhi. vi) CIT Vs. Shivnarayan Jamnalal & Co., (1998) 232 ITR 311. vii) CIT Vs. T. Abdul Majeed (1998) 232 ITR 50. 10. Therefore, we do not find any fallacy and illegality in the order of the ld. CIT(A) deleting the penalty of Rs. 59,00,884/- u/s. 271(1)(c) of the Act. Thus, the issue raised in the grounds of appeal stands dismissed." 11. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal in assessee's own case for A.Y. 2009-10, therefore, we find no infirmity in the order passed by the ld. CIT(A) in deleting the penalty of Rs. 62,39,793/- u/s. 271(1)(c) of the Act . The ld. DR also could not brought any....