M/S THE MAHARASHTRA STATE CO. OP BANK LTD.,MUMBAI vs. ITO-1(3)(3), MUMBAI

PER OM PRAKASH KANT, AM

These cross appeals by the assessee and the Revenue are directed against order dated 01.03.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-3, Mumbai [in short ‘the Ld.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 2 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

CIT(A)’] for assessment year 2013 CIT(A)’] for assessment year 2013-14 in the matter of assessment 14 in the matter of assessment u/s 143(3) of the Income of the Income-tax Act, 1961 (in short ‘the Act’) dated rt ‘the Act’) dated 14.03.2016. The sole ground sole ground raised by the assessee raised by the assessee is reproduced as under:

Ground No 1: Ground No 1: The Learned Commissioner (Appeals) has erred in law & on The Learned Commissioner (Appeals) has erred in law & on The Learned Commissioner (Appeals) has erred in law & on facts in confirming the addition of Rs. 14,22,26,284/ facts in confirming the addition of Rs. 14,22,26,284/ facts in confirming the addition of Rs. 14,22,26,284/- , being rental on properties seized under SARFAESI Act, 2002 by the rental on properties seized under SARFAESI Act, 2002 by the rental on properties seized under SARFAESI Act, 2002 by the Appellant Bank, to the income of assessee bank. Appellant Bank, to the income of assessee bank. 2. The grounds raised by the Revenue are reproduced as under: The grounds raised by the Revenue are reproduced as under: The grounds raised by the Revenue are reproduced as under:

1) On the facts and in the circumstances of the case and in 1) On the facts and in the circumstances of the case and in 1) On the facts and in the circumstances of the case and in law, the Id. CIT(A) law, the Id. CIT(A) erred in allowing deduction of Rs. 13, erred in allowing deduction of Rs. 13, 11,50,048/- to the assessee under section 36(1)(vii) of the Act to the assessee under section 36(1)(vii) of the Act in A.Y 2013- -14. 2) On the facts and in the circumstances of the case and in 2) On the facts and in the circumstances of the case and in 2) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing appeal of the assessee law, the Id. CIT(A) erred in allowing appeal of the assessee law, the Id. CIT(A) erred in allowing appeal of the assessee under section 3 under section 36(1)(vii) of the Act, without calling for the 6(1)(vii) of the Act, without calling for the remand report from the assessing officer, on the fresh details remand report from the assessing officer, on the fresh details remand report from the assessing officer, on the fresh details / computation filed by the appellant, which were not / computation filed by the appellant, which were not / computation filed by the appellant, which were not presented before the Assessing Officer during the assessment presented before the Assessing Officer during the assessment presented before the Assessing Officer during the assessment proceedings. proceedings. 3) On the facts and 3) On the facts and in the circumstances of the case and in in the circumstances of the case and in law, the Id. CIT(A) erred in allowing appeal of the assessee law, the Id. CIT(A) erred in allowing appeal of the assessee law, the Id. CIT(A) erred in allowing appeal of the assessee under section 36(1) (vil) of the Act, without discussing the under section 36(1) (vil) of the Act, without discussing the under section 36(1) (vil) of the Act, without discussing the reason for allowing the appeal of the assessee on this ground. reason for allowing the appeal of the assessee on this ground. reason for allowing the appeal of the assessee on this ground. 4) On the facts and in the circ 4) On the facts and in the circumstances of the case and in umstances of the case and in law, the Id. CIT(A) erred in interpretation of the CBDT circular law, the Id. CIT(A) erred in interpretation of the CBDT circular law, the Id. CIT(A) erred in interpretation of the CBDT circular No. 17/2008 dated 26.11.2008 and allowing appeal of the No. 17/2008 dated 26.11.2008 and allowing appeal of the No. 17/2008 dated 26.11.2008 and allowing appeal of the assessee under section 36(1)(vii) of the Act. assessee under section 36(1)(vii) of the Act. 5) On the facts and in the circumstances of the case and in 5) On the facts and in the circumstances of the case and in 5) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in interpretation of the CBDT circular law, the Id. CIT(A) erred in interpretation of the CBDT circular law, the Id. CIT(A) erred in interpretation of the CBDT circular No. 17/2008 dated 26.11.2008 and allowing the amount of No. 17/2008 dated 26.11.2008 and allowing the amount of No. 17/2008 dated 26.11.2008 and allowing the amount of Rs. 13,11,50,048/ Rs. 13,11,50,048/- under section 36(1)(vii) of the Act, under section 36(1)(vii) of the Act,

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(including opening (including opening credit balance of the provision of the bad credit balance of the provision of the bad debts created us 36(1)(viia) of the act, although, the opening debts created us 36(1)(viia) of the act, although, the opening debts created us 36(1)(viia) of the act, although, the opening balance amount has already been allowed to the assessee balance amount has already been allowed to the assessee balance amount has already been allowed to the assessee u/s 36(1) (via) of the Act, in earlier assessment years. u/s 36(1) (via) of the Act, in earlier assessment years. u/s 36(1) (via) of the Act, in earlier assessment years. 3. Briefly stated, facts of the cas Briefly stated, facts of the case are that the assessee is a state are that the assessee is a state level Apex Co-op. Bank engaged in the business of op. Bank engaged in the business of op. Bank engaged in the business of banking and registered with Reserve Bank of India (RBI) registered with Reserve Bank of India (RBI) having bra branches all over Maharashtra. For the year under consideration, the assessee filed Maharashtra. For the year under consideration, the assessee filed Maharashtra. For the year under consideration, the assessee filed return of income on 29.09. return of income on 29.09.2013 declaring total income at 2013 declaring total income at Rs.95,47,97,680/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were selected for scrutiny and statutory notices under the Act were selected for scrutiny and statutory notices under the Act were issued and complied with. In the assessment completed u/s 143(3) issued and complied with. In the assessment completed u/s 143(3) issued and complied with. In the assessment completed u/s 143(3) Officer, firstly, made of the Act on 14.03.2016, the A of the Act on 14.03.2016, the Assessing Officer, disallowance of Rs.9,87,88,041/ disallowance of Rs.9,87,88,041/- out of claim of the assessee for out of claim of the assessee for bad debt written off. Secondly, the Assessing Officer made addition bad debt written off. , the Assessing Officer made addition for difference of Rs.14,22,26,284/ of Rs.14,22,26,284/- in the amount of receipts in the amount of receipts recorded in Form No. 26AS of recorded in Form No. 26AS of Income-tax forms and corresponding tax forms and corresponding receipts in the books of account of the assessee receipts in the books of account of the assessee . On further appeal, On further appeal, the Ld. CIT(A) deleted the disallowance the Ld. CIT(A) deleted the disallowance of bad debt written off bad debt written off whereas upheld the addition of difference in amount recorded in whereas upheld the addition of difference in amount recorded in whereas upheld the addition of difference in amount recorded in Form No. 26AS and the Form No. 26AS and the corresponding income declared in the profit corresponding income declared in the profit and loss account. Aggrieved by the order of the Ld. CIT(A), both the and loss account. Aggrieved by the order of the Ld. CIT(A) and loss account. Aggrieved by the order of the Ld. CIT(A) parties are before the ITAT raising the respective grounds. parties are before the ITAT raising the respective grounds. parties are before the ITAT raising the respective grounds.

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M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 5 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

assessee. According to the assessee, the rent paid by the tenants . According to the assessee, the rent paid by the tenants . According to the assessee, the rent paid by the tenants was not chargeable for tax in the hands of the assessee as same has was not chargeable for tax in the hands of the assessee as same has was not chargeable for tax in the hands of the assessee as same has been treated as recovery of the outstanding principal and interest been treated as recovery of the outstanding principal and interest been treated as recovery of the outstanding principal and interest from those borrowers by the assessee. The assessee relied on hose borrowers by the assessee. The assessee relied on hose borrowers by the assessee. The assessee relied on various decisions in support of its claim before the Ld. CIT(A). various decisions in support of its claim before the Ld. CIT(A). various decisions in support of its claim before the Ld. CIT(A). However, the Ld. CIT(A) rejected the contention of the assessee However, the Ld. CIT(A) rejected the contention of the assessee However, the Ld. CIT(A) rejected the contention of the assessee observing as under:

“After carefully considering the submissions of the After carefully considering the submissions of the After carefully considering the submissions of the appellant and contentions of the AO, and in the factual matrix, in my and contentions of the AO, and in the factual matrix, in my and contentions of the AO, and in the factual matrix, in my considered view there is no interference called for in the considered view there is no interference called for in the considered view there is no interference called for in the order of the assessing officer. The entire amount of receipts order of the assessing officer. The entire amount of receipts order of the assessing officer. The entire amount of receipts of Rs. 24,50,45,356/ of Rs. 24,50,45,356/- should have been offered for taxation should have been offered for taxation and against which the bank claims full TDS amount. against which the bank claims full TDS amount. against which the bank claims full TDS amount. However, the assessee bank has claimed full TDS amount in However, the assessee bank has claimed full TDS amount in However, the assessee bank has claimed full TDS amount in the return of income amounting to Rs.2,56,71,805/ the return of income amounting to Rs.2,56,71,805/ the return of income amounting to Rs.2,56,71,805/- but offered less income for taxation. However the department is offered less income for taxation. However the department is offered less income for taxation. However the department is concerned about the receipt of the a concerned about the receipt of the assessee which should ssessee which should have been brought to tax, but the same has not been done in have been brought to tax, but the same has not been done in have been brought to tax, but the same has not been done in this case. Therefore I find that the A is justified in making the this case. Therefore I find that the A is justified in making the this case. Therefore I find that the A is justified in making the addition of the difference of income as per 26AS Data addition of the difference of income as per 26AS Data addition of the difference of income as per 26AS Data amounting to Rs. 14,22,26,284/ amounting to Rs. 14,22,26,284/- not offered for taxatio not offered for taxation. Thus this ground of appeal is dismissed. Thus this ground of appeal is dismissed.” 6. We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the dispute and perused the relevant material on record. Before us, the dispute and perused the relevant material on record. Before us, the short plea of the assessee is that under the short plea of the assessee is that under the SARFAESI Act SARFAESI Act, the assessee has taken over the possession of the assets of the aken over the possession of the assets of the aken over the possession of the assets of the defaulter parties but the defaulter parties but the assessee was legal owner of those assets legal owner of those assets and the income from and the income from those assets in the hands of the assessee in the hands of the assessee is in the nature of the repayment of its dues. It was submitted that tax the nature of the repayment of its dues. It was submitted that tax the nature of the repayment of its dues. It was submitted that tax deduction certificate for the tax n certificate for the taxes withheld by the tenants have by the tenants have

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been issued in favour of the assessee, but then the monies are been issued in favour of the assessee, but then the monies are been issued in favour of the assessee, but then the monies are received by the assessee in a purely fiduciary capacity and towards received by the assessee in a purely fiduciary capacity and towards received by the assessee in a purely fiduciary capacity and towards the settlement of his dues rather than as income. the settlement of his dues rather than as income. Third member of Third member of tribunal case of perfect Thread Mills Ltd. ( of perfect Thread Mills Ltd. ( of perfect Thread Mills Ltd. (2020) 113 taxmann.com 384 (Mumbai taxmann.com 384 (Mumbai-Trib) concurred with finding of the with finding of the Judicial member and held t Judicial member and held that recovery of principal amount of loan hat recovery of principal amount of loan from the sale proceeds of a property imposition of the bank under from the sale proceeds of a property imposition of the bank under from the sale proceeds of a property imposition of the bank under SARFAESI ACT is not diversion of sale SARFAESI ACT is not diversion of sale proceeds by overriding title, by overriding title, but on the contrary it was only a mere application of sale proceeds but on the contrary it was only a mere application of sale proceeds but on the contrary it was only a mere application of sale proceeds realised on sale of plots towards the discharge of outstanding loan ale of plots towards the discharge of outstanding loan ale of plots towards the discharge of outstanding loan by the assessee. In the case of commission commissioner of income- liability by the assessee tax Vs Attili N rao (2201) 119 TAXMAN 1030 (SC), the assessee tax Vs Attili N rao (2201) 119 TAXMAN 1030 (SC), tax Vs Attili N rao (2201) 119 TAXMAN 1030 (SC), was dealing in ‘abkari’ business and mortgaged his immovable was dealing in ‘abkari’ business and mortgaged his immovable was dealing in ‘abkari’ business and mortgaged his immovable property to the state excise department to provide security for the he state excise department to provide security for the he state excise department to provide security for the amount of “ Kist” which were due to him to the state. The state sold amount of “ Kist” which were due to him to the state. The state sold amount of “ Kist” which were due to him to the state. The state sold the immovable property by public auction and realise its dues. A sum the immovable property by public auction and realise its dues. A sum the immovable property by public auction and realise its dues. A sum of ₹5,62,980/- was realising the auction. Out of that, the state was realising the auction. Out of that, the state was realising the auction. Out of that, the state deducted the amount of rupees one, 29, 020/ deducted the amount of rupees one, 29, 020/-due to it towards “kist” due to it towards “kist” interest and paid over the balance to the assessee. The assessee interest and paid over the balance to the assessee. The assessee interest and paid over the balance to the assessee. The assessee contended before the Assessing Officer that amount due to the state contended before the Assessing Officer that amount due to the state contended before the Assessing Officer that amount due to the state excise department i.e. Rs. one, 29, 020/ se department i.e. Rs. one, 29, 020/-should be deducted while should be deducted while computing capital gains. The tribunal and the Hon’ble High Court computing capital gains. The tribunal and the Hon’ble High Court computing capital gains. The tribunal and the Hon’ble High Court upheld the claim of the assessee, however the Hon’ble Supreme upheld the claim of the assessee, however the Hon’ble Supreme upheld the claim of the assessee, however the Hon’ble Supreme Court reversing the order of the Hon’ble High Court held that it was Court reversing the order of the Hon’ble High Court held that it wa Court reversing the order of the Hon’ble High Court held that it wa the full price realised shall be subjected to capital gain and the tax the full price realised shall be subjected to capital gain and the tax the full price realised shall be subjected to capital gain and the tax

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 7 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

thereon had to be computed thereon had to be computed. The coordinate bench of the T coordinate bench of the Tribunal in the case of Rajasthan Petro Synthetics Ltd (2014) 49 Rajasthan Petro Synthetics Rajasthan Petro Synthetics Ltd (2014) 49 Ltd (2014) 49 taxmann.com 599 (delhi taxmann.com 599 (delhi-Trib.) held that where the secured where the secured creditor to cover possession and control of assets of an assessee due itor to cover possession and control of assets of an assessee due itor to cover possession and control of assets of an assessee due to default committed in repayment of to default committed in repayment of loan, it did not amount to it did not amount to transfer of asset, within the meaning of section 2(47) of the act. In transfer of asset, within the meaning of section 2(47) of the act transfer of asset, within the meaning of section 2(47) of the act view of the decision view of the decision above, it is evident that during t it is evident that during the pending proceedings of the SARFAESI Act SARFAESI Act, the assessee cannot be treated as the assessee cannot be treated as owner of the assets possessed by it for recovery of its outstanding owner of the assets possessed by it for recovery of its outstanding owner of the assets possessed by it for recovery of its outstanding dues. In the hands of the assessee income corresponding to the dues. In the hands of the assessee income corresponding to the dues. In the hands of the assessee income corresponding to the interest on the advances relevant to assessment interest on the advances relevant to assessment years can only be years can only be assessed. The assessee assessee has given breakup of the sum of has given breakup of the sum of Rs.14,22,26,284/- which has been further reconciled before the Ld. which has been further reconciled before the Ld. which has been further reconciled before the Ld. CIT(A). The relevant part of its submission CIT(A). The relevant part of its submission before the Ld CIT(A) before the Ld CIT(A)is reproduced as under: reproduced as under:

“The appellant submitted t The appellant submitted that: Out of the sum of Rs. 14,22,26,284/- added by AO to the 1. Out of the sum of added by AO to the total Income: total Income: a. The assessee bank has already credited in Profit & Loss A/c The assessee bank has already credited in Profit & Loss A/c The assessee bank has already credited in Profit & Loss A/c -14 an amount of Rs. 2,07,76,389/- (1,80,765 + for AY 2013- 2,05,95,624) as interest recovery. Further, Rs. 38,88,756/ Rs. 38,88,756/- 2,05,95,624) as interest recovery. Further, (37,38,756 + 1,50,000) represents interest which was (37,38,756 + 1,50,000) represents interest which was (37,38,756 + 1,50,000) represents interest which was credited to P & L Ac in earlier & subsequent years. credited to P & L Ac in earlier & subsequent years. credited to P & L Ac in earlier & subsequent years. Thus to this extent the addition by A amounts to double addition of this extent the addition by A amounts to double addition of this extent the addition by A amounts to double addition of the same receipt. the same receipt. b. Rs 6, 10,80, 181/ Rs 6, 10,80, 181/- out of the sum added by AO belongs to out of the sum added by AO belongs to other consortium bankers & the appellant had only received nsortium bankers & the appellant had only received nsortium bankers & the appellant had only received that amount on their behalf. that amount on their behalf. c. The balance The balance Rs 5,64,80,958/- credited to the defaulting credited to the defaulting parties account representing recovery of old outstanding parties account representing recovery of old outstanding parties account representing recovery of old outstanding

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under the SARFAESI Act and recovery of expenses incurred under the SARFAESI Act and recovery of expenses incurred under the SARFAESI Act and recovery of expenses incurred alf of them. Further, Rs. 10,84,903/ Rs. 10,84,903/-has been on behalf of them. Further, credited to Excise duty payable on behalf of the defaulting credited to Excise duty payable on behalf of the defaulting credited to Excise duty payable on behalf of the defaulting party. Thereby balance sheet items are not taxable as Thereby balance sheet items are not taxable as Thereby balance sheet items are not taxable as income in the hands of appellant in AY 2013 income in the hands of appellant in AY 2013-14. 2. Out of the TDS of Rs 1,42,22,628 (10 % of Rs. Out of the TDS of Rs 1,42,22,628 (10 % of Rs. Out of the TDS of Rs 1,42,22,628 (10 % of Rs. 14,22,26, 284/- corresponding to the amount added by AO): corresponding to the amount added by AO): corresponding to the amount added by AO): a. TDS of Rs 20,77,639/ TDS of Rs 20,77,639/- (10% of 2,07,76,389/-) corresponds ) corresponds to the amount already credited by the appellant to the Profit to the amount already credited by the appellant to the Profit to the amount already credited by the appellant to the Profit & loss A/c in AY 2013 & loss A/c in AY 2013-14 and TDS of Rs. 3,88,876/ TDS of Rs. 3,88,876/- (10% of 38,88,756/- -) corresponds to the interest amount which was onds to the interest amount which was credited to P & L Ac in earlier & subsequent years. credited to P & L Ac in earlier & subsequent years. credited to P & L Ac in earlier & subsequent years. Thus this TDS is clearly creditable in AY 2013 TDS is clearly creditable in AY 2013-14 in the hands of the 14 in the hands of the assessee bank. assessee bank. b. TDS of Rs. 61,08.018/ TDS of Rs. 61,08.018/- (10% of 6, 10, 80. 181/ (10% of 6, 10, 80. 181/-) corresponds to the amount bel corresponds to the amount belonging to other consortium of onging to other consortium of bankers & thus is creditable in the hands of the appellant bankers & thus is creditable in the hands of the appellant bankers & thus is creditable in the hands of the appellant bank as TDS was deducted in the name of the appellant bank as TDS was deducted in the name of the appellant bank as TDS was deducted in the name of the appellant bank (ReferToyo Engg. India Ltd. vs. JCIT, SR 27 (ITAT Mumbai) (5 (ReferToyo Engg. India Ltd. vs. JCIT, SR 27 (ITAT Mumbai) (5 (ReferToyo Engg. India Ltd. vs. JCIT, SR 27 (ITAT Mumbai) (5 SOT 616); Arvind Murjani Brands (P.) Ltd. vs. I SOT 616); Arvind Murjani Brands (P.) Ltd. vs. ITO, ward 5(1) TO, ward 5(1) (2012 ITAT Mumbai) [137 ITD 173; Escorts Ltd. vs. DCIT, (2012 ITAT Mumbai) [137 ITD 173; Escorts Ltd. vs. DCIT, (2012 ITAT Mumbai) [137 ITD 173; Escorts Ltd. vs. DCIT, Circle 11(1) (2007 ITAT Delhi) (15 SOT 368); Sunita Devi vs. Circle 11(1) (2007 ITAT Delhi) (15 SOT 368); Sunita Devi vs. Circle 11(1) (2007 ITAT Delhi) (15 SOT 368); Sunita Devi vs. ACIT, Circle 36(1) (2015 /TAT Delhi) (63 taxmann.com 349], ACIT, Circle 36(1) (2015 /TAT Delhi) (63 taxmann.com 349], ACIT, Circle 36(1) (2015 /TAT Delhi) (63 taxmann.com 349], Attili N Rao (Supreme Court) (252 IT 8801 and Mathew Attili N Rao (Supreme Court) (252 IT 8801 and Mathew Attili N Rao (Supreme Court) (252 IT 8801 and Mathew Varghese vs. Varghese vs. M. Amritha Kumar (Supreme Court) (5 SCC M. Amritha Kumar (Supreme Court) (5 SCC 610]; Rajasthan Petro Synthetics Ltd. (Delhi ITAT) (ITA No. 610]; Rajasthan Petro Synthetics Ltd. (Delhi ITAT) (ITA No. 610]; Rajasthan Petro Synthetics Ltd. (Delhi ITAT) (ITA No. 1397/Del/2013]) 1397/Del/2013]) c. Balance TDS of Rs. 56,48,096/ Balance TDS of Rs. 56,48,096/- represents the recovery of represents the recovery of old dues under SARFAESI Act by appellant bank & amount old dues under SARFAESI Act by appellant bank & amount old dues under SARFAESI Act by appellant bank & amount credited to Excise duty pa credited to Excise duty payable on behalf of the defaulting yable on behalf of the defaulting party and is creditable in the hands of appellant bank. party and is creditable in the hands of appellant bank. party and is creditable in the hands of appellant bank. (ReferToyo Engg. India Ltd. Vs. JCIT, SR 27 (ITAT Mumbai) (5 (ReferToyo Engg. India Ltd. Vs. JCIT, SR 27 (ITAT Mumbai) (5 (ReferToyo Engg. India Ltd. Vs. JCIT, SR 27 (ITAT Mumbai) (5 SOT 616); Arvind Murjani Brands (P.) Ltd. vs. ITO, ward 5(1) SOT 616); Arvind Murjani Brands (P.) Ltd. vs. ITO, ward 5(1) SOT 616); Arvind Murjani Brands (P.) Ltd. vs. ITO, ward 5(1) (2012 /TAT Mumbai) /137 ITD 173; Escorts Ltd (2012 /TAT Mumbai) /137 ITD 173; Escorts Ltd (2012 /TAT Mumbai) /137 ITD 173; Escorts Ltd. vs. DCIT, Circle 11(1) (2007 ITAT Delhi) /15 SOT 3681: Sunita Devi vs. Circle 11(1) (2007 ITAT Delhi) /15 SOT 3681: Sunita Devi vs. Circle 11(1) (2007 ITAT Delhi) /15 SOT 3681: Sunita Devi vs. ACIT, Circle 36(1) (2015 ITAT Delhi) (63 taxmann.com 349); ACIT, Circle 36(1) (2015 ITAT Delhi) (63 taxmann.com 349); ACIT, Circle 36(1) (2015 ITAT Delhi) (63 taxmann.com 349); Attili N Rao (Supreme Court) (252 ITR 880] and Mathew Attili N Rao (Supreme Court) (252 ITR 880] and Mathew Attili N Rao (Supreme Court) (252 ITR 880] and Mathew Varghese vs. M. Amritha Kumar (Supreme Court) [5 SCC Varghese vs. M. Amritha Kumar (Supreme Court) [5 SCC Varghese vs. M. Amritha Kumar (Supreme Court) [5 SCC 610); Rajasthan P 610); Rajasthan Petro Synthetics Ltd. (Delhi TAT) (ITA No. etro Synthetics Ltd. (Delhi TAT) (ITA No. 1397/Del/2013]). 1397/Del/2013]).

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6.1 Thus assessee has submitted that part of the sum of Thus assessee has submitted that part of the sum of Thus assessee has submitted that part of the sum of Rs.14,22,26,284/- has been credited as interest on loans to those has been credited as interest on loans to those has been credited as interest on loans to those parties during the year under consideration part of sum has been parties during the year under consideration part of sum has been parties during the year under consideration part of sum has been adjusted against recovery of old interest amount recovery of old interest amount, , part has been treated as belonging to the other treated as belonging to the other lender bankers, , part has been adjusted against expenses or liabilities of excise duties of the adjusted against expenses or liabilities of excise duties of the adjusted against expenses or liabilities of excise duties of the defaulting parties and balance has been adjusted against recovery defaulting parties and balance has been adjusted against recovery defaulting parties and balance has been adjusted against recovery of old outstanding of the defaulting parties. Thus of old outstanding of the defaulting parties. Thus, , in our opinion the amount of Rs.14,22,28,284/ the amount of Rs.14,22,28,284/- cannot be taxed in the hands of axed in the hands of the assessee as rental income under the head the assessee as rental income under the head “income from house income from house property”.

6.2 As far as the issue of claim of the TDS is concerned As far as the issue of claim of the TDS is concerned As far as the issue of claim of the TDS is concerned, The assessee has taken credit of TDS of Rs. assessee has taken credit of TDS of Rs. Rs 1,42,22,628 (10 % of Rs 1,42,22,628 (10 % of Rs.14,22,26,284/-. The TDS has bee . The TDS has been deducted on gross rental n deducted on gross rental receipt of Rs. 14,22,26,284/ receipt of Rs. 14,22,26,284/-. Out of this gross amount, the . Out of this gross amount, the assessee has passed over amount of Rs. 6,10,80,181/- to other assessee has passed over amount of Rs. 6,10,80,181/ assessee has passed over amount of Rs. 6,10,80,181/ lender of the Consortium. The assessee has kept total amount of lender of the Consortium. The assessee has kept total amount of lender of the Consortium. The assessee has kept total amount of Rs. 8,11,46,103 (14,22,26,284 Rs. 8,11,46,103 (14,22,26,284 - 6,10,80,181) with it. This amount ) with it. This amount include the TDS deducted and claimed by the assessee of Rs. include the TDS deducted and claimed by the assess include the TDS deducted and claimed by the assess 1,42,22,628/-. Thus . Thus, the assessee has received amount of Rs. , the assessee has received amount of Rs. 1,42,22,628 by way of credit of TDS and balance amount 1,42,22,628 by way of credit of TDS and balance amount 1,42,22,628 by way of credit of TDS and balance amount (8,11,46,103-1,42,22,628) as net the amount credited out 1,42,22,628) as net the amount credited out 1,42,22,628) as net the amount credited out of Rs. 14,22,26,284 of lease rental receipts. Thus, 14,22,26,284 of lease rental receipts. Thus, the TDS amount is the TDS amount is being part of the gross receipt shown by the gross receipt shown by the assessee assessee and the

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assessee has adjusted against its share of Rs.14,22,28,284/-, thus assessee has adjusted against its share of Rs.14,22,28,284/ assessee has adjusted against its share of Rs.14,22,28,284/ said amount being money of the assessee, the assessee is entitled to said amount being money of the assessee, the assessee is said amount being money of the assessee, the assessee is get credit of said amount of amount of taxes against its taxable income taxable income. The coordinate bench of the Tribunal in the case of Arvind Murjani Arvind Murjani coordinate bench of the T Brands P ltd (2012) 21 taxmann.com 131( Mumbai), held that the Brands P ltd (2012) 21 taxmann.com 131( Mumbai), Brands P ltd (2012) 21 taxmann.com 131( Mumbai), case where amount on which tax was deducted at case where amount on which tax was deducted at source is not at all source is not at all chargeable to tax, command of section 199 will have to be chargeable to tax, command of section 199 will have to be chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit harmoniously and pragmatically read as providing for allowing credit harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which for tax deducted at source in the year of receipt of amount, in which for tax deducted at source in the year of receipt of amount, in which tax was deducted at source tax was deducted at source. The Tribunal Delhi Bench in Bench in the case of Escorts Ltd (2007) 15 SOT 368 (Delhi) Escorts Ltd (2007) 15 SOT 368 (Delhi) held that if the recipient of if the recipient of income considers that he is not liable to tax in respect of income, income considers that he is not liable to tax in respect of income, income considers that he is not liable to tax in respect of income, whether wholly or partly, and therefore does not disclose amount of partly, and therefore does not disclose amount of partly, and therefore does not disclose amount of such income in his re such income in his return of income, income tax department cannot turn of income, income tax department cannot refuse to give credit merely by contending that income had not been refuse to give credit merely by contending that income had not been refuse to give credit merely by contending that income had not been disclosed in the return filed by the assessee for assessment year. disclosed in the return filed by the assessee for assessment year disclosed in the return filed by the assessee for assessment year The Tribunal in the case of Sunita devi Vs ACIT in ITA No. Sunita devi Vs ACIT in ITA No. The Tribunal in the case of 4473/Del/2012 considered the various decisions and held nsidered the various decisions and held nsidered the various decisions and held that Act nowhere says that credit of TDS should be restricted to only to the nowhere says that credit of TDS should be restricted to only to the nowhere says that credit of TDS should be restricted to only to the amount of the income offered in the return of income and credit of tax amount of the income offered in the return of income and credit of tax amount of the income offered in the return of income and credit of tax deducted at source has to be given in the hands of the deductee. The deducted at source has to be given in the hands of the deductee deducted at source has to be given in the hands of the deductee relevant finding of the Tribunal(supra) is reproduced as under: relevant finding of the Tribunal(supra) is reproduced as under: relevant finding of the Tribunal(supra) is reproduced as under:

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 11 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

we feel it necessary to look into Section 199 of the IT Act, which we feel it necessary to look into Section 199 of the IT Act, which we feel it necessary to look into Section 199 of the IT Act, which reads as under : reads as under :- Credit for tax deducted. Credit for tax deducted. “199. (1) Any deduction made in accordance with the “199. (1) Any deduction made in accordance with the “199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central foregoing provisions of this Chapter and paid to the Central foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf Government shall be treated as a payment of tax on behalf Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, of the person from whose income the deduction was made, of the person from whose income the deduction was made, or of the owner of the securi or of the owner of the security, or of the depositor or of the ty, or of the depositor or of the owner of property or of the unit owner of property or of the unit-holder, or of the holder, or of the shareholder, as the case may be. (2) Any sum referred to in shareholder, as the case may be. (2) Any sum referred to in shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central section (1A) of section 192 and paid to the Central section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the Government shall be treated as the tax paid on behalf o Government shall be treated as the tax paid on behalf o person in respect of whose income such payment of tax has person in respect of whose income such payment of tax has person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving been made. (3) The Board may, for the purposes of giving been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the credit in respect of tax deducted or tax paid in terms of the credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules53 as may be provisions of this Chapter, make such rules53 as may be provisions of this Chapter, make such rules53 as may be necessary, includ necessary, including the rules for the purposes of giving ing the rules for the purposes of giving credit to a person other than those referred to in sub-section credit to a person other than those referred to in sub credit to a person other than those referred to in sub (1) and sub (1) and sub-section (2) and also the assessment year for section (2) and also the assessment year for which such credit may be given.]” which such credit may be given.]” 9. Further, in terms of the provisions of sub section (3) of 9. Further, in terms of the provisions of sub section (3) of 9. Further, in terms of the provisions of sub section (3) of section 199 of the Act, the CBDT has made rules for the purpose of giving 199 of the Act, the CBDT has made rules for the purpose of giving 199 of the Act, the CBDT has made rules for the purpose of giving credit of TDS in the case of deductee and other persons as well as credit of TDS in the case of deductee and other persons as well as credit of TDS in the case of deductee and other persons as well as for multiple assessment years, which reads as under : for multiple assessment years, which reads as under : for multiple assessment years, which reads as under :- “Credit for tax deducted at source for the purposes of “Credit for tax deducted at source for the purposes of “Credit for tax deducted at source for the purposes of section 199. tion 199. 37BA. (1) Credit for tax deducted at source and paid to the 37BA. (1) Credit for tax deducted at source and paid to the 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Central Government in accordance with the provisions of Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment Chapter XVII, shall be given to the person to whom payment Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter has been made or credit has been given (hereinafter has been made or credit has been given (hereinafter referred to as ded referred to as deductee) on the basis of information relating uctee) on the basis of information relating to deduction of tax furnished by the deductor to the income- to deduction of tax furnished by the deductor to the income to deduction of tax furnished by the deductor to the income tax authority or the person authorized by such authority. tax authority or the person authorized by such authority. tax authority or the person authorized by such authority. (2) (i) If the income on which tax has been deducted at (2) (i) If the income on which tax has been deducted at (2) (i) If the income on which tax has been deducted at source is assessable in the hands of source is assessable in the hands of a person other than a person other than the deductee, credit for tax deducted at source shall be the deductee, credit for tax deducted at source shall be the deductee, credit for tax deducted at source shall be given to the other person in cases where given to the other person in cases where--- (a) the income of the deductee is included in the total income (a) the income of the deductee is included in the total income (a) the income of the deductee is included in the total income of another person under the provisions of section 60, section of another person under the provisions of section 60, section of another person under the provisions of section 60, section 61, section 64, section93 or section94; 61, section 64, section93 or section94;

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(b) the income of a deductee being an association of persons (b) the income of a deductee being an association of persons (b) the income of a deductee being an association of persons or a trust is assessable in t or a trust is assessable in the hands of members of the he hands of members of the association of persons, or in the hands of trustees, as the association of persons, or in the hands of trustees, as the association of persons, or in the hands of trustees, as the case may be; case may be; (c) the income from an asset held in the name of a deductee, (c) the income from an asset held in the name of a deductee, (c) the income from an asset held in the name of a deductee, being a partner of a firm or a karta of a Hindu undivided being a partner of a firm or a karta of a Hindu undivided being a partner of a firm or a karta of a Hindu undivided family, is assessable as the income family, is assessable as the income of the firm, or Hindu of the firm, or Hindu undivided family, as the case may be; undivided family, as the case may be; (d) the income from a property, deposit, security, unit or (d) the income from a property, deposit, security, unit or (d) the income from a property, deposit, security, unit or share held in the name of a deductee is owned jointly by share held in the name of a deductee is owned jointly by share held in the name of a deductee is owned jointly by the deductee and other persons and the income is the deductee and other persons and the income is the deductee and other persons and the income is assessable in their hands in t assessable in their hands in the same proportion as their he same proportion as their ownership of the asset : ownership of the asset : Provided that the deductee files a declaration with the Provided that the deductee files a declaration with the Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the deductor and the deductor reports the tax deduction in the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to name of the other person in the information relating to name of the other person in the information relating to deduction of tax referred to in deduction of tax referred to in sub-rule (1). (ii) The declaration filed by the deductee under clause (i) (ii) The declaration filed by the deductee under clause (i) (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account shall contain the name, address, permanent account shall contain the name, address, permanent account number of the person to whom credit is to be given, number of the person to whom credit is to be given, number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given payment or credit in relation to which credit is to be given payment or credit in relation to which credit is to be given and reasons for and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of (iii) The deductor shall issue the certificate for deduction of (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name tax at source in the name of the person in whose name tax at source in the name of the person in whose name credit is shown in the information relating to deduction of is shown in the information relating to deduction of is shown in the information relating to deduction of tax referred to in sub tax referred to in sub-rule (1) and shall keep the declaration the declaration in his safe custody. in his safe custody. (3) (i) Credit for tax deducted at source and paid to the (3) (i) Credit for tax deducted at source and paid to the (3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year Central Government, shall be given for the assessment year Central Government, shall be given for the assessment year for which such income is assessable. for which such income is assessable. (ii) Where tax has been deducted at source and paid to the (ii) Where tax has been deducted at source and paid to the (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a ral Government and the income is assessable over a ral Government and the income is assessable over a number of years, credit for tax deducted at source shall be number of years, credit for tax deducted at source shall be number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which allowed across those years in the same proportion in which allowed across those years in the same proportion in which the income is assessable to tax. the income is assessable to tax. (4) Credit for tax deducted at source and paid to the account (4) Credit for tax deducted at source and paid to the (4) Credit for tax deducted at source and paid to the of the Central Government shall be granted on the basis of - of the Central Government shall be granted on the basis of of the Central Government shall be granted on the basis of --

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(i) the information relating to deduction of tax furnished by (i) the information relating to deduction of tax furnished by (i) the information relating to deduction of tax furnished by the deductor to the income the deductor to the income-tax authority or the person tax authority or the person authorized by such authority; and authorized by such authority; and (ii) the information in the retur (ii) the information in the return of income in respect of the n of income in respect of the claim for the credit, subject to verification in accordance claim for the credit, subject to verification in accordance claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board with the risk management strategy formulated by the Board with the risk management strategy formulated by the Board from time to time.” from time to time.” 10. On plain reading of section 199 of the Act and rules mades 10. On plain reading of section 199 of the Act and rules mades 10. On plain reading of section 199 of the Act and rules mades thereunder, it is appare thereunder, it is apparent that sub section 2 and 3 of the section nt that sub section 2 and 3 of the section are not applicable to the facts of the case in hand. Further, sub are not applicable to the facts of the case in hand. Further, sub are not applicable to the facts of the case in hand. Further, sub Rule (2) and (3) of Rule 37BA of the Income Rule (2) and (3) of Rule 37BA of the Income-tax Rules are also not tax Rules are also not applicable to the facts of the case in hand, as the income of the applicable to the facts of the case in hand, as the income of the applicable to the facts of the case in hand, as the income of the assessee is no assessee is not falling under any of the clauses of sub Rule (2) and t falling under any of the clauses of sub Rule (2) and issue of credit in multiple years is also not involved in the case in issue of credit in multiple years is also not involved in the case in issue of credit in multiple years is also not involved in the case in hand. So, only sub section (1) of section 199 of the Act, and sub hand. So, only sub section (1) of section 199 of the Act, and sub hand. So, only sub section (1) of section 199 of the Act, and sub Rule (1) and (4) of the Rule 37BA of the Rules are related to the Rule (1) and (4) of the Rule 37BA of the Rules are related to the Rule (1) and (4) of the Rule 37BA of the Rules are related to the case of the assessee. The first limb of the said subsection refers to case of the assessee. The first limb of the said subsection refers to case of the assessee. The first limb of the said subsection refers to the tax deducted and paid to the Central Government. The second the tax deducted and paid to the Central Government. The second the tax deducted and paid to the Central Government. The second limb of the sub section refers to allowing of credit of the tax so limb of the sub section refers to allowing of credit of the tax so limb of the sub section refers to allowing of credit of the tax so deducted and paid to central government, in the hands deducted and paid to central government, in the hands deducted and paid to central government, in the hands the person from whose income, the tax has been deducted. So, a plain and from whose income, the tax has been deducted. So, a plain and from whose income, the tax has been deducted. So, a plain and literal interpretation of sub section (1) of section 199 leads to result literal interpretation of sub section (1) of section 199 leads to result literal interpretation of sub section (1) of section 199 leads to result that the credit of the tax deducted has to be given in the hands of that the credit of the tax deducted has to be given in the hands of that the credit of the tax deducted has to be given in the hands of the deductee i.e. the person from whose in the deductee i.e. the person from whose income the deduction was come the deduction was made. Thus, said sub section nowhere says that credit of TDS made. Thus, said sub section nowhere says that credit of TDS made. Thus, said sub section nowhere says that credit of TDS should be restricted only to the amount of income or receipt offered should be restricted only to the amount of income or receipt offered should be restricted only to the amount of income or receipt offered in the return of Income or in the Profit and Loss Account. Further, in the return of Income or in the Profit and Loss Account. Further, in the return of Income or in the Profit and Loss Account. Further, sub rule (1) of rule 37BA of the Ru sub rule (1) of rule 37BA of the Rules also emphasize to allow the les also emphasize to allow the credit in the hands of deductor on the basis of the information credit in the hands of deductor on the basis of the information credit in the hands of deductor on the basis of the information related to deduction of tax furnished by the deductor. With effect related to deduction of tax furnished by the deductor. With effect related to deduction of tax furnished by the deductor. With effect from 1.4.2008, the section 199 of the Act has undergone a change from 1.4.2008, the section 199 of the Act has undergone a change from 1.4.2008, the section 199 of the Act has undergone a change and the requirement of TDS c and the requirement of TDS certificate for tax credit has been ertificate for tax credit has been dispensed with and now the credit is being allowed as per Rule dispensed with and now the credit is being allowed as per Rule dispensed with and now the credit is being allowed as per Rule 37BA(4) of the Rules on the basis of information available in the 37BA(4) of the Rules on the basis of information available in the 37BA(4) of the Rules on the basis of information available in the Income Tax Statement (ITS) of the assessee on the data base of Income Tax Statement (ITS) of the assessee on the data base of Income Tax Statement (ITS) of the assessee on the data base of Income Tax Department or on t Income Tax Department or on the basis of form no. 26AS of Income he basis of form no. 26AS of Income Tax forms. In the case of the assessee the information as to the Tax forms. In the case of the assessee the information as to the Tax forms. In the case of the assessee the information as to the income and the tax deducted was available in the ITS. The income and the tax deducted was available in the ITS. The income and the tax deducted was available in the ITS. The Assessing Officer, has accepted the diversion of Assessing Officer, has accepted the diversion of income in the income in the hand of Shri Kapil Ahluwalia but d hand of Shri Kapil Ahluwalia but denied the credit of the total tax enied the credit of the total tax deducted by the deductor. We find that the action of the assessing deducted by the deductor. We find that the action of the assessing deducted by the deductor. We find that the action of the assessing officer was on the basis of the incorrect interpretation of the sub officer was on the basis of the incorrect interpretation of the sub officer was on the basis of the incorrect interpretation of the sub section (1) of section 199 of the Act. The Income section (1) of section 199 of the Act. The Income-tax Appellate tax Appellate Tribunal, Mumbai Bench Tribunal, Mumbai Bench A in the case of Arvind Murjani Brands A in the case of Arvind Murjani Brands

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(P) Ltd. vs. ITO, Ward 5 (1), Mumbai reported (Supra) has held as (P) Ltd. vs. ITO, Ward 5 (1), Mumbai reported (Supra) has held as (P) Ltd. vs. ITO, Ward 5 (1), Mumbai reported (Supra) has held as under :- “That this section recognizes a very important position of “That this section recognizes a very important position of “That this section recognizes a very important position of law, that the tax deducted at source is “treated as a law, that the tax deducted at source is “treated as a law, that the tax deducted at source is “treated as a payment of tax on behalf of payment of tax on behalf of the person from whose income the person from whose income the deduction was made” and consequently “credit shall be the deduction was made” and consequently “credit shall be the deduction was made” and consequently “credit shall be given to him for the amount so deducted.”So the role of given to him for the amount so deducted.”So the role of given to him for the amount so deducted.”So the role of section 199 is confined to allowing the credit for the tax section 199 is confined to allowing the credit for the tax section 199 is confined to allowing the credit for the tax deducted at source to the payee of the amount and none deducted at source to the payee of the amount and none deducted at source to the payee of the amount and none else.” 11. Further in the case of Escorts Ltd. vs. DCIT (Supra) the 11. Further in the case of Escorts Ltd. vs. DCIT (Supra) the 11. Further in the case of Escorts Ltd. vs. DCIT (Supra) the Tribunal has held as under : Tribunal has held as under :- “As per our considered view, credit for TDS must in every “As per our considered view, credit for TDS must in every “As per our considered view, credit for TDS must in every case be given to the assessee from whose income tax was case be given to the assessee from whose income tax was case be given to the assessee from whose income tax was deducted at source and paid to the credit deducted at source and paid to the credit of the Central of the Central Government. If the recipient of the income considers that he Government. If the recipient of the income considers that he Government. If the recipient of the income considers that he is not liable to tax in respect of the income, wholly or partly, is not liable to tax in respect of the income, wholly or partly, is not liable to tax in respect of the income, wholly or partly, therefore, does not disclose the amount of such income in therefore, does not disclose the amount of such income in therefore, does not disclose the amount of such income in his return, the Income his return, the Income-tax Department cannot refuse to g tax Department cannot refuse to give credit merely by contending that the income had not been credit merely by contending that the income had not been credit merely by contending that the income had not been disclosed in the return filed by the assessee for the disclosed in the return filed by the assessee for the disclosed in the return filed by the assessee for the assessment year.” assessment year.” 12. Further, the decisions of the Tribunal in cases of renovation 12. Further, the decisions of the Tribunal in cases of renovation 12. Further, the decisions of the Tribunal in cases of renovation technologies (Supra) and Supreme Renewable Energy Ltd. (S technologies (Supra) and Supreme Renewable Energy Ltd. (S technologies (Supra) and Supreme Renewable Energy Ltd. (Supra) also support the stand of the assessee. Further, the fact that the also support the stand of the assessee. Further, the fact that the also support the stand of the assessee. Further, the fact that the department has neither given credit for the tax of Rs. 12,23,608 to department has neither given credit for the tax of Rs. 12,23,608 to department has neither given credit for the tax of Rs. 12,23,608 to the assessee or to Shri Kapil Ahluwalia nor refunded the said sum the assessee or to Shri Kapil Ahluwalia nor refunded the said sum the assessee or to Shri Kapil Ahluwalia nor refunded the said sum to the deductor. The constitution has not mandate to the deductor. The constitution has not mandated the department d the department to swallow the rightful money of the tax payer without any rule of to swallow the rightful money of the tax payer without any rule of to swallow the rightful money of the tax payer without any rule of law. Further, the departmental representative submitted that there law. Further, the departmental representative submitted that there law. Further, the departmental representative submitted that there is possibility that Shri Kapil Ahluwalia might have taken credit of is possibility that Shri Kapil Ahluwalia might have taken credit of is possibility that Shri Kapil Ahluwalia might have taken credit of the balance Rs. 12, 23,608/ the balance Rs. 12, 23,608/- and therefore if credit of this amount efore if credit of this amount is allowed to the assessee, it will amount to allowing of double is allowed to the assessee, it will amount to allowing of double is allowed to the assessee, it will amount to allowing of double credit of the same account and it will be unjust enrichment in the credit of the same account and it will be unjust enrichment in the credit of the same account and it will be unjust enrichment in the hands of assessee. The ld. AR however, countered the argument of hands of assessee. The ld. AR however, countered the argument of hands of assessee. The ld. AR however, countered the argument of the DR and stated that the T the DR and stated that the TDS Certificate has been issued to the DS Certificate has been issued to the assessee only and as per data base of Income assessee only and as per data base of Income-tax department, the tax department, the TDS is reflecting against the assessee only, therefore allowing TDS is reflecting against the assessee only, therefore allowing TDS is reflecting against the assessee only, therefore allowing credit in the hands of Shri Kapil Ahluwalia was not possible. He credit in the hands of Shri Kapil Ahluwalia was not possible. He credit in the hands of Shri Kapil Ahluwalia was not possible. He further submitted that S further submitted that Sh. Kapil Ahluwalia is liable to pay tax on h. Kapil Ahluwalia is liable to pay tax on the income transferred to him, and therefore, not allowing credit of the income transferred to him, and therefore, not allowing credit of the income transferred to him, and therefore, not allowing credit of Rs. 12,23,608/ Rs. 12,23,608/- to the assessee and retaining the amount by the to the assessee and retaining the amount by the Income-tax department without giving adjustment to either tax department without giving adjustment to either tax department without giving adjustment to either

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 15 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

assessee or Sh. Kapil assessee or Sh. Kapil Ahluwalia amounts to unjust enrichment in Ahluwalia amounts to unjust enrichment in the hands of the department. We agree with the above contention the hands of the department. We agree with the above contention the hands of the department. We agree with the above contention of the ld. Authorised Representative. of the ld. Authorised Representative. We are of the view that We are of the view that neither party should be made unjust enriched at the cost of the neither party should be made unjust enriched at the cost of the neither party should be made unjust enriched at the cost of the other. We hold that the other. We hold that the credit of the Rs. 12,23,608/- is allowable in the hands of the assessee, in view of the clear provisions of sub in the hands of the assessee, in view of the clear provisions of sub in the hands of the assessee, in view of the clear provisions of sub section(1) of section 199 of the Act and Rules made thereunder. section(1) of section 199 of the Act and Rules made thereunder. section(1) of section 199 of the Act and Rules made thereunder. However, we direct the assessing officer to verify whether any However, we direct the assessing officer to verify whether any However, we direct the assessing officer to verify whether any credit of the TDS credit of the TDS of Rs. 12,23,608/- has been allowed by the has been allowed by the Income-tax Department in the hands of Shri Kapil Ahluwalia or tax Department in the hands of Shri Kapil Ahluwalia or tax Department in the hands of Shri Kapil Ahluwalia or not. If it has been not allowed, then the credit of this amount not. If it has been not allowed, then the credit of this amount not. If it has been not allowed, then the credit of this amount should be given in the hands of the assessee. Accordingly ground should be given in the hands of the assessee. Accordingly ground should be given in the hands of the assessee. Accordingly ground no. 1 of the assessee no. 1 of the assessee is allowed.” 6.3 In view of above judicial precedents, we In view of above judicial precedents, we do not find any error do not find any error in the claim of the assessee claim of the assessee. Therefore, we set aside the finding of . Therefore, we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition of the Ld. CIT(A) on the issue in dispute and delete the the Ld. CIT(A) on the issue in dispute and delete the Rs.14,22,28,284/-.

6.4 However, as far However, as far as the liability of the payment of the tax on the as the liability of the payment of the tax on the rental income by the owners of assets, is concerned by the owners of assets, is concerned by the owners of assets, is concerned, the Tribunal has passed an interim order dated 23.06.2021 passed an interim order dated 23.06.2021 and and issued notices to those three default defaulter parties namely (1) Priyadarshini Shetakari (1) Priyadarshini Shetakari SSK, Udgirl Latur, (2) Shetkari Sahkari Sakhar Karkhana Ltd. and SSK, Udgirl Latur, (2) Shetkari Sahkari Sakhar Karkhana Ltd. and SSK, Udgirl Latur, (2) Shetkari Sahkari Sakhar Karkhana Ltd. and (3) Tasagon Taluka Sahakari Sahkhar Karkhana Ltd., show causing (3) Tasagon Taluka Sahakari Sahkhar Karkhana Ltd. (3) Tasagon Taluka Sahakari Sahkhar Karkhana Ltd. why the said rental income of Rs. 14,22,28,284/- might not be why the said rental income of Rs. 14,22,28,284/ why the said rental income of Rs. 14,22,28,284/ assessed in their hand assessed in their hand. The relevant order is reproduced as under: order is reproduced as under:

“INTERIM ORDER

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 16 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 17 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

assessee is concerned, is wholly irrelevant. If an income assessee is concerned, is wholly irrelevant. If an income assessee is concerned, is wholly irrelevant. If an income cannot be taxed in the hands of the assessee, it cannot be cannot be taxed in the hands of the assessee, it cannot be cannot be taxed in the hands of the assessee, it cannot be taxed in the hands of the assessee, and that we must not mix taxed in the hands of the assessee, and that we must not mix taxed in the hands of the assessee, and that we must not mix up two unrelated aspects of the matter by raising questions up two unrelated aspects of the matter by raising questions up two unrelated aspects of the matter by raising questions about the actual owners of the assesses being put to the about the actual owners of the assesses being put to the about the actual owners of the assesses being put to the notice. That is not germane to taxability in the hands of the notice. That is not germane to taxability in the hands of the notice. That is not germane to taxability in the hands of the assessee. 4. Learned Departmental Representative did not have much to 4. Learned Departmental Representative did not have much to 4. Learned Departmental Representative did not have much to say on the service of notice of this hearing on the actual n the service of notice of this hearing on the actual n the service of notice of this hearing on the actual alleged owners of the assets, nor did he see any legal alleged owners of the assets, nor did he see any legal alleged owners of the assets, nor did he see any legal implications to this aspect either. Nevertheless, learned implications to this aspect either. Nevertheless, learned implications to this aspect either. Nevertheless, learned Departmental Representative submits that the rental income is Departmental Representative submits that the rental income is Departmental Representative submits that the rental income is earned, and whether it is t earned, and whether it is to be taxed in the hands of the legal o be taxed in the hands of the legal owner of the asset or in the hands of this assessee, it is to be owner of the asset or in the hands of this assessee, it is to be owner of the asset or in the hands of this assessee, it is to be taxed nevertheless. When an income is earned, it cannot taxed nevertheless. When an income is earned, it cannot taxed nevertheless. When an income is earned, it cannot escape taxation only because the beneficial owner of the escape taxation only because the beneficial owner of the escape taxation only because the beneficial owner of the income is someone other than the legal ow income is someone other than the legal owner. He is, however, ner. He is, however, on the same page as the learned counsel inasmuch he does on the same page as the learned counsel inasmuch he does on the same page as the learned counsel inasmuch he does not really dispute the proposition that the income in question not really dispute the proposition that the income in question not really dispute the proposition that the income in question may have arisen to the owner of the asset and, viewed thus, may have arisen to the owner of the asset and, viewed thus, may have arisen to the owner of the asset and, viewed thus, the repayment to the assessee is in the nature of the the repayment to the assessee is in the nature of the the repayment to the assessee is in the nature of the application of income for repayment of loans. pplication of income for repayment of loans. 5. We are alive to the fact that the income in question cannot 5. We are alive to the fact that the income in question cannot 5. We are alive to the fact that the income in question cannot be taxed in the hands of the assessee just because the said be taxed in the hands of the assessee just because the said be taxed in the hands of the assessee just because the said income cannot be taxed in the hands of some other assessee income cannot be taxed in the hands of some other assessee income cannot be taxed in the hands of some other assessee as well, and the income is g as well, and the income is going untaxed as such. The fact, oing untaxed as such. The fact, however, remains that the plea of the assessee before us, as however, remains that the plea of the assessee before us, as however, remains that the plea of the assessee before us, as one of the dimensions, that this income cannot be taxed in the one of the dimensions, that this income cannot be taxed in the one of the dimensions, that this income cannot be taxed in the hands of this assessee as it lawfully belongs to the owner of hands of this assessee as it lawfully belongs to the owner of hands of this assessee as it lawfully belongs to the owner of the assets and what is received by the the assets and what is received by the assessee is an assessee is an application of income earned by the said owner. On the face of application of income earned by the said owner. On the face of application of income earned by the said owner. On the face of it, this plea makes sense as well. it, this plea makes sense as well. 6. There is, however, a practical difficulty 6. There is, however, a practical difficulty 7. In case we are to uphold the plea of the assessee, without 7. In case we are to uphold the plea of the assessee, without 7. In case we are to uphold the plea of the assessee, without putting the persons in whose hands putting the persons in whose hands the income is to be taxed, the income is to be taxed, to notice, the assessments of this income in the hands of those to notice, the assessments of this income in the hands of those to notice, the assessments of this income in the hands of those persons will perhaps be clearly time persons will perhaps be clearly time-barred. However, when barred. However, when we accept the same plea, after putting these persons to notice, we accept the same plea, after putting these persons to notice, we accept the same plea, after putting these persons to notice, in terms of the provisions of Section 153 in terms of the provisions of Section 153(6)(i) read with (6)(i) read with Explanation 2 (b) to Section 153 Explanation 2 (b) to Section 153- which is materially the same which is materially the same

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 18 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

as Section 153(3) read with Explanation 3 in the pre as Section 153(3) read with Explanation 3 in the pre as Section 153(3) read with Explanation 3 in the pre- amendment section, the assessments or reassessments of amendment section, the assessments or reassessments of amendment section, the assessments or reassessments of income, to bring the said income to tax, will not be time income, to bring the said income to tax, will not be time income, to bring the said income to tax, will not be time- barred. As the provisions in Section 153, whether as in force the provisions in Section 153, whether as in force the provisions in Section 153, whether as in force up to 1st June 2016 or whether as in the amended sections, up to 1st June 2016 or whether as in the amended sections, up to 1st June 2016 or whether as in the amended sections, are similar in nature, it is not really necessary to deal with the are similar in nature, it is not really necessary to deal with the are similar in nature, it is not really necessary to deal with the question as to which of these provisions will apply question as to which of these provisions will apply question as to which of these provisions will apply- as in force at the point of time when the assessment was framed or as in of time when the assessment was framed or as in of time when the assessment was framed or as in force now. The relevant extracts from the above provisions are force now. The relevant extracts from the above provisions are force now. The relevant extracts from the above provisions are as follows: Time limit for completion of assessment, reassessment Time limit for completion of assessment, reassessment Time limit for completion of assessment, reassessment and recomputation. and recomputation. 153. (1) No order of assessment12 shall be made under 153. (1) No order of assessment12 shall be made under 153. (1) No order of assessment12 shall be made under section 143 or section 144 at any time after the expiry section 143 or section 144 at any time after the expiry section 143 or section 144 at any time after the expiry of twenty of twenty-one months from the end of the assessment one months from the end of the assessment year in which the income was first assessable: year in which the income was first assessable: year in which the income was first assessable: Provided that in respect of an order of assessment Provided that in respect of an order of assess Provided that in respect of an order of assess relating to the assessment year commencing on the 1st relating to the assessment year commencing on the 1st relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section day of April, 2018, the provisions of this sub day of April, 2018, the provisions of this sub shall have effect, as if for the words "twenty-one shall have effect, as if for the words "twenty shall have effect, as if for the words "twenty months", the words "eighteen months" had been months", the words "eighteen months" had been months", the words "eighteen months" had been substituted: substituted: Provided further that in respec Provided further that in respect of an order of t of an order of assessment assessment assessment relating relating relating to to to the the the assessment assessment assessment year year year commencing on or after the 1st day of April, 2019, the commencing on or after the 1st day of April, 2019, the commencing on or after the 1st day of April, 2019, the provisions of this subsection shall have effect, as if for provisions of this subsection shall have effect, as if for provisions of this subsection shall have effect, as if for the words "twenty the words "twenty-one months", the words "twelve one months", the words "twelve months" had been substituted. months" had been substituted. (2) ) ) No No No order order order of of of assessment, assessment, assessment, reassessment reassessment reassessment or or or recomputation shall be made under section 147 after recomputation shall be made under section 147 after recomputation shall be made under section 147 after the expiry of nine months from the end of the financial the expiry of nine months from the end of the financial the expiry of nine months from the end of the financial year in which the notice under section 148 was served: year in which the notice under section 148 was served: year in which the notice under section 148 was served: Provided that where the notice under section 148 is Provided that where the notice under section 148 is Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the served on or after the 1st day of April, 2019, the served on or after the 1st day of April, 2019, the provisions of this sub provisions of this sub-section shall have effect, as if for section shall have effect, as if for the words "nine months", the words "twelve months" the words "nine months", the words "twelve months" the words "nine months", the words "twelve months" had been substituted.] had been substituted.] …………………….. ……………………..

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 19 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

…………………….. …………………….. (6) Nothing contained in sub (6) Nothing contained in sub-sections (1) and sections (1) and (2) shall apply apply apply to to to the the the following following following classes classes classes of of of assessments, assessments, assessments, reassessments and recomputation which may, subject reassessments and recomputation which may, subject reassessments and recomputation which may, subject to the provisions of sub to the provisions of sub-sections (3) and (5), be sections (3) and (5), be completed completed— (i) (i) (i) where where where the the the assessment, assessment, assessment, reassessment reassessment reassessment or or or recomputation is made on the assessee or any person in recomputation is made on the assessee or an recomputation is made on the assessee or an consequence of or to give effect to any finding or consequence of or to give effect to any finding or consequence of or to give effect to any finding or direction contained in an order under section 250, direction contained in an order under section 250, direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 254, section 260, section 262, section 263, or section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding section 264 or in an order of any court in a proceeding section 264 or in an order of any court in a proceeding otherwise than by way of appeal otherwise than by way of appeal or reference under this or reference under this Act, on or before the expiry of twelve months from the Act, on or before the expiry of twelve months from the Act, on or before the expiry of twelve months from the end of the month in which such order is received or end of the month in which such order is received or end of the month in which such order is received or passed by the Principal Commissioner or Commissioner, passed by the Principal Commissioner or Commissioner, passed by the Principal Commissioner or Commissioner, as the case may be; or as the case may be; or …………………………. …………………………. Explanation 2. Explanation 2.—For the purposes of this section, where, For the purposes of this section, where, by an order referred to in clause (i) of sub by an order referred to in clause (i) of sub-section (6), section (6),— (b) any income is excluded from the total income of one (b) any income is excluded from the total income of one (b) any income is excluded from the total income of one person and held to be the income of another person, person and held to be the income of another person, person and held to be the income of another person, then, an assessment of such inco then, an assessment of such income on such other me on such other person shall, for the purposes of section 150 and this person shall, for the purposes of section 150 and this person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or section, be deemed to be one made in consequence of or section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the to give effect to any finding or direction contained in the to give effect to any finding or direction contained in the said order, if such other person was given an said order, if such other person was given an said order, if such other person was given an opportunity of being he opportunity of being heard before the said order was ard before the said order was passed. passed. 8. It is thus clear that under the scheme of the Act, it is 8. It is thus clear that under the scheme of the Act, it is 8. It is thus clear that under the scheme of the Act, it is permissible that the parties, other than the parties in appeal, permissible that the parties, other than the parties in appeal, permissible that the parties, other than the parties in appeal, are also served notice about the proceedings before us and the are also served notice about the proceedings before us and the are also served notice about the proceedings before us and the effect of such notice being se effect of such notice being served on other affected parties rved on other affected parties seriously seriously seriously affects affects affects the the the limitation limitation limitation of of of assessments assessments assessments or or or reassessments on such other person. There is also no doubt, reassessments on such other person. There is also no doubt, reassessments on such other person. There is also no doubt, and not even a suggestion by the learned counsel for the and not even a suggestion by the learned counsel for the and not even a suggestion by the learned counsel for the assessee that this course being followed does not affect assessee that this course being followed does not affect assessee that this course being followed does not affect legitimate, and in fact any, interests of the assessee legitimate, and in fact any, interests of the assessee legitimate, and in fact any, interests of the assessee-

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 20 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

appellant, even though it may result in some inconvenience to appellant, even though it may result in some inconvenience to appellant, even though it may result in some inconvenience to the assessee. The service of notice on the affected parties is the assessee. The service of notice on the affected parties is the assessee. The service of notice on the affected parties is thus wholly of neutral impact so far as the assessee is thus wholly of neutral impact so far as the assessee is thus wholly of neutral impact so far as the assessee is concerned. When two concerned. When two courses are available to us, and one of courses are available to us, and one of these courses extends legitimate protection to interests of one these courses extends legitimate protection to interests of one these courses extends legitimate protection to interests of one of the parties before us (i.e. the Assessing Officer in this case), of the parties before us (i.e. the Assessing Officer in this case), of the parties before us (i.e. the Assessing Officer in this case), without offending legitimate interests of the other party before without offending legitimate interests of the other party before without offending legitimate interests of the other party before us (i.e. the assess us (i.e. the assessee-appellant), in our considered view, we appellant), in our considered view, we must follow the said course. The powers we hold, or indeed must follow the said course. The powers we hold, or indeed must follow the said course. The powers we hold, or indeed any public authority has, are the powers that must be any public authority has, are the powers that must be any public authority has, are the powers that must be exercised for the good of the public and in the manner which exercised for the good of the public and in the manner which exercised for the good of the public and in the manner which furthers the common cause in the most op furthers the common cause in the most optimum way. timum way. 9. When these provisions were pointed out to the parties, and 9. When these provisions were pointed out to the parties, and 9. When these provisions were pointed out to the parties, and we put it to them as to why the notices not be issued to the we put it to them as to why the notices not be issued to the we put it to them as to why the notices not be issued to the actual owners of the assets from which the income in question actual owners of the assets from which the income in question actual owners of the assets from which the income in question is derived, both the parties very graciously agreed to our is derived, both the parties very graciously agreed to our is derived, both the parties very graciously agreed to our suggestion and extended their cooperation in service of notices suggestion and extended their cooperation in service of notices suggestion and extended their cooperation in service of notices to the affected parties. Learned counsel for the assessee to the affected parties. Learned counsel for the assessee to the affected parties. Learned counsel for the assessee volunteered to file the names, addresses and such other volunteered to file the names, addresses and such other volunteered to file the names, addresses and such other details of the actual owners of the assets in question, as the details of the actual owners of the assets in question, as the details of the actual owners of the assets in question, as the assessee may ha assessee may have in his possession, at the earliest possible, ve in his possession, at the earliest possible, and learned Departmental Representative volunteered to serve and learned Departmental Representative volunteered to serve and learned Departmental Representative volunteered to serve the notice of next hearing to these persons. We, therefore, the notice of next hearing to these persons. We, therefore, the notice of next hearing to these persons. We, therefore, direct as follows: direct as follows: (a) The assessee will furnish a list of the persons, along (a) The assessee will furnish a list of the persons, along (a) The assessee will furnish a list of the persons, along with the with their addresses and PAN-numbers- if possible, whose assets are held by the assessee whose assets are held by the assessee- appellant under appellant under the SARFAESI Act, within one week from the date of the SARFAESI Act, within one week from the date of the SARFAESI Act, within one week from the date of this order to the learned Departmental Representative, this order to the learned Departmental Representative, this order to the learned Departmental Representative, as also to the ITAT Registry. as also to the ITAT Registry. (b) The Learned Depar (b) The Learned Departmental Representative will tmental Representative will ensure that notices of hearing for the next hearing, i.e. ensure that notices of hearing for the next hearing, i.e. ensure that notices of hearing for the next hearing, i.e. on 30th July 2021, along with a copy of this order, will on 30th July 2021, along with a copy of this order, will on 30th July 2021, along with a copy of this order, will be served upon these persons in accordance with the be served upon these persons in accordance with the be served upon these persons in accordance with the law. The Registry is directed to law. The Registry is directed to hand over copies of hand over copies of notices notices of hearings and this interim order to the learned of hearings and this interim order to the learned Departmental Representative for service on affected Departmental Representative for service on affected Departmental Representative for service on affected parties, and also serve the notice per RPAD, directly on parties, and also serve the notice per RPAD, directly on parties, and also serve the notice per RPAD, directly on the affected parties. the affected parties.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 21 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

(c) The affected parties, whose assets are held by the (c) The affected parties, whose assets are held by the (c) The affected parties, whose assets are held by the assessee under the assessee under the SARFAESI Act, will have the SARFAESI Act, will have the opportunity of hearing on as to why this income not be opportunity of hearing on as to why this income not be opportunity of hearing on as to why this income not be held to be taxable in their hands, as they are said to held to be taxable in their hands, as they are said to held to be taxable in their hands, as they are said to continue to the legal owners of the related assets and continue to the legal owners of the related assets and continue to the legal owners of the related assets and the assessee before us is said to be holding the same the assessee before us is said to be holding the same the assessee before us is said to be holding the same only in a only in a fiduciary capacity. 10. The Registry is directed to issue the notices to all the 10. The Registry is directed to issue the notices to all the 10. The Registry is directed to issue the notices to all the affected parties, including the parties whose assets are held affected parties, including the parties whose assets are held affected parties, including the parties whose assets are held by the assessee by the assessee-appellant before us, along with a copy of this appellant before us, along with a copy of this interim interim interim order, order, order, directly, directly, directly, as as as also also also through through through the the the lea learned lea Departmental Representative, for the next date of hearing, i.e. Departmental Representative, for the next date of hearing, i.e. Departmental Representative, for the next date of hearing, i.e. on 30th July 2021. on 30th July 2021. 11. The interim order, as above, is without prejudice to the 11. The interim order, as above, is without prejudice to the 11. The interim order, as above, is without prejudice to the additional grounds of appeal and all other rights of the additional grounds of appeal and all other rights of the additional grounds of appeal and all other rights of the assessee as indeed both the parties before us. Th assessee as indeed both the parties before us. Th assessee as indeed both the parties before us. The hearing is adjourned to 30th July 2021. The matter may be treated as adjourned to 30th July 2021. The matter may be treated as adjourned to 30th July 2021. The matter may be treated as part-heard.” 6.5. Out of three parties Out of three parties, one party namely Tasgoan Palus Taluka Tasgoan Palus Taluka Sahakari Sakahr Karkhana Sahakari Sakahr Karkhana Ltd. vide letter dated 26/04/23 vide letter dated 26/04/23 submitted that relevant rental income was already offered for submitted that relevant rental income was already offered for submitted that relevant rental income was already offered for taxation in the Income taxation in the Income-tax return filed for assessment year 2013 tax return filed for assessment year 2013- 14. However, no reply has been received from other two parties , 14. However, no reply has been received from other two parties 14. However, no reply has been received from other two parties therefore, invoking section 150/153 nvoking section 150/153 of the Act, w of the Act, we direct the Assessing Officer to take necessary steps for taxing the said income ssessing Officer to take necessary steps for taxing the said income ssessing Officer to take necessary steps for taxing the said income in their hands. The ground of appeal of the assessee is accordingly hands. The ground of appeal of the assessee is accordingly hands. The ground of appeal of the assessee is accordingly allowed.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 22 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

account amounting to Rs.175,57,11,898/ account amounting to Rs.175,57,11,898/- as bad debt written off as bad debt written off. The assessee adjusted Rs.12,95,43,316/ The assessee adjusted Rs.12,95,43,316/- against provision for bad nst provision for bad debt claimed , which was , which was allowed in earlier years and allowed in earlier years and, thus claimed deduction u/s 36(1)(vii) of the Act amounting to Rs.162,61,68,581/- deduction u/s 36(1)(vii) of the Act amounting to Rs.162,61,68,581/ deduction u/s 36(1)(vii) of the Act amounting to Rs.162,61,68,581/ (175,57,11,898- 12,95,43,316) 12,95,43,316). The Assessing Officer, however, The Assessing Officer, however, made disallowance of Rs. made disallowance of Rs. 9,87,88,041/-. The assessee filed a The assessee filed a detailed submission of the computation of bad debt written off detailed submission of the computation of bad debt written off detailed submission of the computation of bad debt written off before the Ld. CIT(A), t before the Ld. CIT(A), the relevant part of which is reproduced as which is reproduced as under:

“During the course of appellate proceedings, the appellant During the course of appellate proceedings, the appellant During the course of appellate proceedings, the appellant vide his letter dated 24.04.2017s vide his letter dated 24.04.2017submitted as under: ubmitted as under: A. Disallowance us 36(1)(vii) of part of Bad debts A. Disallowance us 36(1)(vii) of part of Bad debts A. Disallowance us 36(1)(vii) of part of Bad debts written-off - - Rs.9,87,88,041/- 1. The Ld. AO has made an addition of Rs. 9,87,88,041/ The Ld. AO has made an addition of Rs. 9,87,88,041/ The Ld. AO has made an addition of Rs. 9,87,88,041/- on the ground that this represents excess deduction claimed by the ground that this represents excess deduction claimed by the ground that this represents excess deduction claimed by assessee us 36(1)(vil) of the Income assessee us 36(1)(vil) of the Income Tax Act, 1961. Tax Act, 1961. 2. AO's Calculations: AO's Calculations: The Ld. AO has contended that the assessee is entitled for The Ld. AO has contended that the assessee is entitled for The Ld. AO has contended that the assessee is entitled for deduction us 36(1)(vii) of Rs. 152, 73,80,5401 deduction us 36(1)(vii) of Rs. 152, 73,80,5401- only and thus only and thus disallowed Rs. 9,87,88,041/ disallowed Rs. 9,87,88,041/-. His calculation is as follows: His calculation is as follows: Particulars Amount Bad debts debited to Profit and Loss Account for year debited to Profit and Loss Account for year debited to Profit and Loss Account for year 175,57,11,897 ended 31-3-13 13 Less: Provision for Bad Debts claimed by the assessee Less: Provision for Bad Debts claimed by the assessee Less: Provision for Bad Debts claimed by the assessee (22,83,31,357) u/s 36(1)(via) till AY 13 u/s 36(1)(via) till AY 13-14 (ie including (i) the claim us 14 (ie including (i) the claim us 36(1)(via) in AY 2007 36(1)(via) in AY 2007-08 of Amount Rs. 5,37,34,020/ 08 of Amount Rs. 5,37,34,020/- which was disall which was disallowed by the AO & CIT (A) on the owed by the AO & CIT (A) on the ground that assessee had not made an provision in its ground that assessee had not made an provision in its ground that assessee had not made an provision in its books AND (i) Provision for Bad Debts claimed in AY books AND (i) Provision for Bad Debts claimed in AY books AND (i) Provision for Bad Debts claimed in AY 2013-14 of Rs. 7,74,16,0281 14 of Rs. 7,74,16,0281-. (Copy of CIT A order for . (Copy of CIT A order for AY 2007-08 attached as Annexure 1) 08 attached as Annexure 1) Bad debts al Bad debts allowed by AO us 36(1)(vi) of the Act in his lowed by AO us 36(1)(vi) of the Act in his 152,73,80,540

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 23 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

order passed u/s 143(3) order passed u/s 143(3) Disallowed Disallowed Disallowed amount amount amount (as (as (as claimed claimed claimed by by by assessee 9,87,88,041 assessee assessee 162,61,68,581 162,61,68,581-152, 73,80,540) 3. Assessees' Calculations For claim u/s 36(1)(vii) : Assessees' Calculations For claim u/s 36(1)(vii) : Assessees' Calculations For claim u/s 36(1)(vii) : While the bad debts written off by While the bad debts written off by the assessee in its the assessee in its accounts for the Financial Year 2012 accounts for the Financial Year 2012-13 were Rs. 175,57, 13 were Rs. 175,57, 11,879/-, the assessee claimed deduction under Sec , the assessee claimed deduction under Sec , the assessee claimed deduction under Sec 36(1)(vii) of Rs. 162,61.68.581/ 36(1)(vii) of Rs. 162,61.68.581/- in AY 2013-14 based on the 14 based on the following calculations: following calculations:- Particulars Amount Bad debts debited to Bad debts debited to Profit and Loss Account for year Profit and Loss Account for year 175,57,11,897 ended 31-3-13 13 Less: Opening balance of Provision For Bad debts us Less: Opening balance of Provision For Bad debts us Less: Opening balance of Provision For Bad debts us 12,95,43,316 36(1)(via) o/s as on 1.4.2012 36(1)(via) o/s as on 1.4.2012- as per books Bad debts claimed us 36(1)(vi) of the Income Tax Act in Bad debts claimed us 36(1)(vi) of the Income Tax Act in Bad debts claimed us 36(1)(vi) of the Income Tax Act in 162,61,68,581 ITR ii) In fact, the assessees claim for deduction in its Return was fact, the assessees claim for deduction in its Return was fact, the assessees claim for deduction in its Return was short and the correct amount deductible uls 36(1)(vii) for AY short and the correct amount deductible uls 36(1)(vii) for AY short and the correct amount deductible uls 36(1)(vii) for AY 2013-14 is Rs. 165, 85,30,588/ 14 is Rs. 165, 85,30,588/- the working of which is as the working of which is as follows: Particulars Amount Bad debts debited to Profit and Loss Account for Bad debts debited to Profit and Loss Account for year year 175,57,11,897 ended 31-3-13 13 Less: Provision for bad debts actually claimed and Less: Provision for bad debts actually claimed and Less: Provision for bad debts actually claimed and 9,71,81,309 allowed to the assessee u/s 36(1)(via) ( i.e excluding the allowed to the assessee u/s 36(1)(via) ( i.e excluding the allowed to the assessee u/s 36(1)(via) ( i.e excluding the provision for AY 2007 provision for AY 2007-08 of Rs. 5,37,34.020 which was 08 of Rs. 5,37,34.020 which was disallowed by the AO & CIT (A) and excluding the disallowed by the AO & CIT (A) and excluding the disallowed by the AO & CIT (A) and excluding the provision for current year i.e. AY 2013 n for current year i.e. AY 2013-14 of Rs. 7,74, 7,74, 16,028 in view of the decision of Mumbai Tribunal in the 16,028 in view of the decision of Mumbai Tribunal in the 16,028 in view of the decision of Mumbai Tribunal in the case of Siam Commercial Bank PCL (15 taxmann.com case of Siam Commercial Bank PCL (15 taxmann.com case of Siam Commercial Bank PCL (15 taxmann.com 353 and CBDT 353 and CBDT Instruction No. 17/2008, dated 26- -11- 2008 Bad debts which should be allowed Bad debts which should be allowed as deduction us as deduction us 165,85,30,588 36(1)(vi) of the Act 36(1)(vi) of the Act

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 24 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

Sec 36(1) (via) should be the amount claimed and allowed us Sec 36(1) (via) should be the amount claimed and allowed us Sec 36(1) (via) should be the amount claimed and allowed us 36(1) (via) till the end of the preceding year ie opening 36(1) (via) till the end of the preceding year ie opening 36(1) (via) till the end of the preceding year ie opening balance (i.e. Rs. 9,71,81, balance (i.e. Rs. 9,71,81,309/-) and no! including the amount ) and no! including the amount claimed us 36(1) (via) in the relevant assessment year ie. in claimed us 36(1) (via) in the relevant assessment year ie. in claimed us 36(1) (via) in the relevant assessment year ie. in AY 2013-14. In this regard reference is drawn to CBDT 14. In this regard reference is drawn to CBDT 14. In this regard reference is drawn to CBDT Instruction No. 17/2008, dated 26 Instruction No. 17/2008, dated 26-11-2008 and Mumbai 2008 and Mumbai Tribunal ruling in the case of Siam Commercial Bank Tribunal ruling in the case of Siam Commercial Bank Tribunal ruling in the case of Siam Commercial Bank PCL (15 taxmann.com 3531 which categorically provide that what the taxmann.com 3531 which categorically provide that what the taxmann.com 3531 which categorically provide that what the assessee has done is the correct position i.e. only the assessee has done is the correct position i.e. only the assessee has done is the correct position i.e. only the opening balance is to be deducted and not the amount opening balance is to be deducted and not the amount opening balance is to be deducted and not the amount claimed us 36(1) (via) in AY 2013 claimed us 36(1) (via) in AY 2013-14. (copy attached); and 14. (copy attached); and b. The amount of Rs The amount of Rs. 5,37,34,020/- claimed by assessee u/s claimed by assessee u/s 36(1)(viia) in AY 2007 36(1)(viia) in AY 2007-08 but disallowed by AO and 08 but disallowed by AO and Commissioner( Appeals), as no provision for bad debts was Commissioner( Appeals), as no provision for bad debts was Commissioner( Appeals), as no provision for bad debts was made by assessee in that year, is not required to be made by assessee in that year, is not required to be made by assessee in that year, is not required to be deducted from the bad debts written off deducted from the bad debts written off.” 7.1 In view of the submissions of the assessee, the Ld. CIT(A) of the submissions of the assessee, the Ld. CIT(A) of the submissions of the assessee, the Ld. CIT(A) allowed allowed the the claim claim o of f the the assessee assessee of of deduction deduction of of Rs.165,85,30,588/- u/s 36(1)(vii) of the Act. For allowing credit of u/s 36(1)(vii) of the Act. For allowing credit of u/s 36(1)(vii) of the Act. For allowing credit of the provision for bad and doubtful debt of earlier years, the Ld. the provision for bad and doubtful debt of earlier years, the Ld. the provision for bad and doubtful debt of earlier years, the Ld. CIT(A) has considere CIT(A) has considered the opening credit balance i.e. balance d the opening credit balance i.e. balance brought forward as on 1 brought forward as on 1st April of the relevant accounting year April of the relevant accounting year following the CBDT Instruction No. 17/2008 Rs.537,34,020/- dated following the CBDT Instruction No. 17/2008 Rs.537,34,020/ following the CBDT Instruction No. 17/2008 Rs.537,34,020/ 26.11.2008.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 25 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

which was not allowed to the assessee in assessment year 2007-08. which was not allowed to the assessee in assessment year 2007 which was not allowed to the assessee in assessment year 2007 The Ld. CIT(A) has followed the CBDT The Ld. CIT(A) has followed the CBDT Instruction No. 17/2008 Instruction No. 17/2008 dated 26/11/2008, relevant part of which is reproduced relevant part of which is reproduced relevant part of which is reproduced as under:

“Instruction No. 17/2008, Dated 26.11.2008 Instruction No. 17/2008, Dated 26.11.2008 Instruction No. 17/2008, Dated 26.11.2008 In a recent review of assessment of Banks carried out by In a recent review of assessment of Banks carried out by In a recent review of assessment of Banks carried out by C&AG, it has been observed that while computing the income C&AG, it has been observed that while computing the income C&AG, it has been observed that while computing the income of banks under the head Profit and Gains of Business & of banks under the head Profit and Gains of Business & of banks under the head Profit and Gains of Business & Profession', deductions of Profession', deductions of large amounts under different large amounts under different sections are being allowed by the Assessing Officers without sections are being allowed by the Assessing Officers without sections are being allowed by the Assessing Officers without proper verification, leading to substantial loss of revenue. It proper verification, leading to substantial loss of revenue. It proper verification, leading to substantial loss of revenue. It is, therefore, necessary that assessments in the cases of is, therefore, necessary that assessments in the cases of is, therefore, necessary that assessments in the cases of banks are completed with due care and after banks are completed with due care and after banks are completed with due care and after proper verification. In particular, deductions under the provisions verification. In particular, deductions under the provisions verification. In particular, deductions under the provisions referred to below should be allowed only after a thorough referred to below should be allowed only after a thorough referred to below should be allowed only after a thorough examination of the claim on facts and on law as per the examination of the claim on facts and on law as per the examination of the claim on facts and on law as per the provisions of the Income provisions of the Income-tax Act, 1961 : (i) Under section 36(1) (vii) of (i) Under section 36(1) (vii) of the Act, deduction on account of the Act, deduction on account of bad debts which are written off as irrecoverable in the bad debts which are written off as irrecoverable in the bad debts which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should accounts of the assessee is admissible. However, this should accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of be allowed only if the assessee had debited the amount of be allowed only if the assessee had debited the amount of such debts to the provision for bad and doubtfu such debts to the provision for bad and doubtfu such debts to the provision for bad and doubtful debt account under section 36(1) (viia) of the Act, as required by account under section 36(1) (viia) of the Act, as required by account under section 36(1) (viia) of the Act, as required by section 36(2)(v) of the Act. section 36(2)(v) of the Act. (ii) While considering the claim for bad debts under While considering the claim for bad debts under While considering the claim for bad debts under section 36(1) (vii), the Assessing Officer should allow section 36(1) (vii), the Assessing Officer should allow section 36(1) (vii), the Assessing Officer should allow only such amount of bad debts written off as exce only such amount of bad debts written off as exce only such amount of bad debts written off as exceeds the credit balance available in the provision for bad the credit balance available in the provision for bad the credit balance available in the provision for bad and doubtful debt account created under section 36(1) and doubtful debt account created under section 36(1) and doubtful debt account created under section 36(1) (via) of the Act. The credit balance for this purpose will (via) of the Act. The credit balance for this purpose will (via) of the Act. The credit balance for this purpose will be the opening credit balance i.e., the balance brought be the opening credit balance i.e., the balance brought be the opening credit balance i.e., the balance brought forward as on 1st April of th forward as on 1st April of the relevant accounting e relevant accounting year. ………………………………. ……………………………….” 8.1 The issue of allow The issue of allowability of deduction under section 36(1)(vii) ability of deduction under section 36(1)(vii) vis-à-vis section 36(1)(viia) has been examined in detail by the vis section 36(1)(viia) has been examined in detail by the vis section 36(1)(viia) has been examined in detail by the

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coordinate bench of the Tribunal in the case of coordinate bench of the Tribunal in the case of Siam commercial Siam commercial Bank PCL, reported in (2011) 15 taxmann.com 353 (Mumbai), reported in (2011) 15 taxmann.com 353 (Mumbai), reported in (2011) 15 taxmann.com 353 (Mumbai), the relevant finding of which is reproduced as under: the relevant finding of which is reproduced as under: the relevant finding of which is reproduced as under:

“17. We have heard the rival submissions and perused the 17. We have heard the rival submissions and perused the 17. We have heard the rival submissions and perused the relevant material on record. In order to decide this issue, it relevant material on record. In order to decide this issue, it relevant material on record. In order to decide this issue, it will be apt to take note of the will be apt to take note of the section 36(1)(vii) section 36(1)(vii) and the relevant part of clause (viia), which reads as under : relevant part of clause (viia), which reads as under : relevant part of clause (viia), which reads as under :- "36. Other deductions. "36. Other deductions.--(1) The deductions provided for (1) The deductions provided for in the following clauses shall be allowed in respect of in the following clauses shall be allowed in respect of in the following clauses shall be allowed in respect of the matters the matters dealt with therein, in computing the income dealt with therein, in computing the income referred to in referred to in section 28-- (i) to (vi) (i) to (vi) (vii) subject to the provisions of sub (vii) subject to the provisions of sub-section (2), the section (2), the amount of any bad debt or part thereof which is amount of any bad debt or part thereof which is amount of any bad debt or part thereof which is written off as i written off as irrecoverable in the accounts of the rrecoverable in the accounts of the assessee for the previous year: assessee for the previous year: Provided that in the case of a bank to which clause Provided that in the case of a bank to which clause Provided that in the case of a bank to which clause (viia) applies, the amount of the deduction relating to (viia) applies, the amount of the deduction relating to (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the any such debt or part thereof shall be limited to the any such debt or part thereof shall be limited to the amount by which such debt amount by which such debt or part thereof exceeds the or part thereof exceeds the credit balance in the provision for bad and doubtful credit balance in the provision for bad and doubtful credit balance in the provision for bad and doubtful debts account made under that clause ; debts account made under that clause ; Explanation. Explanation.--For the purposes of this clause, any bad For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the debt or part thereof written off as irrecoverable in the debt or part thereof written off as irrecoverable in the accounts of the assessee accounts of the assessee shall not include any shall not include any provision for bad and doubtful debts made in the provision for bad and doubtful debts made in the provision for bad and doubtful debts made in the accounts of the assessee (viia) in respect of any accounts of the assessee (viia) in respect of any accounts of the assessee (viia) in respect of any provision for bad and doubtful debts made by-- provision for bad and doubtful debts made by provision for bad and doubtful debts made by (a) a scheduled bank not being a bank incorporated by (a) a scheduled bank not being a bank incorporated by (a) a scheduled bank not being a bank incorporated by or under the laws of a country ou or under the laws of a country outside India or a non tside India or a non- scheduled bank.......... scheduled bank.......... (b) a bank, being a bank incorporated by or under the (b) a bank, being a bank incorporated by or under the (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not laws of a country outside India, an amount not laws of a country outside India, an amount not exceeding five per cent. of the total income (computed exceeding five per cent. of the total income (computed exceeding five per cent. of the total income (computed

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before making any deduction under this clause and before making any deduction under this clause and before making any deduction under this clause and Chapter VI ter VI- A);" 18. Section 36(1)(vii) Section 36(1)(vii) provides that subject to the provisions provides that subject to the provisions of sub-section (2), the amount of any bad debt or part thereof section (2), the amount of any bad debt or part thereof section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the which is written off as irrecoverable in the accounts of the which is written off as irrecoverable in the accounts of the assessee for the previous year, shall be allowed as see for the previous year, shall be allowed as see for the previous year, shall be allowed as deduction. Section 36(1)(viia) Section 36(1)(viia) deals with the granting of deals with the granting of deduction in respect of any provision for bad or doubtful deduction in respect of any provision for bad or doubtful deduction in respect of any provision for bad or doubtful debts. It is observed that the assessee is debts. It is observed that the assessee is a foreign bank. As a foreign bank. As such such the the provisions provisions of of sub-clause sub clause (b) (b) of section of 36(1)(viia) shall apply and not sub shall apply and not sub-clause (a). clause (a). Thus it becomes evident that whereas clause (vii) of becomes evident that whereas clause (vii) of becomes evident that whereas clause (vii) of section 36(1) provides deduction in respect of bad debts actually provides deduction in respect of bad debts actually provides deduction in respect of bad debts actually written off, clause (viia) grants deduction in respect of written off, clause (viia) grants deduction in respect of written off, clause (viia) grants deduction in respect of provision for bad and doubtful debts. In order to prevent provision for bad and doubtful debts. In order to prevent provision for bad and doubtful debts. In order to prevent double deduction, firstly at the time of creating provisio double deduction, firstly at the time of creating provisio double deduction, firstly at the time of creating provision under clause (viia) and then, on actual write off under clause under clause (viia) and then, on actual write off under clause under clause (viia) and then, on actual write off under clause (viia), two safeguards have been enshrined in clause (vii). (viia), two safeguards have been enshrined in clause (vii). (viia), two safeguards have been enshrined in clause (vii). Firstly the Explanation stipulates that any bad debt or part Firstly the Explanation stipulates that any bad debt or part Firstly the Explanation stipulates that any bad debt or part thereof written off as irrecoverable in the accounts of the thereof written off as irrecoverable in the accounts of the thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and hall not include any provision for bad and hall not include any provision for bad and doubtful debts made in the accounts of the assessee and doubtful debts made in the accounts of the assessee and doubtful debts made in the accounts of the assessee and secondly proviso explicitly mandates that where in the case secondly proviso explicitly mandates that where in the case secondly proviso explicitly mandates that where in the case of a bank to which clause (viia) applies, the amount of the of a bank to which clause (viia) applies, the amount of the of a bank to which clause (viia) applies, the amount of the deduction relating to any such debt o deduction relating to any such debt or part thereof shall be r part thereof shall be limited to the amount by which such debt or part thereof limited to the amount by which such debt or part thereof limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and exceeds the credit balance in the provision for bad and exceeds the credit balance in the provision for bad and doubtful debts account made under that clause. doubtful debts account made under that clause. 19. It is imperative to note at this stage that the quantum 19. It is imperative to note at this stage that the quantum 19. It is imperative to note at this stage that the quantum aspect of the provision as not exceeding five percent of the aspect of the provision as not exceeding five percent of the e provision as not exceeding five percent of the specified income, has not been disputed by the AO. The specified income, has not been disputed by the AO. The specified income, has not been disputed by the AO. The dispute has arisen only on the question of reducing the dispute has arisen only on the question of reducing the dispute has arisen only on the question of reducing the opening or the closing provision for bad and doubtful debts. opening or the closing provision for bad and doubtful debts. opening or the closing provision for bad and doubtful debts. 20. Now coming to the sequence of a 20. Now coming to the sequence of allowing deduction under llowing deduction under clauses (vii) and (viia), deduction is first allowed towards clauses (vii) and (viia), deduction is first allowed towards clauses (vii) and (viia), deduction is first allowed towards bad debts actually written off under clause (vii) as reduced bad debts actually written off under clause (vii) as reduced bad debts actually written off under clause (vii) as reduced by the amount of provision already allowed and then by the amount of provision already allowed and then by the amount of provision already allowed and then towards provision under clause (viia). It is interesting t towards provision under clause (viia). It is interesting t towards provision under clause (viia). It is interesting to observe that in common parlance when we talk of firstly observe that in common parlance when we talk of firstly observe that in common parlance when we talk of firstly creating the provision and then allowing deduction on creating the provision and then allowing deduction on creating the provision and then allowing deduction on account of bad debts, it is qua the specific debt(s) on micro account of bad debts, it is qua the specific debt(s) on micro account of bad debts, it is qua the specific debt(s) on micro

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basis turning bad in this year for which the provision was basis turning bad in this year for which the provision was basis turning bad in this year for which the provision was made earlier. But when made earlier. But when we talk of creating provision on a we talk of creating provision on a macro basis at the end of the year for which deduction is macro basis at the end of the year for which deduction is macro basis at the end of the year for which deduction is permissible under clause (viia), it is on the debtors as a permissible under clause (viia), it is on the debtors as a permissible under clause (viia), it is on the debtors as a whole which are not properly operating but have also not whole which are not properly operating but have also not whole which are not properly operating but have also not become bad as at the end of the year. The concl become bad as at the end of the year. The concl become bad as at the end of the year. The conclusion of granting deduction firstly under clause (vii) is supported by granting deduction firstly under clause (vii) is supported by granting deduction firstly under clause (vii) is supported by the language of clause (viia)(b), which provides for the the language of clause (viia)(b), which provides for the the language of clause (viia)(b), which provides for the quantum of provision permissible as deduction at `an amount quantum of provision permissible as deduction at `an amount quantum of provision permissible as deduction at `an amount not exceeding five per cent of the total income (computed not exceeding five per cent of the total income (computed not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter ing any deduction under this clause and Chapter ing any deduction under this clause and Chapter VIA).' `Total income' as referred to in clause VIA).' `Total income' as referred to in clause (viia) can be (viia) can be computed only at the end of the year. Since for computing computed only at the end of the year. Since for computing computed only at the end of the year. Since for computing total income before making deduction under this provision, it total income before making deduction under this provision, it total income before making deduction under this provision, it is necessary to grant deduc is necessary to grant deductions under all other relevant tions under all other relevant provisions including bad debts under clause (vii), naturally provisions including bad debts under clause (vii), naturally provisions including bad debts under clause (vii), naturally the amount of deduction towards provision for bad and the amount of deduction towards provision for bad and the amount of deduction towards provision for bad and doubtful debts can be computed only at a later stage. But doubtful debts can be computed only at a later stage. But doubtful debts can be computed only at a later stage. But while computing deduction under clause (vii), one ne while computing deduction under clause (vii), one ne while computing deduction under clause (vii), one needs to take note of the mandate of the Explanation to this provision take note of the mandate of the Explanation to this provision take note of the mandate of the Explanation to this provision which provides that any bad debt or part thereof written off which provides that any bad debt or part thereof written off which provides that any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not as irrecoverable in the accounts of the assessee shall not as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the include any provision for bad and doubtful debts made in the include any provision for bad and doubtful debts made in the accounts of the assessee. It is relevant to note that bad debts ts of the assessee. It is relevant to note that bad debts ts of the assessee. It is relevant to note that bad debts are claimed as deduction as and when the advance becomes are claimed as deduction as and when the advance becomes are claimed as deduction as and when the advance becomes irrecoverable. It is not mandated any where in the provision irrecoverable. It is not mandated any where in the provision irrecoverable. It is not mandated any where in the provision that deduction for bad debts has to be allowed only at the that deduction for bad debts has to be allowed only at the that deduction for bad debts has to be allowed only at the end of the year. In c end of the year. In contrast, the provision for bad and ontrast, the provision for bad and doubtful debts is created only at the end of the year and doubtful debts is created only at the end of the year and doubtful debts is created only at the end of the year and further its deductibility is computed w.r.t. the adjusted total further its deductibility is computed w.r.t. the adjusted total further its deductibility is computed w.r.t. the adjusted total income for the year, which is possible only at the end of the income for the year, which is possible only at the end of the income for the year, which is possible only at the end of the year. The amount, which is written of year. The amount, which is written off as bad debt during f as bad debt during the year is net of the provision already made. As the the year is net of the provision already made. As the the year is net of the provision already made. As the provision for the current year is created at the end of the provision for the current year is created at the end of the provision for the current year is created at the end of the year and deduction for bad debts is allowed on actually year and deduction for bad debts is allowed on actually year and deduction for bad debts is allowed on actually write off, which may happen at any time during the year, write off, which may happen at any time during the year, write off, which may happen at any time during the year, naturally, it is only the opening balance of the provision y, it is only the opening balance of the provision y, it is only the opening balance of the provision against that debt, which has now become bad and hence against that debt, which has now become bad and hence against that debt, which has now become bad and hence written off, can be allowed as deduction. Moreover, when a written off, can be allowed as deduction. Moreover, when a written off, can be allowed as deduction. Moreover, when a debt has become bad and is written off, there can be no debt has become bad and is written off, there can be no debt has become bad and is written off, there can be no question of creating provision on th question of creating provision on that account. From here it at account. From here it clearly emerges that opening balance of the provision is clearly emerges that opening balance of the provision is clearly emerges that opening balance of the provision is required to be adjusted against the amount of bad debts required to be adjusted against the amount of bad debts required to be adjusted against the amount of bad debts

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written off during the year for computing the amount written off during the year for computing the amount written off during the year for computing the amount deductible under clause (vii) and it is only thereafter that the deductible under clause (vii) and it is only thereafter that the deductible under clause (vii) and it is only thereafter that the provision is made under clause (viia) in respect of the provision is made under clause (viia) in respect of the provision is made under clause (viia) in respect of the remaining debts outstanding as at the end of the year. remaining debts outstanding as at the end of the year. remaining debts outstanding as at the end of the year. 21. This view is fortified from the practical angle of the 21. This view is fortified from the practical angle of the 21. This view is fortified from the practical angle of the position as well. Advances of the banks are broadly position as well. Advances of the banks are broadly position as well. Advances of the banks are broadly classified into performing or non classified into performing or non-performing assets. In case performing assets. In case an account does not pose any problem as regards the an account does not pose any problem as regards the an account does not pose any problem as regards the recovery of interest or installments of principal loan, it is recovery of interest or installments of principal loan, it is recovery of interest or installments of principal loan, it is categorized as performing. No provision is required to be categorized as performing. No provision is required to be categorized as performing. No provision is required to be made in respect of such advances. In case an account is n made in respect of such advances. In case an account is n made in respect of such advances. In case an account is not doing well, it slips into non doing well, it slips into non-performing asset. The non performing asset. The non- performing advances are further classified into sub performing advances are further classified into sub performing advances are further classified into sub-standard or doubtful depending upon the period for which an account depending upon the period for which an account depending upon the period for which an account remains non remains non-performing. But once the loss is identified by the performing. But once the loss is identified by the bank on accoun bank on account of advances, but the amount has not been t of advances, but the amount has not been written off, wholly or in part, these are considered as loss written off, wholly or in part, these are considered as loss written off, wholly or in part, these are considered as loss assets. Provisioning is required to be done as per the health assets. Provisioning is required to be done as per the health assets. Provisioning is required to be done as per the health of the advances. Provision is done at a lower percentage in of the advances. Provision is done at a lower percentage in of the advances. Provision is done at a lower percentage in respect of sub respect of sub-standard advances (assets), but for doubtful es (assets), but for doubtful debts the percentage of provision goes up. But when it is a debts the percentage of provision goes up. But when it is a debts the percentage of provision goes up. But when it is a loss asset, the entire amount is written off as unrecoverable. loss asset, the entire amount is written off as unrecoverable. loss asset, the entire amount is written off as unrecoverable. Thus it can be seen that on default, firstly, the advance is Thus it can be seen that on default, firstly, the advance is Thus it can be seen that on default, firstly, the advance is classified classified as as sub-standard, sub standard, then then doubtful doubtful and then eventually loss. Provision is made on progressive basis until eventually loss. Provision is made on progressive basis until eventually loss. Provision is made on progressive basis until the advance is not loss. Once it becomes loss, then the entire the advance is not loss. Once it becomes loss, then the entire the advance is not loss. Once it becomes loss, then the entire amount is written off. From the above discussion it can be amount is written off. From the above discussion it can be amount is written off. From the above discussion it can be seen that the writing off of bad debts is the last step in the seen that the writing off of bad debts is the last step in the seen that the writing off of bad debts is the last step in the order of time. Firstly provision is made and when there order of time. Firstly provision is made and when there order of time. Firstly provision is made and when there remains no chance of recovery, after adjusting security remains no chance of recovery, after adjusting security remains no chance of recovery, after adjusting security available etc., the amount is written off as bad. available etc., the amount is written off as bad. 22. Coming back to the context of 22. Coming back to the context of section 36(1) 36(1), when the provision is provision is made made towards towards non-performing non performing advances, advances, deduction is allowed as per the ceiling under clause (viia). deduction is allowed as per the ceiling under clause (viia). deduction is allowed as per the ceiling under clause (viia). Only when the default continues for a longer period and the Only when the default continues for a longer period and the Only when the default continues for a longer period and the advance gets converted from sub advance gets converted from sub- standard or doubtful to standard or doubtful to bad, the entire amount is written off. On the basis of the tire amount is written off. On the basis of the tire amount is written off. On the basis of the performance of the debt getting worse from bad and then performance of the debt getting worse from bad and then performance of the debt getting worse from bad and then worst from worse, the sub worst from worse, the sub- standard debt is converted into standard debt is converted into doubtful and then from doubtful to bad. When the debt doubtful and then from doubtful to bad. When the debt doubtful and then from doubtful to bad. When the debt becomes sub becomes sub-standard or doubtful, a provision is created vision is created

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under clause (viia). But when the debt becomes bad, the under clause (viia). But when the debt becomes bad, the under clause (viia). But when the debt becomes bad, the entire amount of bad debt, net of the provision already entire amount of bad debt, net of the provision already entire amount of bad debt, net of the provision already allowed in the computation of the earlier year, has to be allowed in the computation of the earlier year, has to be allowed in the computation of the earlier year, has to be allowed as deduction under clause (vii). Simultaneous with allowed as deduction under clause (vii). Simultaneous with allowed as deduction under clause (vii). Simultaneous with the the amount of debt becoming bad in the current year mount of debt becoming bad in the current year mount of debt becoming bad in the current year qualifying for deduction under clause (vii), the amount of qualifying for deduction under clause (vii), the amount of qualifying for deduction under clause (vii), the amount of provision created in the current year is also required to be provision created in the current year is also required to be provision created in the current year is also required to be made in respect of sub made in respect of sub-standard and doubtful debts standard and doubtful debts (exclusive of the amount of bad debts (exclusive of the amount of bad debts already written off already written off during the year). In the next year, when some part of the during the year). In the next year, when some part of the during the year). In the next year, when some part of the current year's sub current year's sub-standard or the doubtful debts becomes standard or the doubtful debts becomes bad, the amount actually written off as reduced by the bad, the amount actually written off as reduced by the bad, the amount actually written off as reduced by the provision allowed in the earlier year under clause (viia), shall provision allowed in the earlier year under clause (viia), shall provision allowed in the earlier year under clause (viia), shall qualify for deduction under clause (vii). Thus in each year, qualify for deduction under clause (vii). Thus in each year, qualify for deduction under clause (vii). Thus in each year, ordinarily there are two types of deductions, viz., firstly on ordinarily there are two types of deductions, viz., firstly on ordinarily there are two types of deductions, viz., firstly on account of provision made at the end of the current year by account of provision made at the end of the current year by account of provision made at the end of the current year by limiting it to the adjusted total income for the year; and limiting it to the adjusted total income for the year; and limiting it to the adjusted total income for the year; and secondly the secondly the amount of bad debts actually written off, net of actually written off, net of the provision allowed as deduction in the earlier year. the provision allowed as deduction in the earlier year. the provision allowed as deduction in the earlier year. However in no case, the amount of cumulative deduction However in no case, the amount of cumulative deduction However in no case, the amount of cumulative deduction under both the clauses, that is under clause (viia) in the under both the clauses, that is under clause (viia) in the under both the clauses, that is under clause (viia) in the preceding year and under clause (vii) preceding year and under clause (vii) in the current year, can in the current year, can exceed the amount of any bad debt written off as exceed the amount of any bad debt written off as exceed the amount of any bad debt written off as irrecoverable in the accounts of the current year. In our irrecoverable in the accounts of the current year. In our irrecoverable in the accounts of the current year. In our considered opinion the ld. CIT(A) was justified in directing considered opinion the ld. CIT(A) was justified in directing considered opinion the ld. CIT(A) was justified in directing the AO to restrict the claim of bad debts by the amount of the AO to restrict the claim of bad debts by the amount of the AO to restrict the claim of bad debts by the amount of opening balance in the provision for bad and doubtful debts ning balance in the provision for bad and doubtful debts ning balance in the provision for bad and doubtful debts account as at the beginning of the year instead of the closing account as at the beginning of the year instead of the closing account as at the beginning of the year instead of the closing balance and then allowing deduction u/s 36(1)(viia). This balance and then allowing deduction u/s 36(1)(viia). This balance and then allowing deduction u/s 36(1)(viia). This ground of the Revenue's appeal fails. ground of the Revenue's appeal fails.” 8.2 The Hon’ble Gujarat Gujarat High Court in the case of he case of CIT Vs UTI Bank Ltd (2013) 29 taxmann.com 79 ( Bank Ltd (2013) 29 taxmann.com 79 (Gujarat) has referred to the has referred to the proviso to section 36(1)(vii) which says that amount of deduction proviso to section 36(1)(vii) which says that amount of deduction proviso to section 36(1)(vii) which says that amount of deduction relating to any such debt or part thereof shall be limited to amount relating to any such debt or part thereof shall be limited to amount relating to any such debt or part thereof shall be limited to amount by which such debt or part thereof by which such debt or part thereof exceeds credit balance in exceeds credit balance in provision for bad and doubtful debt accounts made under the provision for bad and doubtful debt accounts made under the provision for bad and doubtful debt accounts made under the clause and held that following CBDT and held that following CBDT Instruction No. 17/2008, the No. 17/2008, the

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opening balance of provision for bad and doubtful debt should be opening balance of provision for bad and doubtful debt should be opening balance of provision for bad and doubtful debt should be reduced from the bad debt written off i reduced from the bad debt written off instead of closing balance. nstead of closing balance. The relevant finding of the Hon’ble High Court is reproduced as The relevant finding of the Hon’ble High Court is reproduced as The relevant finding of the Hon’ble High Court is reproduced as under:

“15. In the present case, however, the question of method of 15. In the present case, however, the question of method of 15. In the present case, however, the question of method of operation of proviso to operation of proviso to section 36(l) (vii) arises. Such proviso arises. Such proviso as noted, provides that in case of an assessee to which as noted, provides that in case of an assessee to which as noted, provides that in case of an assessee to which clause (viia) applies, the amount of deduction relating to any clause (viia) applies, the amount of deduction relating to any clause (viia) applies, the amount of deduction relating to any such debt or part thereof shall be limited to the amount by such debt or part thereof shall be limited to the amount by such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balan which such debt or part thereof exceeds the credit balan which such debt or part thereof exceeds the credit balance in the provision for account made under that clause. The the provision for account made under that clause. The the provision for account made under that clause. The revenue's contention is that by virtue of such proviso, the revenue's contention is that by virtue of such proviso, the revenue's contention is that by virtue of such proviso, the claim of the assessee for deduction for debts write off, should claim of the assessee for deduction for debts write off, should claim of the assessee for deduction for debts write off, should be reduced by the closing balance of the assessee in his be reduced by the closing balance of the assessee in his be reduced by the closing balance of the assessee in his account for the account for the provision of bad and doubtful debts. On the provision of bad and doubtful debts. On the other hand, the assessee contents that such diminution be other hand, the assessee contents that such diminution be other hand, the assessee contents that such diminution be limited to the opening balance of such account. limited to the opening balance of such account. 16.We notice that in this respect the provision is silent. We 16.We notice that in this respect the provision is silent. We 16.We notice that in this respect the provision is silent. We may therefore record that the interpretatio may therefore record that the interpretation adopted by the n adopted by the Tribunal in the impugned judgment would ordinarily give rise Tribunal in the impugned judgment would ordinarily give rise Tribunal in the impugned judgment would ordinarily give rise to a question of law particularly when it is pointed out that to a question of law particularly when it is pointed out that to a question of law particularly when it is pointed out that there is no previous decision of any High Court on the there is no previous decision of any High Court on the there is no previous decision of any High Court on the subject. However, the issue has been made sufficiently clear subject. However, the issue has been made sufficiently clear subject. However, the issue has been made sufficiently clear by the CBDT Circular No.17/2008 dated 26 by the CBDT Circular No.17/2008 dated 26-11-2008. In the 2008. In the said circular, this very issue has been examined and said circular, this very issue has been examined and said circular, this very issue has been examined and clarified in the following manner: clarified in the following manner:- " 2. In a recent review of assessment of Banks carried " 2. In a recent review of assessment of Banks carried " 2. In a recent review of assessment of Banks carried out by C&AG, it has been observed that while out by C&AG, it has been observed that while out by C&AG, it has been observed that while computing computing the income of banks under the head 'Profit the income of banks under the head 'Profit and Gains of Business & and Gains of Business & Profession , deductions of Profession , deductions of large amounts under different sections are being large amounts under different sections are being large amounts under different sections are being allowed by the Assessing Officers without proper allowed by the Assessing Officers without proper allowed by the Assessing Officers without proper verification, leading to substantial loss of revenue. It is, verification, leading to substantial loss of revenue. It is, verification, leading to substantial loss of revenue. It is, therefore, necessary that assessments in the cases of refore, necessary that assessments in the cases of refore, necessary that assessments in the cases of banks are completed with due care and after proper banks are completed with due care and after proper banks are completed with due care and after proper verification. verification. verification. In In particular, deductions under In particular, deductions under particular, deductions under the the the provisions referred provisions referred provisions referred to below to to below below ITA ITA ITA Nos. 152 & Nos. 152 Nos. 152 & & 233/Ahd/2006, 815 & 4387/Ahd/2007 8 ITA No. 233/Ahd/2006, 815 & 4387/Ahd/2007 8 ITA No. 233/Ahd/2006, 815 & 4387/Ahd/2007 8 ITA No.

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237/Ahd/2008 A.Y 237/Ahd/2008 A.Y. 2001-02 to 2003-04 should be 04 should be allowed only after a thorough examination of the claim allowed only after a thorough examination of the claim allowed only after a thorough examination of the claim on facts and on law as per the provisions of the I.T, on facts and on law as per the provisions of the I.T, on facts and on law as per the provisions of the I.T, Act, 1961. Act, 1961. (i) Under (i) Under section 36(l)(vii) of the Act, deduction on of the Act, deduction on account of bad debts which are written off as account of bad debts which are written off as account of bad debts which are written off as irrecoverable in the accounts of the assessee is irrecoverable in the accounts of the assessee is irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if admissible. However, this should be allowed only if admissible. However, this should be allowed only if the assessee had debited the amount of such ||ibs to the assessee had debited the amount of such ||ibs to the assessee had debited the amount of such ||ibs to the provision for bad and doubtful debt account the provision for bad and doubtful debt account the provision for bad and doubtful debt account under section 36f3||lfl|a) of the^Act, as required ||lfl|a) of the^Act, as required by section 36(2) section 36(2) (v) of the Act. (ii) While considering the claim for bad debts u/s (ii) While considering the claim for bad debts u/s (ii) While considering the claim for bad debts u/s 36(1)(vii), the assessing 36(1)(vii), the assessing officver should allow only such officver should allow only such amount of bad debts written off as exceeds the credit amount of bad debts written off as exceeds the credit amount of bad debts written off as exceeds the credit balance available in the provision for bad and doubtful balance available in the provision for bad and doubtful balance available in the provision for bad and doubtful debt account created u/s 36(1) (viia) of the Act. The debt account created u/s 36(1) (viia) of the Act. The debt account created u/s 36(1) (viia) of the Act. The credit balance for this purpose will be the opening credit balance for this purpose will be the opening credit balance for this purpose will be the opening credit b credit balance i.e., the balance brought forward as on alance i.e., the balance brought forward as on 1st April of the relevant accounting year." 1st April of the relevant accounting year." 17. As already noted, in absence of such clarification by 17. As already noted, in absence of such clarification by 17. As already noted, in absence of such clarification by CBDT, we would have been inclined to admit the appeals. CBDT, we would have been inclined to admit the appeals. CBDT, we would have been inclined to admit the appeals. However, when such circular issued under However, when such circular issued under section 119(2) section 119(2) of the Act clarifies the Act clarifies-the position beyond any doubt, we have no the position beyond any doubt, we have no reason to entertain the revenue's appeals. As already noted, reason to entertain the revenue's appeals. As already noted, reason to entertain the revenue's appeals. As already noted, the statutory provision is silent on the precise method of the statutory provision is silent on the precise method of the statutory provision is silent on the precise method of working out the working out the deduction. It is by now well-settled that such settled that such circulars issued by the Board in exercise of its statutory circulars issued by the Board in exercise of its statutory circulars issued by the Board in exercise of its statutory powers under powers under section 119(2) of the Act, may have the effect of the Act, may have the effect of relaxing the rigours of a statutory of relaxing the rigours of a statutory provision. In the case of provision. In the case of Catholic Syrian Bank Ltd. (supra) itself, the Apex Court Catholic Syrian Bank Ltd. (supra) itself, the Apex Court Catholic Syrian Bank Ltd. (supra) itself, the Apex Court touched on the effect of the circular issued by the Board. It touched on the effect of the circular issued by the Board. It touched on the effect of the circular issued by the Board. It was observed as under: was observed as under:- "Now, we shall proceed to examine the effect of the "Now, we shall proceed to examine the effect of the "Now, we shall proceed to examine the effect of the circulars which are in force and a circulars which are in force and are issued by the re issued by the Central Board of Direct Taxes (for short, "the Board") in Central Board of Direct Taxes (for short, "the Board") in Central Board of Direct Taxes (for short, "the Board") in exercise the power vested n it under exercise the power vested n it under section 119 section 119 of the Act. Circulars can be issued by the Board to the Act. Circulars can be issued by the Board to the Act. Circulars can be issued by the Board to explain or tone down the rigo explain or tone down the rigours of law and to ensure urs of law and to ensure fair enforcement of its provisions. These circulars have fair enforcement of its provisions. These circulars have fair enforcement of its provisions. These circulars have

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the force of law and are binding on the income-tax the force of law and are binding on the income the force of law and are binding on the income authorities, though they cannot be enforced adversely authorities, though they cannot be enforced adversely authorities, though they cannot be enforced adversely against the assessee. Normally, these circulars cannot against the assessee. Normally, these circulars cannot against the assessee. Normally, these circulars cannot be ignored A c be ignored A circular may not override or detract from ircular may not override or detract from the provisions of the Act but it can seek to mitigate the the provisions of the Act but it can seek to mitigate the the provisions of the Act but it can seek to mitigate the rigour of a particular provision for the benefit of the rigour of a particular provision for the benefit of the rigour of a particular provision for the benefit of the assessee in certain specified circumstances. so long as assessee in certain specified circumstances. so long as assessee in certain specified circumstances. so long as the circular is in force, it aids the uniform the circular is in force, it aids the uniform and proper administration and application of the provisions of the administration and application of the provisions of the administration and application of the provisions of the Act. (Refer to UCO Bank v. CIT(1999) 4 SCC 599). " Act. (Refer to UCO Bank v. CIT(1999) 4 SCC 599). " Act. (Refer to UCO Bank v. CIT(1999) 4 SCC 599). " 18. In case of 18. In case of UCO Bank vs. Commissioner of Income UCO Bank vs. Commissioner of Income Tax reported in 237 ITR 889 the Sup reported in 237 ITR 889 the Supreme Court in reme Court in connection with effect of circulars issued by the Board connection with effect of circulars issued by the Board connection with effect of circulars issued by the Board under section 119 section 119 of the Act observed: " Such instructions may be by way of relaxation of any " Such instructions may be by way of relaxation of any " Such instructions may be by way of relaxation of any of the provisions of the sections specifi of the provisions of the sections specified there or ed there or otherwise. The Board, thus, has powers inter alia, to otherwise. The Board, thus, has powers inter alia, to otherwise. The Board, thus, has powers inter alia, to tone down the rigour of the law and ensure a fair tone down the rigour of the law and ensure a fair tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in enforcement of its provisions, by issuing circulars in enforcement of its provisions, by issuing circulars in exercise exercise exercise of of of its its its statutory statutory statutory powers powers powers under under section under 119 which are binding on the authorities in the which are binding on the authorities in the which are binding on the authorities in the administration of the Act. Under administration of the Act. Under section 119(2)(a) section 119(2)(a), however, the circulars as contemplated therein cannot however, the circulars as contemplated therein cannot however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the be adverse to the assessee. Thus, the authority which authority which wields the power for its own advantage under the Act wields the power for its own advantage under the Act wields the power for its own advantage under the Act is given the right to forgo the advantage when required is given the right to forgo the advantage when required is given the right to forgo the advantage when required to wield it in the manner it considers just by relaxing to wield it in the manner it considers just by relaxing to wield it in the manner it considers just by relaxing the rigour of the law or in other permissible manners the rigour of the law or in other permissible manners the rigour of the law or in other permissible manners as laid down in as laid down in section 119. The power is given for . The power is given for the purpose of just, proper and efficient management the purpose of just, proper and efficient management the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a of the work of assessment and in public interest. It is a of the work of assessment and in public interest. It is a beneficial power given to the Board for proper beneficial power given to the Board for proper beneficial power given to the Board for proper administration administration of fiscal law so that undue hardship of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may not be caused to the assessee and the fiscal laws may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be may be correctly applied. Hard cases which can be may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus properly categorised as belonging to a class, can thus properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing be given the benefit of relaxation of law by issuing be given the benefit of relaxation of law by issuing circula circulars binding^ the taxing authorities." 19. In the result, bearing in mind the circular issued by CBDT 19. In the result, bearing in mind the circular issued by CBDT 19. In the result, bearing in mind the circular issued by CBDT dated 26.11.2008 no further controversy should arise. dated 26.11.2008 no further controversy should arise. dated 26.11.2008 no further controversy should arise. In the result, the tax appeals are dismissed. result, the tax appeals are dismissed.”

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8.3 In view of above discussion, we don’t find any e In view of above discussion, we don’t find any e In view of above discussion, we don’t find any error in the order of the Ld. CIT(A) in considering the opening credit balance of order of the Ld. CIT(A) in considering the opening credit balance of order of the Ld. CIT(A) in considering the opening credit balance of the provision of the bad the provision of the bad and doubtful debt for the purpose of for the purpose of reducing from bad debt written off reducing from bad debt written off u/s 36(1)(vii) of the Act and u/s 36(1)(vii) of the Act and declining to considering the provision for bad and doubtful debt considering the provision for bad and doubtful debt considering the provision for bad and doubtful debt debited during the year under consideration. Accordingly during the year under consideration. Accordingly during the year under consideration. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute and uphold the finding of the Ld. CIT(A) on the issue in dispute and uphold the finding of the Ld. CIT(A) on the issue in dispute and ground No. 1 of the appeal of the Revenue is dismissed. ground No. 1 of the appeal of the Revenue is dismissed. ground No. 1 of the appeal of the Revenue is dismissed.

“The Commissioner (Appeals) allo The Commissioner (Appeals) allowed deduction u/s 36(1) wed deduction u/s 36(1) (vii) for AY 2013 (vii) for AY 2013-14 to the extent betire of of Rs. 14 to the extent betire of of Rs. 1,65,85,30,588 / 1,65,85,30,588 /- after reducing Rs. 4,21,52,840/ after reducing Rs. 4,21,52,840/- being deduction u/s 36(1)(viia) allowed in AY 2012 deduction u/s 36(1)(viia) allowed in AY 2012-13. However, 13. However, subsequent to the Commissioner (Appeals) Order for AY subsequent to the Commissioner (Appeals) Order for AY subsequent to the Commissioner (Appeals) Order for AY 2013-14, the AO has reassessed AY 2012 e AO has reassessed AY 2012-13 and vide order 13 and vide order dated 22/12/2019 u/s 143(3) rw Section 147 disallowed dated 22/12/2019 u/s 143(3) rw Section 147 disallowed dated 22/12/2019 u/s 143(3) rw Section 147 disallowed the deduction of Rs. 4,21,52,840/ the deduction of Rs. 4,21,52,840/- u/s 36(1) (via) which was u/s 36(1) (via) which was earlier allowed. earlier allowed.” 9.1 Before us the learned DR submitted that there was no details Before us the learned DR submitted that there was no details Before us the learned DR submitted that there was no details available with the Assessing Officer regarding the claim of the th the Assessing Officer regarding the claim of the th the Assessing Officer regarding the claim of the assessee raised before him by way of the additional ground, and assessee raised before him by way of the additional ground, and assessee raised before him by way of the additional ground, and therefore following the ratio of the decision dated 6/06/2017 of therefore following the ratio of the decision dated 6/06/2017 of therefore following the ratio of the decision dated 6/06/2017 of Hon’ble Madras High Court in the case of Hon’ble Madras High Court in the case of CIT Vs M/s Abhinitha CIT Vs M/s Abhinitha Foundation P Ltd in TC(A) No. 811 of 2016, Ltd in TC(A) No. 811 of 2016, the the calim of the

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assessee is not acceptable assessee is not acceptable. The relevant finding of the Hon’ble . The relevant finding of the Hon’ble Madras High Court (supra) is reproduced as under: Madras High Court (supra) is reproduced as under:

“12.5. A reading of the aforesaid observations would clearly 12.5. A reading of the aforesaid observations would clearly 12.5. A reading of the aforesaid observations would clearly establish that the arguments advan establish that the arguments advanced by Mr.Ravi that the ced by Mr.Ravi that the assessee company could only raise an additional ground assessee company could only raise an additional ground assessee company could only raise an additional ground and not make a new claim or additional claim is not and not make a new claim or additional claim is not and not make a new claim or additional claim is not sustainable. As indicated by us hereinabove, this power of sustainable. As indicated by us hereinabove, this power of sustainable. As indicated by us hereinabove, this power of entertaining the claim vests with the appellate authorities entertaining the claim vests with the appellate authorities entertaining the claim vests with the appellate authorities based on the facts and circumstances of the case. The power on the facts and circumstances of the case. The power on the facts and circumstances of the case. The power of the appellate authorities to consider claims made based on of the appellate authorities to consider claims made based on of the appellate authorities to consider claims made based on material already on record is co material already on record is co-terminus with the power of terminus with the power of the Assessing Officer. the Assessing Officer. The failure to advert to the claim in the The failure to advert to the claim in the original return original return or the revised return cannot denude the or the revised return cannot denude the appellate authorities of their power to consider the claim, if, appellate authorities of their power to consider the claim, if, appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise the relevant material is available on record and is otherwise the relevant material is available on record and is otherwise tenable in law. Any other view, in our opinion, will set at tenable in law. Any other view, in our opinion, will set at tenable in law. Any other view, in our opinion, will set at naught the plenary powers of naught the plenary powers of appellate authorities. appellate authorities.” 9.2 Further the learned DR submitted that it was not a Further the learned DR submitted that it was not a Further the learned DR submitted that it was not a inadvertent error or due to a apparent or due to a apparent mistake mistake and therefore following the ratio of the Hon’ble Bombay High Court in the case of following the ratio of the Hon’ble Bombay High Court in the case of following the ratio of the Hon’ble Bombay High Court in the case of CIT Vs Pruthvi Brokers & Shareholders in ITA No. 3908 of CIT Vs Pruthvi Brokers & Shareholders in ITA No. CIT Vs Pruthvi Brokers & Shareholders in ITA No. 2010, claim can’t be admitted claim can’t be admitted. The relevant finding of the Hon’ble . The relevant finding of the Hon’ble High Court is reproduced as under: High Court is reproduced as under:

“18. In the case before us, the CIT(A) and the Tribunal have 18. In the case before us, the CIT(A) and the Tribunal have 18. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs.40,00,000/ held the omission to claim the deduction of Rs.40,00,000/ held the omission to claim the deduction of Rs.40,00,000/- to be inadvertent. be inadvertent. Both the appellate authorities held, after he appellate authorities held, after considering all the facts, that the assessee had inadvertently considering all the facts, that the assessee had inadvertently considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/ claimed a deduction of Rs.20,00,000/- paid after the end of paid after the end of the year in question. We see no reason to the year in question. We see no reason to interfere with this interfere with this finding. We see less reason to int finding. We see less reason to interfere with the erfere with the exercise of discretion by the appellate authorities in permitting the discretion by the appellate authorities in permitting the discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled respondent to raise this claim. That the respondent is entitled respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly to the deduction in law is admitted and, in any event, clearly to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the resp established. In the circumstances, the respondent ought not ondent ought not be prejudiced. be prejudiced.”

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 36 ITA Nos. 3878 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

9.3 We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The plea of the dispute and perused the relevant material on record. The plea of the dispute and perused the relevant material on record. The plea of the assessee that deduction u/s 36(1)(vii) of the Act has been reduced assessee that deduction u/s 36(1)(vii) of the Act has been reduced assessee that deduction u/s 36(1)(vii) of the Act has been reduced by the Assessing Offi by the Assessing Officer while order giving effect to the order of the cer while order giving effect to the order of the Ld. CIT(A) consequent to the order passed u/s 143(3) r.w.s. 147 of Ld. CIT(A) consequent to the order passed u/s 143(3) r.w.s. 147 of Ld. CIT(A) consequent to the order passed u/s 143(3) r.w.s. 147 of the Act. We find that this ground does not arise from the impugned the Act. We find that this ground does not arise from the impugned the Act. We find that this ground does not arise from the impugned order before us and therefore, order before us and therefore, the assessee may prefer the assessee may prefer for rectification in the order of Assessing Officer in the order of Assessing Officer if so advised and if so advised and being within the limitation period limitation period or may explore any other remedy under or may explore any other remedy under the statute. The additional ground of the assessee is accordingly he additional ground of the assessee is accordingly he additional ground of the assessee is accordingly dismissed as infructuous. dismissed as infructuous.