DY CIT-1(3)(2), MUMBAI vs. MAHARASHTRA STATE CO-OPERATIVE BANK LIMITED, MUMBAI

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 & 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, M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 3 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 (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.

4. Before us, the assessee has filed a Paper Book co Before us, the assessee has filed a Paper Book co Before us, the assessee has filed a Paper Book containing pages 1 to 91.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 4 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

5. The ground of appeal of the assessee relates to addition of e ground of appeal of the assessee relates to addition of e ground of appeal of the assessee relates to addition of Rs.14,22,26,284/- which arose due to difference in the income which arose due to difference in the income which arose due to difference in the income reported in income-tax return tax return corresponding to the r corresponding to the receipts shown in Form No. 26AS i.e. a form prescribed by the Income-tax in Form No. 26AS i.e. a form prescribed by the Income in Form No. 26AS i.e. a form prescribed by the Income departmental for providing details of tax deducted on the receipts of for providing details of tax deducted on the receipts of for providing details of tax deducted on the receipts of the assessee. The brief facts qua the issue The brief facts qua the issue in dispute are that as per in dispute are that as per the Form 26AS of income Form 26AS of income-tax form receipts of Rs.24,50,45,356/ tax form receipts of Rs.24,50,45,356/- were shown, whereas the assessee in its return of income has whereas the assessee in its return of income has whereas the assessee in its return of income has shown corresponding income to the extent of Rs.10,28,19,072/ wn corresponding income to the extent of Rs.10,28,19,072/-. wn corresponding income to the extent of Rs.10,28,19,072/ Regarding the difference of Rs.14,22,28,284/ ifference of Rs.14,22,28,284/-, t , the assessee explained that it was engaged in extending loans and advances explained that it was engaged in extending loans and advances explained that it was engaged in extending loans and advances during the normal course of its business and o normal course of its business and out of loans extended ut of loans extended some of borrowers defaulted in repayment of the loans and the borrowers defaulted in repayment of the loans and the borrowers defaulted in repayment of the loans and the assessee took possession of the secured assets in terms of the assessee took possession of the secured assets in terms of the assessee took possession of the secured assets in terms of the provisions of the securitization and reconstruction of financial securitization and reconstruction of financial securitization and reconstruction of financial assets and enforcement of Security Interest Act, 2002, referred to as assets and enforcement of Security Interest Act, 2002, referred to as assets and enforcement of Security Interest Act, 2002, referred to as SARFAESI Act, 2002. The assessee submitted that it has seized , 2002. The assessee submitted that it has seized , 2002. The assessee submitted that it has seized assets of six borrowers under the said assets of six borrowers under the said SARFAESI Act SARFAESI Act and the assessee received amount against lease agreements of assets i.e assessee received amount against lease agreements of assets assessee received amount against lease agreements of assets properties of those defaulters of those defaulters, which has represented as recovery of which has represented as recovery of outstanding principal rincipal amount and interest from the borrowers and and interest from the borrowers and accordingly those receipts are adjusted by the assessee towards those receipts are adjusted by the assessee towards those receipts are adjusted by the assessee towards amounts outstanding and interest thereon due from those amounts outstanding and interest thereon due from t amounts outstanding and interest thereon due from t borrowers. The tax deducted borrowers. The tax deducted by the tenants of proeprties of proeprties has also been claimed by the assessee for credit against the tax payment e assessee for credit against the tax payment e assessee for credit against the tax payment of M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 5 & 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 6 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 & 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 8 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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]).

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 9 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 10 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 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:

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; M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 12 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 (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 -- M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 13 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 (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.”

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 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019

2. Grievance raised by the assessee, as set out in the 2. Grievance raised by the assessee, as set out in the 2. Grievance raised by the assessee, as set out in the memorandum of appeal, is as follows: memorandum of appeal, is as follows: The learned Commissioner (Appeals) has erred in law The learned Commissioner (Appeals) has erred in law The learned Commissioner (Appeals) has erred in law and on facts in confirming the addition of Rs and on facts in confirming the addition of Rs and on facts in confirming the addition of Rs 14,22,26,284, being rental 14,22,26,284, being rental income on the properties income on the properties seized under SARFAESI Act 2002 by the appellant seized under SARFAESI Act 2002 by the appellant seized under SARFAESI Act 2002 by the appellant bank, to the income of the bank. bank, to the income of the bank.

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 19 & 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 & 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 & 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.

7. The ground No. 1 of the appeal of the Revenue relates to The ground No. 1 of the appeal of the Revenue relates to The ground No. 1 of the appeal of the Revenue relates to disallowance of bad debt written off amounting to disallowance of bad debt written off amounting to Rs.9,87,88,041/ Rs.9,87,88,041/-. The brief facts qua the issue in dispute are that the Assessing The brief facts qua the issue in dispute are that the Assessing The brief facts qua the issue in dispute are that the Assessing Officer noticed that the assessee has debited to profit and loss Officer noticed that the assessee has debited to profit and loss Officer noticed that the assessee has debited to profit and loss M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 22 & 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. 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 & 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

4. The only two issues which, therefore, are before your The only two issues which, therefore, are before your The only two issues which, therefore, are before your Honor in so far as this Ground is concerned are: Honor in so far as this Ground is concerned are: a. The amount which is to be deducted from Bad Debts on The amount which is to be deducted from Bad Debts on The amount which is to be deducted from Bad Debts on account of Provision for bad and doubtful debts made under account of Provision for bad and doubtful debts made under account of Provision for bad and doubtful debts made under M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 24 & 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.

8. 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 revenue is and perused the relevant material on record. The revenue is and perused the relevant material on record. The revenue is aggrieved by way of the allowing deduction of the assessee u/s aggrieved by way of the allowing deduction of the assessee u aggrieved by way of the allowing deduction of the assessee u 36(1)(vii) of the Act. We find that the Ld. CIT(A) has duly verified the 36(1)(vii) of the Act. We find that the Ld. CIT(A) has duly verified the 36(1)(vii) of the Act. We find that the Ld. CIT(A) has duly verified the amount which were already allowed to the assessee in earlier years amount which were already allowed to the assessee in earlie amount which were already allowed to the assessee in earlie and also taken into consideration and also taken into consideration the amount of Rs.13,11,50,048/ the amount of Rs.13,11,50,048/- M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 25 & 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 26 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 27 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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.

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 "

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 32 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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."

M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 34 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 M/s The Maharashtra State Co-op. Bank Ltd. M/s The Maharashtra State Co 35 & 3916/Mum/2019 ITA Nos. 3878 & 3916/Mum/2019 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 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 & 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.