M/S THE STATE BANK OF PATIALA,PATIALA vs. ACIT, PATIALA

The Ld. CIT(A) erred in confirming disallowance by The Ld. CIT(A) erred in confirming disallowance by The Ld. CIT(A) erred in confirming disallowance by Assessing Officer the amount of interest accrued but not due g Officer the amount of interest accrued but not due g Officer the amount of interest accrued but not due on securities contrary to the provisions of the Act. on securities contrary to the provisions of the Act. 1.1 The Ld. CIT(A) failed to note that interest on securities 1.1 The Ld. CIT(A) failed to note that interest on securities 1.1 The Ld. CIT(A) failed to note that interest on securities accrue only on the dates specified in the security as due date accrue only on the dates specified in the security as due date accrue only on the dates specified in the security as due date for payment, mere account for payment, mere accounting of interest on time period basis ing of interest on time period basis for Balance Sheet purposes does not give raise to real income. for Balance Sheet purposes does not give raise to real income. for Balance Sheet purposes does not give raise to real income. 2.1 The Ld. CIT(A) failed to appreciate that provision towards 2.1 The Ld. CIT(A) failed to appreciate that provision towards 2.1 The Ld. CIT(A) failed to appreciate that provision towards restructured debts and standard assets are only provision restructured debts and standard assets are only provision restructured debts and standard assets are only provision made for bad and doubtful debts ref made for bad and doubtful debts referred to in section 36(1) erred to in section 36(1) (viia) and hence deduction thereof ought to have been allowed. (viia) and hence deduction thereof ought to have been allowed. (viia) and hence deduction thereof ought to have been allowed. 2.2 The Ld. CIT(A) erred in not granting deduction u/s 2.2 The Ld. CIT(A) erred in not granting deduction u/s 2.2 The Ld. CIT(A) erred in not granting deduction u/s 36(1)(viia) on the balance outstanding in respect of rural 36(1)(viia) on the balance outstanding in respect of rural 36(1)(viia) on the balance outstanding in respect of rural advances as specified in Explanation to section 36(1) advances as specified in Explanation to section 36(1) advances as specified in Explanation to section 36(1) (via), but 3 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 restricting the same to incremental advances by an artificial restricting the same to incremental advances by an artificial restricting the same to incremental advances by an artificial construction of statute. construction of statute.

Briefly stated, facts of the case are that the assessee i.e. State Briefly stated, facts of the case are that the assessee i.e. State Briefly stated, facts of the case are that the assessee i.e. State Bank of Patiala ( which later on merged with State Bank of India ) ( which later on merged with State Bank of India ) ( which later on merged with State Bank of India ) filed its original return of income on 27.11.2013 declaring total d its original return of income on 27.11.2013 declaring total d its original return of income on 27.11.2013 declaring total income of Rs.1475,22,52,090/ income of Rs.1475,22,52,090/-, which was subsequently revised to , which was subsequently revised to Rs.988,32,46,450/- on 20.11.2014. The assessee- -company being one of the scheduled one of the scheduled banks, was engaged in the providing banking was engaged in the providing banking facility to its customers. The return of income filed by the assessee ility to its customers. The return of income filed by the assessee ility to its customers. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income- was selected for scrutiny and statutory notices under the Income was selected for scrutiny and statutory notices under the Income tax Act, 1961 (in short ‘the Act’) were issued and complied with. In tax Act, 1961 (in short ‘the Act’) were issued and complied with. In tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s 143(3) of the Act on 20.01.2016, the the assessment completed u/s 143(3) of the Act on 20.01 the assessment completed u/s 143(3) of the Act on 20.01 Assessing Officer made various additions to the returned income Assessing Officer made various additions to the returned income Assessing Officer made various additions to the returned income and assessed total income at Rs. 1898,85,40,474/-. On further and assessed total income at Rs. 1898,85,40,474/ and assessed total income at Rs. 1898,85,40,474/ appeal, the Ld. CIT(A) allowed part relief to the assessee vide order appeal, the Ld. CIT(A) allowed part relief to the assessee vide order appeal, the Ld. CIT(A) allowed part relief to the assessee vide order dated 31.01.2017.

Aggrieved the assessee is b Aggrieved the assessee is before the Income Income-tax Appellate Tribunal (in short ‘ITAT’) raising grounds as reproduced above. Tribunal (in short ‘ITAT’) raising grounds as reproduced above. Tribunal (in short ‘ITAT’) raising grounds as reproduced above.

At the outset, we may like we may like to mention that the appeals of the that the appeals of the assessee came up for adjudication before the Chandigarh Bench of for adjudication before the Chandigarh Bench of for adjudication before the Chandigarh Bench of 4 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 the ITAT. On the issue raised the ITAT. On the issue raised by the assessee in Ground No. 2.2, by the assessee in Ground No. 2.2, the Ld. Counsel of the assessee relied on few decisions of the the Ld. Counsel of the assessee relied on few decisions of the the Ld. Counsel of the assessee relied on few decisions of the Division Bench of the Tribunal Division Bench of the Tribunal, however, the Chandigarh Bench of owever, the Chandigarh Bench of the Tribunal disagree the Tribunal disagreed with the view expressed by the other view expressed by the other cited by the Ld. Counsel of the assessee and Division Benches cited by the Ld. Counsel of the assessee and cited by the Ld. Counsel of the assessee and accordingly, reference was made to the Hon’ble President reference was made to the Hon’ble President ITAT for reference was made to the Hon’ble President Special Bench on the issue raised in ground No. 2.2 constituting a Special Bench on the issue raised in ground No. 2.2 Special Bench on the issue raised in ground No. 2.2 in the appeal. The relevant reference in the appeal. The relevant reference was made for constitution made for constitution of a Special Bench, wherein following questions was wherein following questions was framed: framed:

We further find that the following question of law came 10. We further find that the following question of law came 10. We further find that the following question of law came up for consideration before the up for consideration before the Hon‟ble Madras High ‟ble Madras High Court in M/s City Union Bank Ltd. (supra): Court in M/s City Union Bank Ltd. (supra): ―5. By order dated 29.11.2010, this court admitted the By order dated 29.11.2010, this court admitted the By order dated 29.11.2010, this court admitted the aforesaid tax case appeal on the following substantial aforesaid tax case appeal on the following substantial aforesaid tax case appeal on the following substantial questions of law: questions of law: 1. …… 1. …… 2. Whether in the facts and circumstances of the case, the 2. Whether in the facts and circumstances of the case, t 2. Whether in the facts and circumstances of the case, t Tribunal was right in deleting disallowance of provision Tribunal was right in deleting disallowance of provision Tribunal was right in deleting disallowance of provision before bad debts under Section 36 (1) (viia) of Rs.8.53 before bad debts under Section 36 (1) (viia) of Rs.8.53 before bad debts under Section 36 (1) (viia) of Rs.8.53 crores observing that as per Rule 62ABA of the Income Tax crores observing that as per Rule 62ABA of the Income Tax crores observing that as per Rule 62ABA of the Income Tax Rules 1962, the aggregate average advances made by the Rules 1962, the aggregate average advances made by the Rules 1962, the aggregate average advances made by the rural branches have to be c rural branches have to be computed by taking the omputed by taking the amounts of advances made by each rural branch as amounts of advances made by each rural branch as amounts of advances made by each rural branch as outstanding at the end of last day of each month outstanding at the end of last day of each month outstanding at the end of last day of each month comprised in the previous year, whereas the aggregate comprised in the previous year, whereas the aggregate comprised in the previous year, whereas the aggregate average has to be worked out only in respect of advances average has to be worked out only in respect of advances average has to be worked out only in respect of advances made during the year as o made during the year as otherwise, there would be double therwise, there would be double deduction?" deduction?"

While in principle agreeing with the submission of the 11. While in principle agreeing with the submission of the 11. While in principle agreeing with the submission of the taxpayer, the Hon taxpayer, the Hon‟ble Madras High Court took into ‟ble Madras High Court took into consideration the aforesaid decision of Hon‟ble Calcutta consideration the aforesaid decision of Hon consideration the aforesaid decision of Hon High Court. The relevant observations of Hon‟ble Madras High Court. The relevant observations of Hon High Court. The relevant observations of Hon High Court are as under: High Court are as under: ―10.2 ―10.2 Similarly, the second issue relating to deduction of Similarly, the second issue relating to deduction of Rs.8.53 crores u/s 36(1)(viia) with regard to the provision Rs.8.53 crores u/s 36(1)(viia) with regard to the provision Rs.8.53 crores u/s 36(1)(viia) with regard to the provision for bad and doubtful debts, is coveredby the decision in for bad and doubtful debts, is coveredby the decision in for bad and doubtful debts, is coveredby the decision in Principal Commissioner of Income Tax, Jalpaiguri v. Principal Commissioner of Income Tax, Jalpa Principal Commissioner of Income Tax, Jalpa UttarbangaKshetriya Gramin Bank [(2018) 94 taxmann. UttarbangaKshetriya Gramin Bank [(2018) 94 taxmann. UttarbangaKshetriya Gramin Bank [(2018) 94 taxmann. Com 90 (Calcutta), in favour of the assessee and the Com 90 (Calcutta), in favour of the assessee and the Com 90 (Calcutta), in favour of the assessee and the relevant passage of the same is usefully extracted below: relevant passage of the same is usefully extracted below: relevant passage of the same is usefully extracted below: "6. Mr. Nizamuddin, learned advocate appeared on behalf "6. Mr. Nizamuddin, learned advocate appeared on behalf "6. Mr. Nizamuddin, learned advocate appeared on behalf of the Revenue and submitte of the Revenue and submitted the amended direction d the amended direction made by the Tribunal on the ITO has resulted in the made by the Tribunal on the ITO has resulted in the made by the Tribunal on the ITO has resulted in the assessee assessee assessee getting getting getting double double double deduction deduction deduction which which which is is is not not not 8 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 permissible on computation made under Rule 6ABA. He permissible on computation made under Rule 6ABA. He permissible on computation made under Rule 6ABA. He submitted a double deduction in the manner thus obtained submitted a double deduction in the manner thus obtained submitted a double deduction in the manner thus obtained by the assessee has not by the assessee has not been expressly provided. He been expressly provided. He relied on a judgment of the Supreme Court in the case of relied on a judgment of the Supreme Court in the case of relied on a judgment of the Supreme Court in the case of Escorts Ltd. v. Union of India reported in (1993) 199 ITR Escorts Ltd. v. Union of India reported in (1993) 199 ITR Escorts Ltd. v. Union of India reported in (1993) 199 ITR 43, on the following portion in the said judgment 43, on the following portion in the said judgment 43, on the following portion in the said judgment appearing in page 64 of the report. appearing in page 64 of the report. "A double deduction cannot "A double deduction cannot be a matter of inference, it be a matter of inference, it must be provided for in clear and express language, must be provided for in clear and express language, must be provided for in clear and express language, regard being had to its unusual nature and its serious regard being had to its unusual nature and its serious regard being had to its unusual nature and its serious impact on the revenues of the State." impact on the revenues of the State."

Mr.Khaitan, learned senior Advocate appeared on 7. Mr.Khaitan, learned senior Advocate appeared on 7. Mr.Khaitan, learned senior Advocate appeared on behalf of the assessee and sub behalf of the assessee and submitted that the computation mitted that the computation to be made as prescribed by Rule 6ABA is for the purpose to be made as prescribed by Rule 6ABA is for the purpose to be made as prescribed by Rule 6ABA is for the purpose of fixing the limit of the deduction available under section of fixing the limit of the deduction available under section of fixing the limit of the deduction available under section 36(1)(viia). Clause (a) and (b) in Rule 6ABA cannot be 36(1)(viia). Clause (a) and (b) in Rule 6ABA cannot be 36(1)(viia). Clause (a) and (b) in Rule 6ABA cannot be given given given the the the restricted restricted restricted interpretation. interpretation. interpretation. The The The amount amount amount of of of advances as outstanding at the last day of each month nces as outstanding at the last day of each month nces as outstanding at the last day of each month would would would be be be a a a fluctuating fluctuating fluctuating figure figure figure depending depending depending on on on the the the outstanding as increased or reduced respectively by outstanding as increased or reduced respectively by outstanding as increased or reduced respectively by advances made and repayments received. The assessee advances made and repayments received. The assessee advances made and repayments received. The assessee might provide for bad and doubtful doubts but the might provide for bad and doubtful doubts but the might provide for bad and doubtful doubts but the deduction would only be allowed at the percentage of deduction would only be allowed at the percentage of tion would only be allowed at the percentage of aggregate average advance, computation of which is aggregate average advance, computation of which is aggregate average advance, computation of which is prescribed by Rule 6ABA. prescribed by Rule 6ABA.

We find from the amended direction made by the 8. We find from the amended direction made by the 8. We find from the amended direction made by the Tribunal that such direction is in terms of Rule 6ABA. The Tribunal that such direction is in terms of Rule 6ABA. The Tribunal that such direction is in terms of Rule 6ABA. The ITO has made the compu ITO has made the computation of aggregate monthly tation of aggregate monthly advances taking loans and advances made during only advances taking loans and advances made during only advances taking loans and advances made during only the previous year relevant to assessment year 2009-10 as the previous year relevant to assessment year 2009 the previous year relevant to assessment year 2009 confirmed by CIT (A). The Tribunal amended such confirmed by CIT (A). The Tribunal amended such confirmed by CIT (A). The Tribunal amended such direction, in our view, correctly applying the rule. direction, in our view, correctly applying the rule. direction, in our view, correctly applying the rule.

For the reason 9. For the reasons aforesaid we do not find the questions s aforesaid we do not find the questions suggested to be substantial questions of law involved in suggested to be substantial questions of law involved in suggested to be substantial questions of law involved in the case. As such the application and appeal are the case. As such the application and appeal are the case. As such the application and appeal are dismissed." dismissed."

As noted above, the Hon 13. As noted above, the Hon‟ble Calcutta High Cou ‟ble Calcutta High Court, vide aforesaid decision, has affirmed the findings rendered by aforesaid decision, has affirmed the findings rendered by aforesaid decision, has affirmed the findings rendered by the Division Bench of the Tribunal in Uttar Banga the Division Bench of the Tribunal in Uttar Banga the Division Bench of the Tribunal in Uttar Banga Kshetriya Gramin Bank vs ACIT, in and Kshetriya Gramin Bank vs ACIT, in ITA No. 846 and Kshetriya Gramin Bank vs ACIT, in ITA No. 846 and 1745/Kol/2012, wherein the Division Bench of the 1745/Kol/2012, wherein the Division Bench of the 1745/Kol/2012, wherein the Division Bench of the Tribunal vide order dated08/07/2015 held that for the Tribunal vide order dated08/07/2015 held Tribunal vide order dated08/07/2015 held purpose of section 36(1)(viia), to compute the aggregate purpose of section 36(1)(viia), to compute the aggregate purpose of section 36(1)(viia), to compute the aggregate monthly average advance made by the rural branch of monthly average advance made by the rural branch of monthly average advance made by the rural branch of scheduled Bank, the amount of advances by each rural scheduled Bank, the amount of advances by each rural scheduled Bank, the amount of advances by each rural branch as outstanding at the end of the last day of each branch as outstanding at the end of the last day of each branch as outstanding at the end of the last day of each month comprised in the month comprised in the previous year be taken into previous year be taken into 11 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 consideration. The Hon consideration. The Hon‟ble Madras High Court, vide ‟ble Madras High Court, vide aforesaid decision, has concurred with the decision of the aforesaid decision, has concurred with the decision of the aforesaid decision, has concurred with the decision of the Hon‟ble Calcutta High Court. Thus, once two Hon‟ble ‟ble Calcutta High Court. Thus, once two Hon‟ble ‟ble Calcutta High Court. Thus, once two Hon‟ble High Courts of the country have expressed their opinion in High Courts of the country have expressed their opinion in High Courts of the country have expressed their opinion in respect respect of the issue which arose before us, in absence of of the issue which arose before us, in absence of contradictory view by any other Hon contradictory view by any other Hon‟ble Court of ‟ble Court of equivalent or higher judicial hierarchy being brought to our equivalent or higher judicial hierarchy being brought to our equivalent or higher judicial hierarchy being brought to our notice, we as a matter of judicial propriety are bound to notice, we as a matter of judicial propriety are bound to notice, we as a matter of judicial propriety are bound to follow the view so expressed by the H follow the view so expressed by the Hon‟ble High Courts ‟ble High Courts in decisions cited supra. In this regard, it is also relevant in decisions cited supra. In this regard, it is also relevant in decisions cited supra. In this regard, it is also relevant to note the following observations of the Hon‟ble Supreme to note the following observations of the Hon to note the following observations of the Hon Court in ACCE vs Dunlop India Ltd., [1985] 154 ITR 172 Court in ACCE vs Dunlop India Ltd., [1985] 154 ITR 172 Court in ACCE vs Dunlop India Ltd., [1985] 154 ITR 172 (SC): ―8. We desire to add and as was said in Cassell & Co. We desire to add and as was said in Cassell & Co. We desire to add and as was said in Cassell & Co. Ltd. vs. Broome (1972) AC 1027 (HL), we hope it will never td. vs. Broome (1972) AC 1027 (HL), we hope it will never td. vs. Broome (1972) AC 1027 (HL), we hope it will never be necessary for us to say so again that "in the be necessary for us to say so again that "in the be necessary for us to say so again that "in the hierarchical system of Courts" which exists in our country, hierarchical system of Courts" which exists in our country, hierarchical system of Courts" which exists in our country, "it is necessary for lower tier", including the High Court, "to "it is necessary for lower tier", including the High Court, "to "it is necessary for lower tier", including the High Court, "to accept loyally the decisi accept loyally the decisions of the higher tiers". "It is ons of the higher tiers". "It is inevitable in a hierarchical system of Courts that there are inevitable in a hierarchical system of Courts that there are inevitable in a hierarchical system of Courts that there are decisions of the supreme appellate tribunal which do not decisions of the supreme appellate tribunal which do not decisions of the supreme appellate tribunal which do not attract the unamimous approval of all members of the attract the unamimous approval of all members of the attract the unamimous approval of all members of the judiciary.... But the judicial system only works if someone judiciary.... But the judicial system only works if judiciary.... But the judicial system only works if is allowed to have the last word and that last word, once is allowed to have the last word and that last word, once is allowed to have the last word and that last word, once spoken, is loyally accepted" (See observations of Lord spoken, is loyally accepted" (See observations of Lord spoken, is loyally accepted" (See observations of Lord Hailsham and Lord Diplock in Broome vs. Cassell). The Hailsham and Lord Diplock in Broome vs. Cassell). The Hailsham and Lord Diplock in Broome vs. Cassell). The better wisdom of the Court below must yield to the higher better wisdom of the Court below must yield to the higher better wisdom of the Court below must yield to the higher wisdom of the Court abo wisdom of the Court above. That is the strength of the ve. That is the strength of the hierarchical judicial system. hierarchical judicial system.‟ 14. 14.

As As As regards regards regards the the the submission submission submission of of of the the the learned learned learned Departmental Representative that no substantial question Departmental Representative that no substantial question Departmental Representative that no substantial question of law was admitted by the Hon of law was admitted by the Hon‟ble Calcutta High Court, ‟ble Calcutta High Court, we are of the considered view that we are of the considered view that non-admission of a admission of a substantial question of law under section 260A of the Act substantial question of law under section 260A of the Act substantial question of law under section 260A of the Act by the Hon by the Hon‟ble High Court does not render the decision of ‟ble High Court does not render the decision of Hon‟ble Court to be non ‟ble Court to be non-binding and the doctrine of binding and the doctrine of merger would still be applicable. In any case, we find that merger would still be applicable. In any case, we find that merger would still be applicable. In any case, we find that the Hon the Hon‟ble Madras High Court in the aforesaid decision ble Madras High Court in the aforesaid decision concurred with the legal proposition laid down by the concurred with the legal proposition laid down by the concurred with the legal proposition laid down by the Hon‟ble Calcutta High Court after admitting the question ‟ble Calcutta High Court after admitting the question ‟ble Calcutta High Court after admitting the question of law as proposed by the Revenue in its appeal on this of law as proposed by the Revenue in its appeal on this of law as proposed by the Revenue in its appeal on this 12 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 issue. Thus, we find no merits in this pl issue. Thus, we find no merits in this plea raised by the ea raised by the learned Departmental Representative. learned Departmental Representative. 15. 15.

As far as other grounds of appeal are concerned, we have As far as other grounds of appeal are concerned, we have As far as other grounds of appeal are concerned, we have heard rival submission of the parties on the issue-in-dispute and heard rival submission of the parties on the issue heard rival submission of the parties on the issue perused the relevant material on record. perused the relevant material on record.

Brief facts relat 108. Brief facts relating to this issue are that the AO made ing to this issue are that the AO made addition in respect of interest of securities on accrual basis addition in respect of interest of securities on accrual basis addition in respect of interest of securities on accrual basis instead of due basis of Rs. 3,804,07,30,799/-. The facts instead of due basis of Rs. 3,804,07,30,799/ instead of due basis of Rs. 3,804,07,30,799/ are interest on securities is payable six are interest on securities is payable six-monthly on the monthly on the coupon date i.e. 30th June and 31st December. While coupon date i.e. 30th June and 31st Dece coupon date i.e. 30th June and 31st Dece closing the books as on 31st March, there is accrued closing the books as on 31st March, there is accrued closing the books as on 31st March, there is accrued interest on securities of 3 months i.e. from 1st January to interest on securities of 3 months i.e. from 1st January to interest on securities of 3 months i.e. from 1st January to 31st March. However, the bank is not eligible to receive 31st March. However, the bank is not eligible to receive 31st March. However, the bank is not eligible to receive 15 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 such interest as on 31st March, as the payment of interest such interest as on 31st March, as the payment of interest such interest as on 31st March, as the payment of interest gets due only o gets due only on the coupon date i.e. 30th June. It is the n the coupon date i.e. 30th June. It is the practice of the Bank to account for the interest on practice of the Bank to account for the interest on practice of the Bank to account for the interest on securities on accrual basis while arriving at the book securities on accrual basis while arriving at the book securities on accrual basis while arriving at the book profit. However, in the return of income, the interest on profit. However, in the return of income, the interest on profit. However, in the return of income, the interest on securities is taxed on due basis since the right to receive securities is taxed on due basis since the righ securities is taxed on due basis since the righ interest on securities arises on due date only which falls interest on securities arises on due date only which falls interest on securities arises on due date only which falls after the accounting year. Accordingly, for the AY 2008-09, after the accounting year. Accordingly, for the AY 2008 after the accounting year. Accordingly, for the AY 2008 the interest on Government securities of Rs.771.67 crore the interest on Government securities of Rs.771.67 crore the interest on Government securities of Rs.771.67 crore that had not become due to the Bank as on 31st March that had not become due to the Bank as on 31st March that had not become due to the Bank as on 31st March 2008 has not b 2008 has not been offered for tax. However, AO een offered for tax. However, AO considered it as interest accrued and taxed the total considered it as interest accrued and taxed the total considered it as interest accrued and taxed the total amount which bank claimed in the book profit as income amount which bank claimed in the book profit as income amount which bank claimed in the book profit as income and Rs. 771.67 crore was taxed by the AO on accrual and Rs. 771.67 crore was taxed by the AO on accrual and Rs. 771.67 crore was taxed by the AO on accrual basis. The CIT(A) allowed the claim and deleted the basis. The CIT(A) allowed the claim and deleted the basis. The CIT(A) allowed the claim and deleted the addition b addition by observing as under: - “4.3 In the case of the appellant, the facts are discussed “4.3 In the case of the appellant, the facts are discussed “4.3 In the case of the appellant, the facts are discussed above. Here appellant had offered the income based on above. Here appellant had offered the income based on above. Here appellant had offered the income based on the principle of right to receive interest on securities. In the the principle of right to receive interest on securities. In the the principle of right to receive interest on securities. In the case of securities there are two coupon dates on which case of securities there are two coupon dates on which case of securities there are two coupon dates on which interest is received i.e 3oth June & 3151 December. As the interest is received i.e 3oth June & 3151 December. As the interest is received i.e 3oth June & 3151 December. As the bank has to close its books on 313t March, there is bank has to close its books on 313t March, there is bank has to close its books on 313t March, there is accrued interest on securities from 15, January to 31St accrued interest on securities from 15, January to 31St accrued interest on securities from 15, January to 31St March. Bank had not offered interest which has to be March. Bank had not offered interest which has to be March. Bank had not offered interest which has to be received on 301h June as it has no received on 301h June as it has no right to receive any right to receive any income tax return, but while calculating the book profit income tax return, but while calculating the book profit income tax return, but while calculating the book profit bank had offered the interest on accrual basis. However, bank had offered the interest on accrual basis. However, bank had offered the interest on accrual basis. However, AO had assessed the total interest due to the bank in the AO had assessed the total interest due to the bank in the AO had assessed the total interest due to the bank in the A.Y. This issue is recurring in nature which has arisen in A.Y. This issue is recurring in nature which has arisen in A.Y. This issue is recurring in nature which has arisen in appellants own case in A.Y. 1999 llants own case in A.Y. 1999- 00 to 2007 00 to 2007-08 and also ITAT's order in appellant's own case for the A.Yrs 1991-92 ITAT's order in appellant's own case for the A.Yrs 1991 ITAT's order in appellant's own case for the A.Yrs 1991 to 1996 to 1996-97 which are in favour of the appellant and which 97 which are in favour of the appellant and which are as under: are as under: ……………………………………. ……………………………………. 4.4 In view of the above decision of CIT(A) and ]TAT, claim 4.4 In view of the above decision of CIT(A) and ]TAT, 4.4 In view of the above decision of CIT(A) and ]TAT, of the appellant is allowed. of the appellant is allowed. This ground of appeal is allowed. Aggrieved, revenue This ground of appeal is allowed. Aggrieved, revenue This ground of appeal is allowed. Aggrieved, revenue came in appeal before Tribunal. came in appeal before Tribunal.

We have heard rival contentions and gone through 109. We have heard rival contentions and gone through 109. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the facts and circumstances of the case. We noted that the facts and circumstances of the case. We noted that interest on securities is p interest on securities is payable six-monthly on the coupon monthly on the coupon date i.e. on 30th June and 31st December. While closing date i.e. on 30th June and 31st December. While closing date i.e. on 30th June and 31st December. While closing the books as on 31st March, there is interest on securities the books as on 31st March, there is interest on securities the books as on 31st March, there is interest on securities of 3 months i.e. from 1st January to 31st March is of 3 months i.e. from 1st January to 31st March is of 3 months i.e. from 1st January to 31st March is accounted for. However, the assessee is not eligible to accounted for. However, the assessee is not eligible to accounted for. However, the assessee is not eligible to receive such interest on 31st March, as the payment of receive such interest on 31st March, as the payment of receive such interest on 31st March, as the payment of interest accrues and becomes due only on the coupon date interest accrues and becomes due only on the coupon date interest accrues and becomes due only on the coupon date i.e. 30th June. It is the practice of the assessee to account i.e. 30th June. It is the practice of the assessee to account i.e. 30th June. It is the practice of the assessee to account for the interest on securities for the period upto 31st March for the interest on securities for the period upto 31st March for the interest on securities for the period upto 31st March while arriving at th while arriving at the book profit on the basis that interest e book profit on the basis that interest accrues from day to day for accounting purposes. accrues from day to day for accounting purposes. accrues from day to day for accounting purposes. However, in the return of income filed for tax purposes, the However, in the return of income filed for tax purposes, the However, in the return of income filed for tax purposes, the interest on securities is taxed on accrued and due basis interest on securities is taxed on accrued and due basis interest on securities is taxed on accrued and due basis since the right to receive interest on securities arises on since the right to receive interest on securitie since the right to receive interest on securitie the due date only which falls after the accounting year. the due date only which falls after the accounting year. the due date only which falls after the accounting year.

The AO has taxed such interest which has neither 110. The AO has taxed such interest which has neither 110. The AO has taxed such interest which has neither accrued nor become due as on 31st March 2018 of accrued nor become due as on 31st March 2018 of accrued nor become due as on 31st March 2018 of Rs.3804,07,30,799/ Rs.3804,07,30,799/-. The CIT(A) deleted the disallowance . The CIT(A) deleted the disallowance following Tribunal’s order following Tribunal’s order in assessee’s own case for AYs in assessee’s own case for AYs 1991-92 to 1996 92 to 1996-97 and the CIT(A) order for AY 2007 97 and the CIT(A) order for AY 2007-08. The Revenue before the Tribunal emphasized on the fact The Revenue before the Tribunal emphasized on the fact The Revenue before the Tribunal emphasized on the fact that the income has been accrued in the books of account that the income has been accrued in the books of account that the income has been accrued in the books of account of the assessee and based on the matching concept, the of the assessee and based on the matching concept, the of the assessee and based on the matching concept, the interest income should be taxable. terest income should be taxable. 111. But assessee contended that the issue is squarely 111. But assessee contended that the issue is squarely 111. But assessee contended that the issue is squarely covered in favour of the assessee in its own case for covered in favour of the assessee in its own case for covered in favour of the assessee in its own case for assessment years assessment years1991-92 to 1994-95 by the order of 95 by the order of Tribunal dated 19.05.2008, which is filed in Assessee Tribunal dated 19.05.2008, which is filed in Assessee Tribunal dated 19.05.2008, which is filed in Assessee Paper Book Paper Book- II, which was followed by the Tribunal in the II, which was followed by the Tribunal in the subsequent assessment years. Moreover, the Hon’ble subsequent assessment years. Moreover, the Hon’ble subsequent assessment years. Moreover, the Hon’ble Bombay High Court on appeal by Revenue for assessment Bombay High Court on appeal by Revenue for assessment Bombay High Court on appeal by Revenue for assessment year 1996 1996-97 has upheld the decision of Tribunal vide its 97 has upheld the decision of Tribunal vide its order dated 01.08.2016. order dated 01.08.2016. 112. The facts of the case in the year under consideration 112. The facts of the case in the year under consideration 112. The facts of the case in the year under consideration are same as the facts of the earlier years. In view of the are same as the facts of the earlier years. In view of the are same as the facts of the earlier years. In view of the above, this ground of appeal is covered in favour of the above, this ground of appeal is covered in favour of the above, this ground of appeal is covered in favour of the assessee vide the aforementioned orders of the Tribunal sessee vide the aforementioned orders of the Tribunal sessee vide the aforementioned orders of the Tribunal and Bombay High Court. The right to receive interest on and Bombay High Court. The right to receive interest on and Bombay High Court. The right to receive interest on 17 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 securities arises on due date only, which falls after the securities arises on due date only, which falls after the securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be taxed in the accounting year and, accordingly, it cannot be taxed in the accounting year and, accordingly, it cannot be taxed in the accounting year itself. In D accounting year itself. In DIT vs. Credit Suisse First Boston IT vs. Credit Suisse First Boston (Cyprus) Ltd. [2013] 351 ITR 323 (Bombay) Hon’ble (Cyprus) Ltd. [2013] 351 ITR 323 (Bombay) Hon’ble (Cyprus) Ltd. [2013] 351 ITR 323 (Bombay) Hon’ble Bombay High Court was concerned with a case wherein Bombay High Court was concerned with a case wherein Bombay High Court was concerned with a case wherein the tax officer had taxed interest accrued but not due on the tax officer had taxed interest accrued but not due on the tax officer had taxed interest accrued but not due on securities held as on 31st March. The Bombay High Court securities held as on 31st March. The Bombay High Court securities held as on 31st March. The Bombay High Court held that right to receive the interest vested only on the held that right to receive the interest vested only on the hat right to receive the interest vested only on the due date mentioned in the securities and, hence, the same due date mentioned in the securities and, hence, the same due date mentioned in the securities and, hence, the same cannot be taxed since interest was not payable on the cannot be taxed since interest was not payable on the cannot be taxed since interest was not payable on the 31st March as per the terms of the said securities. 31st March as per the terms of the said securities. 31st March as per the terms of the said securities.

The learned CIT DR referred to se 113. The learned CIT DR referred to several decisions such veral decisions such as State Bank of Travancore Vs. CIT [1986] 158 ITR 102 as State Bank of Travancore Vs. CIT [1986] 158 ITR 102 as State Bank of Travancore Vs. CIT [1986] 158 ITR 102 (SC), U.P Chalchitra Nigam Ltd. Vs. CIT [2015] 370 ITR (SC), U.P Chalchitra Nigam Ltd. Vs. CIT [2015] 370 ITR (SC), U.P Chalchitra Nigam Ltd. Vs. CIT [2015] 370 ITR 379 379 379 (Allahabad) (Allahabad) (Allahabad) and and and Mahindra Mahindra Mahindra Telecommunication Telecommunication Telecommunication Investment P. Ltd Vs. ITO [2016] 69 taxmann.com 431 Investment P. Ltd Vs. ITO [2016] 69 taxmann.com 431 Investment P. Ltd Vs. ITO [2016] 69 taxmann.com 431 (Mumbai). He argued that t (Mumbai). He argued that thefacts are not applicable to hefacts are not applicable to the present issue as in the said cases there was no the present issue as in the said cases there was no the present issue as in the said cases there was no dispute that as per the terms of contract between the dispute that as per the terms of contract between the dispute that as per the terms of contract between the parties, income had accrued but the dispute was with parties, income had accrued but the dispute was with parties, income had accrued but the dispute was with respect to its taxability based on the financial difficulty of respect to its taxability based on the financial difficulty of respect to its taxability based on the financial difficulty of the debtor parties. However, in the present case, the issue debtor parties. However, in the present case, the issue debtor parties. However, in the present case, the issue is with respect to whether the interest has become due is with respect to whether the interest has become due is with respect to whether the interest has become due and payable as per the terms of securities. The present is and payable as per the terms of securities. The present is and payable as per the terms of securities. The present is not a case wherein the right to receive the interest on not a case wherein the right to receive the interest on not a case wherein the right to receive the interest on securities exists and there is securities exists and there is improbability of realisation of improbability of realisation of such interest. Even in such a case, the courts have held such interest. Even in such a case, the courts have held such interest. Even in such a case, the courts have held that no real income has accrued to the assessee. Reliance that no real income has accrued to the assessee. Reliance that no real income has accrued to the assessee. Reliance in this regard is placed on the decision of the Supreme in this regard is placed on the decision of the Supreme in this regard is placed on the decision of the Supreme Court in the case of CIT vs. Excel Industries Ltd. [2013] Court in the case of CIT vs. Excel Industries Ltd. [ Court in the case of CIT vs. Excel Industries Ltd. [ 358 ITR 295 (SC), wherein the benefit of an entitlement to 358 ITR 295 (SC), wherein the benefit of an entitlement to 358 ITR 295 (SC), wherein the benefit of an entitlement to make duty free imports could not be taken until the goods make duty free imports could not be taken until the goods make duty free imports could not be taken until the goods are imported and made available for clearance, also there are imported and made available for clearance, also there are imported and made available for clearance, also there was no liability on part of the other party to pass on the was no liability on part of the other party to pass on the was no liability on part of the other party to pass on the benefit to the a benefit to the assessee and, hence, it was held that only ssessee and, hence, it was held that only hypothetical income had accrued to the assessee. The hypothetical income had accrued to the assessee. The hypothetical income had accrued to the assessee. The Court Court Court has has has equated equated equated the the the right right right to to to receive receive receive with with with a a a corresponding liability to pay which does not exist in the corresponding liability to pay which does not exist in the corresponding liability to pay which does not exist in the present case as the obligation of the issuer to pay arises present case as the obligation of the issuer to pay aris present case as the obligation of the issuer to pay aris only on the coupon date. The learned CIT DR also relied on only on the coupon date. The learned CIT DR also relied on only on the coupon date. The learned CIT DR also relied on the decision of the Bombay High Court in the case of the decision of the Bombay High Court in the case of the decision of the Bombay High Court in the case of 18 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 Taparia Tools Ltd. Vs. JCIT [2003] 260 ITR 102 (Bombay). Taparia Tools Ltd. Vs. JCIT [2003] 260 ITR 102 (Bombay). Taparia Tools Ltd. Vs. JCIT [2003] 260 ITR 102 (Bombay). It is to be clarified that the matching concept theory It is to be clarified that the matching concept theory It is to be clarified that the matching concept theory referred by the CIT DR in the referred by the CIT DR in the decision of the Bombay High decision of the Bombay High Court in the case of Taparia Tools Ltd. (supra) has been Court in the case of Taparia Tools Ltd. (supra) has been Court in the case of Taparia Tools Ltd. (supra) has been reversed by the SupremeCourt in the case of Taparia Tools reversed by the SupremeCourt in the case of Taparia Tools reversed by the SupremeCourt in the case of Taparia Tools Ltd. Vs. JCIT [2015] 372 ITR 605 (SC). Ltd. Vs. JCIT [2015] 372 ITR 605 (SC).

We noted that this ground of appeal is covered in 114. We noted that this ground of appeal is covered in 114. We noted that this ground of appeal is covered in favour of the ass favour of the assessee vide the aforementioned orders of essee vide the aforementioned orders of the Tribunal and Bombay High Court. The right to receive the Tribunal and Bombay High Court. The right to receive the Tribunal and Bombay High Court. The right to receive interest on securities arises on due date only, which falls interest on securities arises on due date only, which falls interest on securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be after the accounting year and, accordingly, it cannot be after the accounting year and, accordingly, it cannot be taxed in the accounting year itself. Hence taxed in the accounting year itself. Hence, in view of the , in view of the above discussion, we decide this issue in favour of above discussion, we decide this issue in favour of above discussion, we decide this issue in favour of assessee and accordingly, this ground of Revenue’s assessee and accordingly, this ground of Revenue’s assessee and accordingly, this ground of Revenue’s appeal is dismissed. appeal is dismissed.” 8.1 The issue in dispute involved in the year under consideration The issue in dispute involved in the year under consideration The issue in dispute involved in the year under consideration being identical to the issue adjudicated by the being identical to the issue adjudicated by the Tribunal (supra) for Tribunal (supra) for assessment year 2008 assessment year 2008-09, therefore, respectfully following the 09, therefore, respectfully following the same, the finding of the Ld. CIT(A) on the issue same, the finding of the Ld. CIT(A) on the issue-in in-dispute is set aside. The Assessing officer is directed to allow the claim of the The Assessing officer is directed to allow the claim of the The Assessing officer is directed to allow the claim of the assessee as directed by the Tribunal(s assessee as directed by the Tribunal(supra). The ground of appeal of The ground of appeal of the assessee is accordingly allowed. the assessee is accordingly allowed.

The Revenue before us emphasized that the provision 72. The Revenue before us emphasized that the provision 72. The Revenue before us emphasized that the provision for standard assets is not same as provision for bad and for standard assets is not same as provision for bad and for standard assets is not same as provision for bad and doubtful debts and the same is contingent in nature, since doubtful debts and the same is contingent in nature, si doubtful debts and the same is contingent in nature, si it is created only out of abundant caution. We noted from it is created only out of abundant caution. We noted from it is created only out of abundant caution. We noted from the provisions that the assessee is required to make a the provisions that the assessee is required to make a the provisions that the assessee is required to make a provision on all its debts ranging from 0.25% to 100% provision on all its debts ranging from 0.25% to 100% provision on all its debts ranging from 0.25% to 100% depending upon the categorization of the loan in terms of depending upon the categorization of the loan in terms of depending upon the categorization of the loan in terms of the guidelines issued by RB the guidelines issued by RBI. The provision on debts made I. The provision on debts made by the assessee is in line with the RBI guidelines and by the assessee is in line with the RBI guidelines and by the assessee is in line with the RBI guidelines and section 36(1)(viia) of the Act does not have a requirement section 36(1)(viia) of the Act does not have a requirement section 36(1)(viia) of the Act does not have a requirement that the provision for debts should be in respect of that the provision for debts should be in respect of that the provision for debts should be in respect of specified debts only. Section 36(1)(viia) of the Act provides specified debts only. Section 36(1)(viia) of the Act provi specified debts only. Section 36(1)(viia) of the Act provi for a deduction to the bank in respect of ‘any provision for a deduction to the bank in respect of ‘any provision for a deduction to the bank in respect of ‘any provision made for bad and doubtful debts’ subject to certain made for bad and doubtful debts’ subject to certain made for bad and doubtful debts’ subject to certain ceiling. It does not specify the methodology for calculation ceiling. It does not specify the methodology for calculation ceiling. It does not specify the methodology for calculation of provision for bad and doubtful debts. The banks are of provision for bad and doubtful debts. The banks are of provision for bad and doubtful debts. The banks are required to make provision required to make provision for bad and doubtful debts in for bad and doubtful debts in accordance with the RBI guidelines. All the loan assets are accordance with the RBI guidelines. All the loan assets are accordance with the RBI guidelines. All the loan assets are initially classified as ‘Standard’. Later on depending upon initially classified as ‘Standard’. Later on depending upon initially classified as ‘Standard’. Later on depending upon the problems arising, if any, and symptoms of sickness the problems arising, if any, and symptoms of sickness the problems arising, if any, and symptoms of sickness shown including delays in the repayment of the principal shown including delays in the repayment of the prin shown including delays in the repayment of the prin and interest, deterioration of security, etc., they may be and interest, deterioration of security, etc., they may be and interest, deterioration of security, etc., they may be shifted to other categories. Aprovision made on any loan shifted to other categories. Aprovision made on any loan shifted to other categories. Aprovision made on any loan assets is a provision for ‘bad and doubtful debts’ assets is a provision for ‘bad and doubtful debts’ assets is a provision for ‘bad and doubtful debts’ irrespective of the category in which the loan falls. This is irrespective of the category in which the loan falls. This is irrespective of the category in which the loan falls. This is to provide for the in to provide for the inherent risk of loan losses which the herent risk of loan losses which the bank may suffer in subsequent years. bank may suffer in subsequent years.

We noted from the provision of Section 36(1)(viia) of the 73. We noted from the provision of Section 36(1)(viia) of the 73. We noted from the provision of Section 36(1)(viia) of the Act that the same allows a deduction to banks in respect Act that the same allows a deduction to banks in respect Act that the same allows a deduction to banks in respect of any provision made ‘for’ bad and doubtful debts. It does of any provision made ‘for’ bad and doubtful debts. It does of any provision made ‘for’ bad and doubtful debts. It does not restrict the allowance to provision made ‘on’ bad and not restrict the allowance to provision made ‘on’ bad and not restrict the allowance to provision made ‘on’ bad and doubtful debts. Even in respect of assets that are doubtful debts. Even in respect of assets that are doubtful debts. Even in respect of assets that are classified as standard assets, a part of the debts are classified as standard assets, a part of the debts are classified as standard assets, a part of the debts are doubtful of recovery. The fact that a provision is made for doubtful of recovery. The fact that a provision is made for doubtful of recovery. The fact that a provision is made for standard assets by itself indica standard assets by itself indicates that a part of the tes that a part of the standard assets are doubtful of recovery. Accordingly, the standard assets are doubtful of recovery. Accordingly, the standard assets are doubtful of recovery. Accordingly, the entire provision made by the assessee, including in entire provision made by the assessee, including in entire provision made by the assessee, including in respect of standard assets, is for bad and doubtful debts respect of standard assets, is for bad and doubtful debts respect of standard assets, is for bad and doubtful debts as envisaged by section 36(1)(viia) of the Act. Thus, in light as envisaged by section 36(1)(viia) of the Act. Thus, in light as envisaged by section 36(1)(viia) of the Act. Thus, in light of above, the assessee is eligible to claim deduction under f above, the assessee is eligible to claim deduction under f above, the assessee is eligible to claim deduction under section 36(1)(viia) of the Act even in respect of the section 36(1)(viia) of the Act even in respect of the section 36(1)(viia) of the Act even in respect of the 23 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 provision made for standard assets. This issue was provision made for standard assets. This issue was provision made for standard assets. This issue was considered by the ITAT in assessment year 2006-07 in ITA considered by the ITAT in assessment year 2006 considered by the ITAT in assessment year 2006 3145/Mum/2009 dated 6.09.2016, in a 3145/Mum/2009 dated 6.09.2016, in an appeal against n appeal against the revision order of the CIT passed under section 263 of the revision order of the CIT passed under section 263 of the revision order of the CIT passed under section 263 of the Act, wherein it is held as under: the Act, wherein it is held as under: “So, however, we may also clarify that we are in principle “So, however, we may also clarify that we are in principle “So, however, we may also clarify that we are in principle in agreement that a provision for bad and doubtful debts in agreement that a provision for bad and doubtful debts in agreement that a provision for bad and doubtful debts cannot include that agains cannot include that against standard assets i.e. which the t standard assets i.e. which the bank(assessee) itself regards as good for receipt and, bank(assessee) itself regards as good for receipt and, bank(assessee) itself regards as good for receipt and, therefore with the decision by the tribunal in Bharat therefore with the decision by the tribunal in Bharat therefore with the decision by the tribunal in Bharat Overseas Bank Ltd. (supra) relied upon by the Revenue. A Overseas Bank Ltd. (supra) relied upon by the Revenue. A Overseas Bank Ltd. (supra) relied upon by the Revenue. A provision by definition a charge against profits, while that provision by definition a charge against profits, while t provision by definition a charge against profits, while t in respect of an asset, considered good, would be more in in respect of an asset, considered good, would be more in in respect of an asset, considered good, would be more in the nature of an appropriation of profit i.e. a reserve. This the nature of an appropriation of profit i.e. a reserve. This the nature of an appropriation of profit i.e. a reserve. This is precisely what the Tribunal in Bharat Overseas Bank is precisely what the Tribunal in Bharat Overseas Bank is precisely what the Tribunal in Bharat Overseas Bank Ltd. (supra) means when its states of the deduction being Ltd. (supra) means when its states of the deduction being Ltd. (supra) means when its states of the deduction being not in the nature o not in the nature of a standard allowance. No contrary f a standard allowance. No contrary judgement by the Tribunal or a higher court has even judgement by the Tribunal or a higher court has even judgement by the Tribunal or a higher court has even otherwise been brought to our notice. At the same time, the otherwise been brought to our notice. At the same time, the otherwise been brought to our notice. At the same time, the provision as per RBI guidelines provision as per RBI guidelines – which are contended to which are contended to have been followed / adopted, provide for the minimum have been followed / adopted, provide for the mini have been followed / adopted, provide for the mini provision, and the bank is free to make a higher provision, provision, and the bank is free to make a higher provision, provision, and the bank is free to make a higher provision, i.e., than that prescribed by the RBI norms. Provisioning, it i.e., than that prescribed by the RBI norms. Provisioning, it i.e., than that prescribed by the RBI norms. Provisioning, it may be noted, is a management function, made reflecting may be noted, is a management function, made reflecting may be noted, is a management function, made reflecting its risk assessment qua different assets. If therefore, the its risk assessment qua different assets. If therefore, the its risk assessment qua different assets. If therefore, the assessee assessee-bank is able to satisfy the assessing authority is able to satisfy the assessing authority that the provision as made is justified with reference to the that the provision as made is justified with reference to the that the provision as made is justified with reference to the debts considered by it as bad and doubtful, we see no debts considered by it as bad and doubtful, we see no debts considered by it as bad and doubtful, we see no reason as to why the same cannot be allowed. The matter reason as to why the same cannot be allowed. The matter reason as to why the same cannot be allowed. The matter is accordingly restored back to thefile o is accordingly restored back to thefile of the A.O. for fresh f the A.O. for fresh determination by issuing definite findings of fact. Even as determination by issuing definite findings of fact. Even as determination by issuing definite findings of fact. Even as the primary onus would be on the assessee, the A.O. the primary onus would be on the assessee, the A.O. the primary onus would be on the assessee, the A.O. cannot substitute his own judgement with regard to the cannot substitute his own judgement with regard to the cannot substitute his own judgement with regard to the risk risk risk assessment assessment assessment qua qua qua a a a particular particular particular asset asset asset and, and, and, correspondingly, the pro correspondingly, the provision in its respect. His purview vision in its respect. His purview would be to examine the reasonableness of the assessee’s would be to examine the reasonableness of the assessee’s would be to examine the reasonableness of the assessee’s claim in light of the facts and circumstances qua each claim in light of the facts and circumstances qua each claim in light of the facts and circumstances qua each asset/s in respect of which provision is made. In arriving asset/s in respect of which provision is made. In arriving asset/s in respect of which provision is made. In arriving at our decision, we have taken a holistic view of the at our decision, we have taken a holistic view of at our decision, we have taken a holistic view of matter, placing due emphasis on the words ‘provision’ matter, placing due emphasis on the words ‘provision’ matter, placing due emphasis on the words ‘provision’ preceding the words ‘for bad and doubtful debts’ as well preceding the words ‘for bad and doubtful debts’ as well preceding the words ‘for bad and doubtful debts’ as well 24 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 as the words ‘not exceeding’ occurring in the section, and as the words ‘not exceeding’ occurring in the section, and as the words ‘not exceeding’ occurring in the section, and which stand highlighted for the purpose. We decide which stand highlighted for the purpose. We decide which stand highlighted for the purpose. We decide accordingly.”

In view of the above discussion, e above discussion, arguments of both the sides, we are of the view that the arguments of both the sides, we are of the view that the arguments of both the sides, we are of the view that the assessee is eligible for claim of deduction u/s 36(1)(viia) of assessee is eligible for claim of deduction u/s 36(1)(viia) of assessee is eligible for claim of deduction u/s 36(1)(viia) of the Act on standard assets and this issue is covered by the Act on standard assets and this issue is covered by the Act on standard assets and this issue is covered by Tribunal’s decision in assessee’s own case for AY 2006-07 Tribunal’s decision in assessee’s own case for AY 2006 Tribunal’s decision in assessee’s own case for AY 2006 in ITA No.3145/Mum/2004 vide order dated 06.09.2016. ITA No.3145/Mum/2004 vide order dated 06.09.2016. ITA No.3145/Mum/2004 vide order dated 06.09.2016. Hence, we allow this issue of assessee’s appeal.” Hence, we allow this issue of assessee’s appeal. Hence, we allow this issue of assessee’s appeal.

Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that issue-in-dispute is covered in favour of the dispute is covered in favour of the assessee by the order of assessee by the order of the Tribunal dated 03.02.2020 in its own case for assessment year the Tribunal dated 03.02.2020 in its own case for assessment year the Tribunal dated 03.02.2020 in its own case for assessment year 2008-09 in ITA No. 3644/Mum/2016. 09 in ITA No. 3644/Mum/2016.

Before us, the Ld. Counsel of the Before us, the Ld. Counsel of the assessee submitted assessee submitted that return of income for the year under consideration was filed on income for the year under consideration was filed on income for the year under consideration was filed on 24.11.2014 which is within the due date (i.e. 30.11.2014) 24.11.2014 which is within the due date (i.e. 24.11.2014 which is within the due date (i.e. prescribed u/s 139 of the Act and therefore, no interest could be prescribed u/s 139 of the Act and therefore, no interest could be prescribed u/s 139 of the Act and therefore, no interest could be levied u/s 234A of the Act. As this is a matter of verification at the levied u/s 234A of the Act. As this is a matter of verification at the levied u/s 234A of the Act. As this is a matter of verification at the end of the Assessing the Assessing Officer, therefore, accordingly we restore this therefore, accordingly we restore this issue to the file of the Assessing Officer for verification and decide in issue to the file of the Assessing Officer for verification and decide in issue to the file of the Assessing Officer for verification and decide in accordance with law. accordance with law.

The ground No. 5 raised by the assessee is in respect of u/s The ground No. 5 raised by the assessee is in respect of u/s The ground No. 5 raised by the assessee is in respect of u/s 234B levied by the Assessing Offi 234B levied by the Assessing Officer which being consequential in cer which being consequential in nature, hence same is same is dismissed as infructuous.

The ground No. 6 relates to lev The ground No. 6 relates to levy of interest u/s 234C of the u/s 234C of the Act which according to the Ld. Counsel of the assessee should have Act which according to the Ld. Counsel of the assessee should have Act which according to the Ld. Counsel of the assessee should have been levied on the returned income. This the returned income. This matter of levy of interest matter of levy of interest u/s 234C is also matter of verification u/s 234C is also matter of verification by the Assessing Officer by the Assessing Officer is restored back to the file of the Ld. Assessing therefore, issue is restored back to the file of the Ld. Assessing is restored back to the file of the Ld. Assessing Officer for deciding in accordance with law. Officer for deciding in accordance with law.

The The The grounds grounds grounds raised raised raised by by by the the the assessee assessee assessee in in in ITA ITA ITA 1259/CHANDI/2017 CHANDI/2017 for assessment year 2015-16 are reproduced 16 are reproduced as under:

As far as ground No. 3 of the appeal is concerned the assessee As far as ground No. 3 of the appeal is concerned the assessee As far as ground No. 3 of the appeal is concerned the assessee is aggrieved that deduc is aggrieved that deduction u/s 36(1)(viia) shall be increased tion u/s 36(1)(viia) shall be increased consequential to addition/disallowance made in the assessment addition/disallowance made in the assessment addition/disallowance made in the assessment order.

Before us, the Ld. Counsel of the assessee fairly Before us, the Ld. Counsel of the assessee fairly Before us, the Ld. Counsel of the assessee fairly admitted that this issue is decided against the assessee by the consolidated order decided against the assessee by the consolidated order decided against the assessee by the consolidated order dated 09.02.2018 passed by the ITAT in the assessee’s own case for 02.2018 passed by the ITAT in the assessee’s own case for 02.2018 passed by the ITAT in the assessee’s own case for assessment year 2011 assessment year 2011-12 in ITA No. 861/Chd/2017. 12 in ITA No. 861/Chd/2017. The relevant part of the order of the ITAT is reproduced as under: part of the order of the ITAT is reproduced as under: part of the order of the ITAT is reproduced as under:

Briefly stated, the onl 16. Briefly stated, the only plea of the assessee vis y plea of the assessee vis-à-vis this ground is that the assessee ought to have this ground is that the assessee ought to have this ground is that the assessee ought to have beenallowed deduction u/s 36(1)(viia) of the Act on beenallowed deduction u/s 36(1)(viia) of the Act on beenallowed deduction u/s 36(1)(viia) of the Act on account of account of provision for any bad and doubtful debt on the provision for any bad and doubtful debt on the provision for any bad and doubtful debt on the incomeenhanced incomeenhanced incomeenhanced during during during assessment assessment assessment proceedings.Ld. proceedings.Ld. proceedings.Ld. CIT(Appeals) reje CIT(Appeals) rejected this plea of the assessee bystating cted this plea of the assessee bystating that that that the the the additions additions additions made made made by by by the the the Assessing Assessing Assessing Officerrepresented concealed income of the assessee Officerrepresented concealed income of the assessee Officerrepresented concealed income of the assessee and,therefore, the same was not eligible for any and,therefore, the same was not eligible for any and,therefore, the same was not eligible for any deduction. deduction. 17. We are in agreement with the Ld.CIT(Appeals) in this 17. We are in agreement with the Ld.CIT(Appeals) in this 17. We are in agreement with the Ld.CIT(Appeals) in this regard, that the assessee is not entitled to claim any d, that the assessee is not entitled to claim any d, that the assessee is not entitled to claim any deduction on account of the enhancement made to the deduction on account of the enhancement made to the deduction on account of the enhancement made to the income of the assessee during assessment proceedings by income of the assessee during assessment proceedings by income of the assessee during assessment proceedings by virtue of various additions/ disallowances made during virtue of various additions/ disallowances made during virtue of various additions/ disallowances made during assessment proceedings and the reason for the same is assessment proceedings and the reason for t assessment proceedings and the reason for t that as per the provisions of section 36(1) (via) of the Act, that as per the provisions of section 36(1) (via) of the Act, that as per the provisions of section 36(1) (via) of the Act, deduction is allowed in respect of any provision for bad deduction is allowed in respect of any provision for bad deduction is allowed in respect of any provision for bad and doubtful debt made by the assessee. For better and doubtful debt made by the assessee. For better and doubtful debt made by the assessee. For better understanding Section 36(1) (via) is reproduced as under: understanding Section 36(1) (via) is reproduced as under: understanding Section 36(1) (via) is reproduced as under: "Section 36(1)(vi "Section 36(1)(via) in The Income- Tax Act, 1995 Tax Act, 1995 (via) in respect of any provision for bad and doubtful debts (via) in respect of any provision for bad and doubtful debts (via) in respect of any provision for bad and doubtful debts made by 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 outside India) or a or under the laws of a country outside India) or a or under the laws of a country outside India) or a nonscheduled bank, an amount not exceeding five per cent nonscheduled bank, an amount not exceeding fi nonscheduled bank, an amount not exceeding fi of the total income (computed before making any of the total income (computed before making any of the total income (computed before making any deduction under this clause and Chapter VIA) and an deduction under this clause and Chapter VIA) and an deduction under this clause and Chapter VIA) and an amount not exceeding? ten/ per cent of the aggregate amount not exceeding? ten/ per cent of the aggregate amount not exceeding? ten/ per cent of the aggregate 30 The State Bank of India The State Bank of India 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017 average advances made by the rural branches of such average advances made by the rural branches of such average advances made by the rural branches of such bank computed in the prescribed manner; bank computed in the prescribed manner;" Clearly, no such provision has been made in the books of Clearly, no such provision has been made in the books of Clearly, no such provision has been made in the books of account account account of of of the the the assessee assessee assessee with with with respect respect respect to to to the the the additions/disallowances made. Therefore as per the plain additions/disallowances made. Therefore as per the plain additions/disallowances made. Therefore as per the plain reading of the section itself, the assessee is not entitled to reading of the section itself, the assessee is not entitled to reading of the section itself, the assessee is not entitled to claim any deduction on the enhanc claim any deduction on the enhanced income. ed income. In view of the above, ground No.2 raised by theassessee In view of the above, ground No.2 raised by theassessee In view of the above, ground No.2 raised by theassessee stands dismissed. stands dismissed.” 25.1 The issue being identical to the issue decided by the The issue being identical to the issue decided by the The issue being identical to the issue decided by the ITAT(supra) above and therefore, respectfully following the finding above and therefore, respectfully following the finding above and therefore, respectfully following the finding of the Tribunal (supra) the ground No. 3 o of the Tribunal (supra) the ground No. 3 of the appeal of the f the appeal of the assessee is dismissed. assessee is dismissed.

In the result, the appeals of the assessee are partly allowed for In the result, the appeals of the assessee are partly allowed for In the result, the appeals of the assessee are partly allowed for statistical purposes.