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

PER OM PRAKASH KANT, AM PRAKASH KANT, AM

These three appeals by the assessee are directed These three appeals by the assessee are directed These three appeals by the assessee are directed against three separate orders passed by the separate orders passed by the Ld. Commissioner of Income Ld. Commissioner of Income-tax (Appeals), Patiala [in short ‘the Ld. CIT(A)’] for assessment year , Patiala [in short ‘the Ld. CIT(A)’] for assessment year , Patiala [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, 2014-15 and 2015 15 and 2015-16 respectively. As common issue in 16 respectively. As common issue in dispute has been raised in the grounds of appea been raised in the grounds of appeals, therefore these , therefore these appeals were heard together and disposed off by way this appeals were heard together and disposed off by way this appeals were heard together and disposed off by way this consolidated order for convenience and avoid repetition of facts. order for convenience and avoid repetition of facts. order for convenience and avoid repetition of facts.

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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. 3. The Ld. CIT(A) erred in not deciding the ground relating to 3. The Ld. CIT(A) erred in not deciding the ground relating to 3. The Ld. CIT(A) erred in not deciding the ground relating to allowability of bad debts written off us 36(1)(vii) claimed allowability of bad debts written off us 36(1)(vii) claimed allowability of bad debts written off us 36(1)(vii) claimed based on decision of Apex Court in based on decision of Apex Court in the case of Catholic Syrian the case of Catholic Syrian Bank Ltd (343 ITR 270) stating that the same was not raised Bank Ltd (343 ITR 270) stating that the same was not raised Bank Ltd (343 ITR 270) stating that the same was not raised before Assessing Officer. before Assessing Officer. 3. 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.

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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:

“Whether deduction under section 36(1) (via) of the Income Tax Whether deduction under section 36(1) (via) of the Income Tax Whether deduction under section 36(1) (via) of the Income Tax Act 1961 r.w.r6ABA of the Income Tax Act 1962 is to be Act 1961 r.w.r6ABA of the Income Tax Act 1962 is to be Act 1961 r.w.r6ABA of the Income Tax Act 1962 is to be allowed on the total outstanding advances including opening allowed on the total outstanding advances including opening allowed on the total outstanding advances including opening balances upon which the assesse balances upon which the assessee bank has already claimed e bank has already claimed such deduction in earlier years or the same has to be allowed such deduction in earlier years or the same has to be allowed such deduction in earlier years or the same has to be allowed in respect of incremental advances made during the year?" in respect of incremental advances made during the year?" in respect of incremental advances made during the year?" The proposed common order in respect of the appeals bearing The proposed common order in respect of the appeals bearing The proposed common order in respect of the appeals bearing IT No. 510, 538 & 1259/Chd/2017 is attached here IT No. 510, 538 & 1259/Chd/2017 is attached here IT No. 510, 538 & 1259/Chd/2017 is attached herewith.” 5.1 The Special Bench constituted by the Hon’ble President The Special Bench constituted by the Hon’ble President The Special Bench constituted by the Hon’ble President ITAT heard the parties on the reference made and decided the issue in heard the parties on the reference made and decided the issue in heard the parties on the reference made and decided the issue in favour of the assessee favour of the assessee in its order dated 10/11/2022 10/11/2022,observing as under:

“8. We have considered the submissions of both 8. We have considered the submissions of both 8. We have considered the submissions of both sides and perused the material available on record. Since, it has been perused the material available on record. Since, it has been perused the material available on record. Since, it has been submitted that this issue has already been decided by the submitted that this issue has already been decided by the submitted that this issue has already been decided by the Hon‟ble Calcutta High Court and the Hon ble Calcutta High Court and the Hon‟ble ble Madras High Court in aforesaid decisions, therefore, at the outset we have Court in aforesaid decisions, therefore, at the outset we have Court in aforesaid decisions, therefore, at the outset we have dealt with these decisions. We find that the following question of dealt with these decisions. We find that the following question of dealt with these decisions. We find that the following question of law was proposed for admission by the Revenue in its appeal law was proposed for admission by the Revenue in its appeal law was proposed for admission by the Revenue in its appeal

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before the Hon‟ble Calcutta High Court in UttarbangaK before the Hon ble Calcutta High Court in UttarbangaKshetriya Gramin Bank (supra): Gramin Bank (supra): ―Whether on the facts and in the circumstances of the Whether on the facts and in the circumstances of the Whether on the facts and in the circumstances of the case the Ld. Tribunal has erred in law in allowing case the Ld. Tribunal has erred in law in allowing case the Ld. Tribunal has erred in law in allowing deduction under section 36(1)(viia) of the I.T. Act, 1961, for deduction under section 36(1)(viia) of the I.T. Act, 1961, for deduction under section 36(1)(viia) of the I.T. Act, 1961, for the same advances made for all previous years leading to the same advances made for all previous years leading to the same advances made for all previous years leading to multiple multiple multiple deductions deductions deductions in in in every every every assessment assessment assessment year year year by by by misinterpreting the Rule 6ABA of the I.T. Rules, 1962 and misinterpreting the Rule 6ABA of the I.T. Rules, 1962 and misinterpreting the Rule 6ABA of the I.T. Rules, 1962 and also against the ratio of judgment in the case of J.K also against the ratio of judgment in the case of J.K also against the ratio of judgment in the case of J.K Synthetics Ltd. v. UOI 199 ITR 43 (SC).?" Synthetics Ltd. v. UOI 199 ITR 43 (SC).?" 9. While dismissing the Revenue 9. While dismissing the Revenue‟s appeal and upholding the appeal and upholding the findings of the Tribunal, the Hon findings of the Tribunal, the Hon‟ble Calcutta High Court, in the ‟ble Calcutta High Court, in the aforesaid decision, observed as under: aforesaid decision, observed as under: ―5. The assessee's appeal, however, was allowed by the The assessee's appeal, however, was allowed by the The assessee's appeal, however, was allowed by the Tribunal. The Tribunal's interpretation of the aforesaid Tribunal. The Tribunal's interpretation of the aforesaid Tribunal. The Tribunal's interpretation of the aforesaid statutory p statutory provisions would appear from the following rovisions would appear from the following passage: passage:— "From this Rule, it is apparent that for the purpose of "From this Rule, it is apparent that for the purpose of "From this Rule, it is apparent that for the purpose of section 36(1) (viia), the aggregate average advance made section 36(1) (viia), the aggregate average advance made section 36(1) (viia), the aggregate average advance made by the rural branches of as scheduled bank shall be by the rural branches of as scheduled bank shall be by the rural branches of as scheduled bank shall be computed by taking the amount of advances made by computed by taking the amount of advan computed by taking the amount of advan each rural branch as outstanding at the end of the last each rural branch as outstanding at the end of the last each rural branch as outstanding at the end of the last day of each month comprised in the previous year has to day of each month comprised in the previous year has to day of each month comprised in the previous year has to be aggregated separately. The CIT (Appeals) instead of be aggregated separately. The CIT (Appeals) instead of be aggregated separately. The CIT (Appeals) instead of giving the direction to the Assessing Officer to take the giving the direction to the Assessing Officer to take the giving the direction to the Assessing Officer to take the amount of advances amount of advances as outstanding at the end of the last as outstanding at the end of the last day of each month in the previous year directed the day of each month in the previous year directed the day of each month in the previous year directed the Assessing Officer to take loans and advances made Assessing Officer to take loans and advances made Assessing Officer to take loans and advances made during the year only, we therefore, set aside the order of during the year only, we therefore, set aside the order of during the year only, we therefore, set aside the order of CIT (Appeals) on this issue and amend the direction of the CIT (Appeals) on this issue and amend the direction of th CIT (Appeals) on this issue and amend the direction of th CIT (Appeals) and direct the Assessing Officer to compute CIT (Appeals) and direct the Assessing Officer to compute CIT (Appeals) and direct the Assessing Officer to compute 10% of the aggregate monthly average advances made by 10% of the aggregate monthly average advances made by 10% of the aggregate monthly average advances made by the rural branch of such Bank by taking the amount of the rural branch of such Bank by taking the amount of the rural branch of such Bank by taking the amount of advances by each rural branch of such Bank by taking the advances by each rural branch of such Bank by taking the advances by each rural branch of such Bank by taking the amount of advances by each rura amount of advances by each rural branch as outstanding l branch as outstanding at the end of the last day of each month comprised in the at the end of the last day of each month comprised in the at the end of the last day of each month comprised in the previous year and aggregate the same separately as given previous year and aggregate the same separately as given previous year and aggregate the same separately as given under Rule 6ABA of the Income Tax Rules, 1962." under Rule 6ABA of the Income Tax Rules, 1962." under Rule 6ABA of the Income Tax Rules, 1962."

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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." 7. 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. 8. 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. 9. 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." 11. This court has no disagreement with the legal 11. This court has no disagreement with the legal 11. This court has no disagreement with the legal proposition laid down in the aforesaid decisions. However, proposition laid down in the aforesaid decisions. However, proposition laid down in the aforesaid decisions. However,

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in the present case, though there was no double in the present case, though there was no double in the present case, though there was no double deduction, as alleged by the appellant / Revenue, there deduction, as alleged by the appellant / Revenue, there deduction, as alleged by the appellant / Revenue, there was no clear vision about the advances made by the rural was no clear vision about the advances made was no clear vision about the advances made and non and non-rural branches of the bank and the quantum of rural branches of the bank and the quantum of deduction was not properly determined by the assessing deduction was not properly determined by the assessing deduction was not properly determined by the assessing officer based on the materials furnished by the respondent officer based on the materials furnished by the respondent officer based on the materials furnished by the respondent / assessee. In this context, the relevant paragraphs of the / assessee. In this context, the relevant paragraphs of the / assessee. In this context, the relevant paragraphs of the assessment ord assessment order dated 31.03.2006 passed by the er dated 31.03.2006 passed by the assessing officer are quoted below: assessing officer are quoted below: ―5.3 When the assessee was asked to clarify whether the When the assessee was asked to clarify whether the When the assessee was asked to clarify whether the advances which were considered to be bad and doubtful advances which were considered to be bad and doubtful advances which were considered to be bad and doubtful in earlier years and for which the provision was made so in earlier years and for which the provision was made so in earlier years and for which the provision was made so as to claim deduct as to claim deduction under section 36(1)(viia) of the Act, ion under section 36(1)(viia) of the Act, have been recovered subsequently, it was stated that as have been recovered subsequently, it was stated that as have been recovered subsequently, it was stated that as the provision claimed was not with reference to any the provision claimed was not with reference to any the provision claimed was not with reference to any particular debt due to the assessee but on an overall particular debt due to the assessee but on an overall particular debt due to the assessee but on an overall basis, it is not possible to certify that the bad debts basis, it is not possible to certify that the bad de basis, it is not possible to certify that the bad de claimed as trading loss for deduction under section claimed as trading loss for deduction under section claimed as trading loss for deduction under section 36(1)(viia) was recovered or not. It was also stated that 36(1)(viia) was recovered or not. It was also stated that 36(1)(viia) was recovered or not. It was also stated that theassessee would not be able to give age theassessee would not be able to give age- -wise details of outstanding advances for the branches more so for the outstanding advances for the branches more so for the outstanding advances for the branches more so for the rural branches with reference rural branches with reference to which the deduction was to which the deduction was claimed, so as to determine whether any advance of claimed, so as to determine whether any advance of claimed, so as to determine whether any advance of earlier year for which provision was made is still earlier year for which provision was made is still earlier year for which provision was made is still outstanding. outstanding. 5.4. In other words, the assessee is not in a position to 5.4. In other words, the assessee is not in a position to 5.4. In other words, the assessee is not in a position to give details of the advances with reference to which the give details of the advances with reference to which th give details of the advances with reference to which th deduction of Rs.14.99 crores was allowed as per deduction of Rs.14.99 crores was allowed as per deduction of Rs.14.99 crores was allowed as per Annexure 2 as deduction under section 36(1)(viia) towards Annexure 2 as deduction under section 36(1)(viia) towards Annexure 2 as deduction under section 36(1)(viia) towards unknown and anticipated trading loss by virtue of mere unknown and anticipated trading loss by virtue of mere unknown and anticipated trading loss by virtue of mere provision made on ad provision made on ad-hoc basis for bad and doubtful hoc basis for bad and doubtful debts and to confirm that these advances were still debts and to confirm that these advances debts and to confirm that these advances outstanding as at the end of the previous year relevant to outstanding as at the end of the previous year relevant to outstanding as at the end of the previous year relevant to this accounting year. this accounting year.‟ ―6.3.1. ―6.3.1. Therefore due to assessee's inability to relate the Therefore due to assessee's inability to relate the provision to any particular advance of a branch, it cannot provision to any particular advance of a branch, it cannot provision to any particular advance of a branch, it cannot be said whether it is a provision for rural be said whether it is a provision for rural advance or for non-rural advance so as to examine the monetary limit rural advance so as to examine the monetary limit rural advance so as to examine the monetary limit prescribed under section 36(1)(viia) for allowing deduction prescribed under section 36(1)(viia) for allowing deduction prescribed under section 36(1)(viia) for allowing deduction thereunder. Then such provision is only reserve for bad thereunder. Then such provision is only reserve for bad thereunder. Then such provision is only reserve for bad

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debts and not provision for bad and doubtful debts. debts and not provision for bad and doubtful debts. debts and not provision for bad and doubtful debts. Though the provisi Though the provisions of section 36(1)(viia) may be ons of section 36(1)(viia) may be understood as a beneficial provision to the assessee understood as a beneficial provision to the assessee understood as a beneficial provision to the assessee company to claim deduction even in respect of reserve company to claim deduction even in respect of reserve company to claim deduction even in respect of reserve created by it to meet certain anticipated loss or created by it to meet certain anticipated loss or created by it to meet certain anticipated loss or contingency due to default of its debtors whom the contingency due to default of its debtors whom the contingency due to default of its debtors whom the assessee may n assessee may not be able to easily identify at the end of ot be able to easily identify at the end of the previous year, yet the computation machinery for the previous year, yet the computation machinery for the previous year, yet the computation machinery for determining the deduction admissible in the matter of determining the deduction admissible in the matter of determining the deduction admissible in the matter of write off bad and doubtful debts of rural or non-rural write off bad and doubtful debts of rural or non write off bad and doubtful debts of rural or non advance under section 36(1)(v) read with the proviso advance under section 36(1)(v) read with the provi advance under section 36(1)(v) read with the provi thereunder and section 36(2)(v) of the Act would fail.‟ thereunder and section 36(2)(v) of the Act would fail. thereunder and section 36(2)(v) of the Act would fail. Thus, it is evident from the above extract that the quantum Thus, it is evident from the above extract that the quantum Thus, it is evident from the above extract that the quantum of deduction arrived at by the assessing officer was not of deduction arrived at by the assessing officer was not of deduction arrived at by the assessing officer was not based on the documents produced by the respondent / based on the documents produced by the respondent / based on the documents produced by the respondent / assessee. The CIT(A) as wel assessee. The CIT(A) as well as the Tribunal also, did not l as the Tribunal also, did not look into those aspect, while allowing the deduction look into those aspect, while allowing the deduction look into those aspect, while allowing the deduction claimed by the respondent / assessee. Therefore, this claimed by the respondent / assessee. Therefore, this claimed by the respondent / assessee. Therefore, this court is of the opinion that for that limited purpose, the court is of the opinion that for that limited purpose, the court is of the opinion that for that limited purpose, the matter has to be re matter has to be re-examined by the assessing officer and examined by the assessing officer and the same has also been agreed upon by the learned the same has also been agreed upon by the learned the same has also been agreed upon by the learned counsel appearing for both sides. counsel appearing for both sides.‟ 12. We find that one of the reasons recorded by the 12. We find that one of the reasons recorded by the 12. We find that one of the reasons recorded by the Division Bench of the Tribunal for referring the issue to the Division Bench of the Tribunal for referring the issue to the Division Bench of the Tribunal for referring the issue to the Special Bench was “No decision of any higher authorities Special Bench was “No decision of any higher authorities Special Bench was “No decision of any higher authorities was brought to our notice by either of the parties”. was brought to our notice by either of the parties”. was brought to our notice by either of the parties”. However, now decisions of two Hon However, now decisions of two Hon‟ble High Courts have ‟ble High Courts have been brought to our notice, wherein similar issue has been been brought to our notice, wherein similar issue has been been brought to our notice, wherein similar issue has been considered in favour of the taxpayer. considered in favour of the taxpayer. 13. 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 ITA No. 846 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

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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. 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 ITA Nos. 510, 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. 15. Therefore, Therefore, Therefore, respectfully respectfully respectfully following following following the the the aforesaid aforesaid aforesaid decisions passed by Hon decisions passed by Hon‟ble Calcutta High Court and ‟ble Calcutta High Court and Hon‟ble Madras High Court, we decide the question ‟ble Madras High Court, we decide the question ‟ble Madras High Court, we decide the question referred for our adjudication in favour of the assessee and referred for our adjudication in favour of the referred for our adjudication in favour of the held that the deduction under section 36(1)(viia) r/w Rule held that the deduction under section 36(1)(viia) r/w Rule held that the deduction under section 36(1)(viia) r/w Rule 6 ABA is to be allowed on the total outstanding advances 6 ABA is to be allowed on the total outstanding advances 6 ABA is to be allowed on the total outstanding advances at the end of each month considering the opening at the end of each month considering the opening at the end of each month considering the opening balances. Since other issues arising in the appeals are still balances. Since other issues arising in the appeals are still balances. Since other issues arising in the appeals are still pending adjudica pending adjudication, therefore, we send the matter back tion, therefore, we send the matter back to the Division Bench for disposing of to the Division Bench for disposing of the appeals in the the appeals in the above terms.” above terms.” 5.2 In view of the issue in dispute involved in ground No. 2.2 of In view of the issue in dispute involved in ground No. 2.2 of In view of the issue in dispute involved in ground No. 2.2 of the appeal decided by the Special Bench (supra the appeal decided by the Special Bench (supra), the ), the ground No. 2.2 of the appeal stands allowed in favour of the assessee. allowed in favour of the assessee.

13 The State Bank of India The State Bank of India ITA Nos. 510, 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017

for the purpose of Income for the purpose of Income-tax, on the ground that same was not n the ground that same was not due. The assessee in original return of income declared total income The assessee in original return of income declared total income The assessee in original return of income declared total income of Rs. 1475,22,52,090/ of Rs. 1475,22,52,090/- but in revised return declared income but in revised return declared income of Rs. Rs. 988,32,46,450/- 988,32,46,450/ and and thus thus reduced reduced income income of of Rs. Rs. as interest on securities was not due as on 486,90,05,631/- as interest on securities was not due as on as interest on securities was not due as on 31/03/2013. According to the Assessing Officer, in view of the According to the Assessing Officer, in view of the According to the Assessing Officer, in view of the mercantile system of accounting followed by the assessee, the mercantile system of accounting followed by the assessee, the mercantile system of accounting followed by the assessee, the interest accrued for the period from January to March of the d for the period from January to March of the d for the period from January to March of the Financial Year accrued in the hands of the assessee and same was Financial Year accrued in the hands of the assessee and same was Financial Year accrued in the hands of the assessee and same was liable for taxation in the year under consideration. The finding of liable for taxation in the year under consideration. The finding of liable for taxation in the year under consideration. The finding of the Ld. Assessing Officer was upheld by the Ld. CIT(A) observing as the Ld. Assessing Officer was upheld by the Ld. CIT(A) observing as the Ld. Assessing Officer was upheld by the Ld. CIT(A) observing as under:

“Therefore, by relying on the judgements and on the facts herefore, by relying on the judgements and on the facts herefore, by relying on the judgements and on the facts stated above, it is clear that the non stated above, it is clear that the non-accounting of interest accounting of interest on accrual basis shall distort the appellant bank's taxable on accrual basis shall distort the appellant bank's taxable on accrual basis shall distort the appellant bank's taxable income as it shall violate the principle of consistency of income as it shall violate the principle of consistency of income as it shall violate the principle of consistency of debiting of expendi debiting of expenditure and crediting of income along with ture and crediting of income along with the provisions of section 145 of the IT. Act, 1961. The the provisions of section 145 of the IT. Act, 1961. The the provisions of section 145 of the IT. Act, 1961. The appellant has not accounted for the interest income on appellant has not accounted for the interest income on appellant has not accounted for the interest income on accrual basis which means it ought to have followed the accrual basis which means it ought to have followed the accrual basis which means it ought to have followed the same principle with regard to the debiting of expenditure same principle with regard to the debiting of exp same principle with regard to the debiting of exp on account of interest payment to depositors on the on account of interest payment to depositors on the on account of interest payment to depositors on the deposits on accrual basis which obviously it has not done. deposits on accrual basis which obviously it has not done. deposits on accrual basis which obviously it has not done. The appellant's contention that it is in consonance with the The appellant's contention that it is in consonance with the The appellant's contention that it is in consonance with the RBI guidelines is misplaced as the said guidelines are RBI guidelines is misplaced as the said guidelines are RBI guidelines is misplaced as the said guidelines are meant to regulate th meant to regulate the affairs of the banks whereas the tax e affairs of the banks whereas the tax liability of the appellant shall be strictly computed in liability of the appellant shall be strictly computed in liability of the appellant shall be strictly computed in accordance with the provisions of the Income Tax Act, accordance with the provisions of the Income Tax Act, accordance with the provisions of the Income Tax Act, 1961. Each year is an independent assessment year and 1961. Each year is an independent assessment year and 1961. Each year is an independent assessment year and that appelant cannot be allowed to manipulate the that appelant cannot be allowed to manipulate the that appelant cannot be allowed to manipulate the fundamental principles of accounting and provisions of ndamental principles of accounting and provisions of ndamental principles of accounting and provisions of section 145, todefer its liability to the subsequent years. In section 145, todefer its liability to the subsequent years. In section 145, todefer its liability to the subsequent years. In

14 The State Bank of India The State Bank of India ITA Nos. 510, 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017

fact, the appellant has prepared its accounts by crediting fact, the appellant has prepared its accounts by crediting fact, the appellant has prepared its accounts by crediting the interest on accrual basis, it is only in computation that the interest on accrual basis, it is only in computation that the interest on accrual basis, it is only in computation that the interest on sec the interest on securities has been subtracted on accrual urities has been subtracted on accrual basis. In view of the facts stated above and the applicable legal In view of the facts stated above and the applicable legal In view of the facts stated above and the applicable legal position, theaction of the AO in disallowing the impugned position, theaction of the AO in disallowing the impugned position, theaction of the AO in disallowing the impugned claim of deduction of interest on securities on accrual claim of deduction of interest on securities on accrual claim of deduction of interest on securities on accrual basis is upheld and the addition made basis is upheld and the addition made on that count is on that count is confirmed.This ground of appeal is, therefore, dismissed.” confirmed.This ground of appeal is, therefore, dismissed. confirmed.This ground of appeal is, therefore, dismissed. 8. Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the issue-in-dispute is covered in favour of the assessee by the order of dispute is covered in favour of the assessee by the order of dispute is covered in favour of the assessee by the order of the ITAT dated 03.02.2020 in its own case fo the ITAT dated 03.02.2020 in its own case for assessment year r assessment year 2008-09 in ITA No. 4563/Mum/2016. The relevant finding of the 09 in ITA No. 4563/Mum/2016. The relevant finding of the 09 in ITA No. 4563/Mum/2016. The relevant finding of the Tribunal is reproduce Tribunal is reproduced as under:

“107. The next issue in this appeal of revenue is as 107. The next issue in this appeal of revenue is as 107. The next issue in this appeal of revenue is as regards to the order of CIT(A) deleting the addition made regards to the order of CIT(A) deleting the addition made regards to the order of CIT(A) deleting the addition made by AO on account of interest on by AO on account of interest on securities on accrual basis securities on accrual basis as the assessee is following mercantile system of as the assessee is following mercantile system of as the assessee is following mercantile system of accounting. For this revenue has raised the following accounting. For this revenue has raised the following accounting. For this revenue has raised the following Ground No. 2: Ground No. 2:- “2. On the facts and circumstances of the case, in law, the “2. On the facts and circumstances of the case, in law, the “2. On the facts and circumstances of the case, in law, the Ld. CIT(A) has erred in allowing the assessee’s plea that Ld. CIT(A) has erred in allowing the assessee’s Ld. CIT(A) has erred in allowing the assessee’s the interestincome on securities has to be taxed on the due the interestincome on securities has to be taxed on the due the interestincome on securities has to be taxed on the due basis only without appreciating that as per the mercantile basis only without appreciating that as per the mercantile basis only without appreciating that as per the mercantile system of accounting followed by the assessee, interest on system of accounting followed by the assessee, interest on system of accounting followed by the assessee, interest on securities has to be taxed on accrual basis.” securities has to be taxed on accrual basis.” securities has to be taxed on accrual basis.” 108. 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 ITA Nos. 510, 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.

16 The State Bank of India The State Bank of India ITA Nos. 510, 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017

17 The State Bank of India The State Bank of India ITA Nos. 510, 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. 113. 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 ITA Nos. 510, 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). 114. 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.

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CDR, SME restructuring structuring. According to the Assessin . According to the Assessing Officer provision on standard asset etc. cannot be considered for the provision on standard asset etc. cannot be considered for the provision on standard asset etc. cannot be considered for the purpose of making provision of bad and doubtful debts u/s purpose of making provision of bad and doubtful debts u/s purpose of making provision of bad and doubtful debts u/s 36(1)(viia) of the Act. According to the assessee, however, those 36(1)(viia) of the Act. According to the assessee, however, those 36(1)(viia) of the Act. According to the assessee, however, those debts were classified as per guidelines of the Reserve Bank of India debts were classified as per guidelines of the Reserve Bank debts were classified as per guidelines of the Reserve Bank however they are non however they are non-performing assets and therefore there were assets and therefore there were falling in the category of bad and doubtful debts. The contention of falling in the category of bad and doubtful debts. The contention of falling in the category of bad and doubtful debts. The contention of the assessee was not accepted and the Assessing Officer and he the assessee was not accepted and the Assessing Officer the assessee was not accepted and the Assessing Officer restricted the provision of bad and doubtful debts restricted the provision of bad and doubtful debts to the amount of to the amount of Rs.236,92,32,723/- as against as against claim of Rs.593,81,63,000/ of Rs.593,81,63,000/- by the assessee and therefore, assessee and therefore, he made addition of Rs.356,89,30,277/ made addition of Rs.356,89,30,277/-.

“11.1.2 “11.1.2 I have considered the submissions made by I have considered the submissions made by the appellant and thearguments given by the AO in the the appellant and thearguments given by the AO in the the appellant and thearguments given by the AO in the assessment order. The crux of the arguments of the assessment order. The crux of the arguments of the assessment order. The crux of the arguments of the appellant is that the provisions for bad and doubtful debts appellant is that the provisions for bad and doubtful debts appellant is that the provisions for bad and doubtful debts have been made as per strict guidelines of the RBI which have been made as per strict guidelines of the R have been made as per strict guidelines of the R is a statutory regulatory authority in its case. The A0, on is a statutory regulatory authority in its case. The A0, on is a statutory regulatory authority in its case. The A0, on the other hand, relied on the plain and unambiguous the other hand, relied on the plain and unambiguous the other hand, relied on the plain and unambiguous language of the relevant provision of the Act, which language of the relevant provision of the Act, which language of the relevant provision of the Act, which mentions the words "any provision for bad and doubtful mentions the words "any provision for bad and doubtful mentions the words "any provision for bad and doubtful debts". The first proviso t debts". The first proviso to this sub section, as averred by o this sub section, as averred by the AO, provides for "deduction in respect of any provision the AO, provides for "deduction in respect of any provision the AO, provides for "deduction in respect of any provision made by it for any assets classified by the Reserve Bank made by it for any assets classified by the Reserve Bank made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance of India as doubtful assets or loss assets in accordance of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf,..." Thus, it is with the guidelines issued by it in this behalf, with the guidelines issued by it in this behalf, quite clear that the provision on standard assets and quite clear that the provision on standard assets and quite clear that the provision on standard assets and corporate debt restructuring and non corporate debt restructuring and non-CDR and SME CDR and SME restructuring are outside the ambit of this subsection. restructuring are outside the ambit of this subsection. restructuring are outside the ambit of this subsection. These are good and financially recoverable assets earning These are good and financially recoverable assets earning These are good and financially recoverable assets earning

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income. The decisions income. The decisions of the Hon'ble ITATs cited by the AO of the Hon'ble ITATs cited by the AO also support his action. In view of the above, I'm of the also support his action. In view of the above, I'm of the also support his action. In view of the above, I'm of the considered view that the A is justified in reducing the considered view that the A is justified in reducing the considered view that the A is justified in reducing the provision for bad and doubtful debts to be considered for provision for bad and doubtful debts to be considered for provision for bad and doubtful debts to be considered for deduction u/s 36(1)(viia) of the Act. This ground of appeal deduction u/s 36(1)(viia) of the Act. This grou deduction u/s 36(1)(viia) of the Act. This grou is, therefore, dismissed. is, therefore, dismissed.” 12. 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. 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 assessee by the order of dispute is covered in favour of the assessee by the order of dispute is covered in favour of the assessee by the order of the Tribunal dated 03.02.2020 passed in its own case for dated 03.02.2020 passed in its own case for dated 03.02.2020 passed in its own case for assessment year 2008 assessment year 2008-09 in ITA no. 3644/Mum/2016. The relevant 09 in ITA no. 3644/Mum/2016. The relevant part of the decision is reproduced as under: part of the decision is reproduced as under:

“69. The next issue in this appeal of assessee is as 69. The next issue in this appeal of assessee is as 69. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO regards to the order of CIT(A) confirming the actio regards to the order of CIT(A) confirming the actio in disallowing deduction claimed by assessee under in disallowing deduction claimed by assessee under in disallowing deduction claimed by assessee under section 36(1)(viia) of the Act being the amount of standard section 36(1)(viia) of the Act being the amount of standard section 36(1)(viia) of the Act being the amount of standard assets. For this assessee raised the following ground No. assets. For this assessee raised the following ground No. assets. For this assessee raised the following ground No. 8: - “8. “8. “8. Deprecation Deprecation Deprecation under under under section section section 36(1)(viia) 36(1)(viia) 36(1)(viia) of of of Rs.566,96,68,537 Rs.566,96,68,537 8.1 The lea 8.1 The learned CIT(A) erred in holding that the provision rned CIT(A) erred in holding that the provision for standard assets amounting to Rs.566,96,68,537 is to for standard assets amounting to Rs.566,96,68,537 is to for standard assets amounting to Rs.566,96,68,537 is to be excluded for determining the deduction under section be excluded for determining the deduction under section be excluded for determining the deduction under section 36(1)(viia). 36(1)(viia). 8.2 The learned CIT(A) erred in not appreciating that even 8.2 The learned CIT(A) erred in not appreciating that even 8.2 The learned CIT(A) erred in not appreciating that even in respect of assets th in respect of assets that are classified as standard assets, at are classified as standard assets, a part of the debts are doubtful of recovery and a part of the debts are doubtful of recovery and a part of the debts are doubtful of recovery and accordingly accordingly accordingly qualifies qualifies qualifies for for for deduction deduction deduction under under under section section section 36(1)(viia).” 36(1)(viia).” 70. Brief facts are that the assessee is claiming deduction 70. Brief facts are that the assessee is claiming deduction 70. Brief facts are that the assessee is claiming deduction under section 36(1)(viia) of the Act for provision for bad under section 36(1)(viia) of the Act for pro under section 36(1)(viia) of the Act for pro and doubtful debts including provision made for standard and doubtful debts including provision made for standard and doubtful debts including provision made for standard assets of Rs. 566,96,68,537/ assets of Rs. 566,96,68,537/-. The AO has held that the . The AO has held that the

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provision provision provision for for for standard standard standard asset asset asset amounting amounting amounting to to to Rs. Rs. Rs. 566,96,68,537/ 566,96,68,537/- is to be excluded for determining the is to be excluded for determining the deduction under section 36(1 deduction under section 36(1)(viia) of the Act. The CIT(A) )(viia) of the Act. The CIT(A) also confirmed the action of the AO by observing as under: also confirmed the action of the AO by observing as under: also confirmed the action of the AO by observing as under: - “16.3 I have considered the appellant's submissions. “16.3 I have considered the appellant's submissions. “16.3 I have considered the appellant's submissions. This is recurring issue and this issue was considered by This is recurring issue and this issue was considered by This is recurring issue and this issue was considered by CIT(A) in appellant'sown case for A.Y. 2007-08 which are CIT(A) in appellant'sown case for A.Y. 2007 CIT(A) in appellant'sown case for A.Y. 2007 reproduced as under: reproduced as under: The issue is considered. The arguments and the plea so The issue is considered. The arguments and the plea so The issue is considered. The arguments and the plea so raised by the assessee is misplaced. The section raised by the assessee is misplaced. The section raised by the assessee is misplaced. The section 36(J)(viia) is for providing provision in respect of bad and 36(J)(viia) is for providing provision in respect of bad and 36(J)(viia) is for providing provision in respect of bad and doubtful debts only and not in respect of the standard doubtful debts only and not in respect of the standard doubtful debts only and not in respect of the standard assets. In assets. In view thereof, it is held that the AO has rightly view thereof, it is held that the AO has rightly excluded the amount of provision of Rs. 589,18,98,060 excluded the amount of provision of Rs. 589,18,98,060 excluded the amount of provision of Rs. 589,18,98,060 onto standard assets out of the claim made by the onto standard assets out of the claim made by the onto standard assets out of the claim made by the assessee under section 36( l)(viia). The addition is assessee under section 36( l)(viia). The addition is assessee under section 36( l)(viia). The addition is accordingly confirmed. accordingly confirmed. 16.4 In view of the above 16.4 In view of the above decision of CIT(A) In view of the decision of CIT(A) In view of the above decision of CIT(A), claim of the appellant is above decision of CIT(A), claim of the appellant is above decision of CIT(A), claim of the appellant is disallowed. This ground of appeal is disallowed.” disallowed. This ground of appeal is disallowed.” disallowed. This ground of appeal is disallowed.” 71. We have noted the facts that the assessee has claimed 71. We have noted the facts that the assessee has claimed 71. We have noted the facts that the assessee has claimed that provision for standard assets should be taken into that provision for standard assets should be taken into that provision for standard assets should be taken into consideration for computing the deduction under section ideration for computing the deduction under section ideration for computing the deduction under section 36(1)(viia) of the Act. The assessee has also filed the 36(1)(viia) of the Act. The assessee has also filed the 36(1)(viia) of the Act. The assessee has also filed the details vide note 17 and Annexure 6 to the revised return details vide note 17 and Annexure 6 to the revised return details vide note 17 and Annexure 6 to the revised return of income on pages 8, 9 and 20 of Paper Book – 1 filed by of income on pages 8, 9 and 20 of Paper Book of income on pages 8, 9 and 20 of Paper Book assessee. As per the provisions assessee. As per the provisions of section 36(1)(viia) of the of section 36(1)(viia) of the Act, a bank is eligible to avail deduction in respect of Act, a bank is eligible to avail deduction in respect of Act, a bank is eligible to avail deduction in respect of provision made for bad and doubtful debts, of an amount provision made for bad and doubtful debts, of an amount provision made for bad and doubtful debts, of an amount not exceeding 7.5% of total income and 10% of the not exceeding 7.5% of total income and 10% of the not exceeding 7.5% of total income and 10% of the aggregate average advances made bythe rural branches aggregate average advances made bythe rural branches aggregate average advances made bythe rural branches of the ban of the bank. The provision is created by the assessee on k. The provision is created by the assessee on the basis of RBI Guidelines. The assessee is required to the basis of RBI Guidelines. The assessee is required to the basis of RBI Guidelines. The assessee is required to create provision on non create provision on non-performing assets on the basis of performing assets on the basis of the classification of assets into the four prescribed the classification of assets into the four prescribed the classification of assets into the four prescribed categories i.e. loss assets, doubtful as categories i.e. loss assets, doubtful assets, substandard sets, substandard assets and standard assets [refer para 5.1.2 of the RBI assets and standard assets [refer para 5.1.2 of the RBI assets and standard assets [refer para 5.1.2 of the RBI Guidelines]. Guidelines].

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23 The State Bank of India The State Bank of India ITA Nos. 510, 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

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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.” 74. In view of th accordingly.” 74. 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. 13. As the issue-in in-dispute involved in the ground raised is dispute involved in the ground raised is identical to the issue adjudicated by the Tribunal (supra) above and identical to the issue adjudicated by the Tribunal (supra) above and identical to the issue adjudicated by the Tribunal (supra) above and therefore, respectfully f therefore, respectfully following the finding of the Tribunal (supra) ollowing the finding of the Tribunal (supra) the finding of the Ld. CIT(A) on the issue the finding of the Ld. CIT(A) on the issue-in-dispute is set aside dispute is set aside and the Assessing Officer is directed to allow the claim of the assessee the Assessing Officer is directed to allow the claim of the assessee the Assessing Officer is directed to allow the claim of the assessee for deduction u/s 36(1)(viia) as adjudicated by the Tribunal (supra). for deduction u/s 36(1)(viia) as adjudicated by the Tribunal (supra). for deduction u/s 36(1)(viia) as adjudicated by the Tribunal (supra). The ground of appeal of the assessee is accordingly allowed. The ground of appeal of the assessee is accordingly allowed. The ground of appeal of the assessee is accordingly allowed.

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26 The State Bank of India The State Bank of India ITA Nos. 510, 538 & 1259/CHANDI/2017 ITA Nos. 510, 538 & 1259/CHANDI/2017

claim of the assessee of deduction u/s 36(1)(vii) in accordance with claim of the assessee of deduction u/s 36(1)(vii) in accordance with claim of the assessee of deduction u/s 36(1)(vii) in accordance with law. The ground No. 3 of the appeal is accordingly allowed for law. The ground No. 3 of the appeal is accordingly allowed for law. The ground No. 3 of the appeal is accordingly allowed for statistical purposes.

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“1. The Ld. CIT(A) erred in confirming disallowance made The Ld. CIT(A) erred in confirming disallowance made The Ld. CIT(A) erred in confirming disallowance made by the Assessing Officer of the amount of interest accrued by the Assessing Officer of the amount of interest accrued by the Assessing Officer of the amount of interest accrued but not due on securities contrary to the provisions of the but not due on securities contrary to the provisions of the but not due on securities contrary to the provisions of the Act. 1.1 The Ld 1.1 The Ld. CIT(A) failed to note that interest on securities . CIT(A) failed to note that interest on securities accrue only on the dates specified in the security as due accrue only on the dates specified in the security as due accrue only on the dates specified in the security as due date for payment, mere accounting of interest on time date for payment, mere accounting of interest on time date for payment, mere accounting of interest on time period basis for Balance Sheet purposes does not give period basis for Balance Sheet purposes does not give period basis for Balance Sheet purposes does not give raise to real income. raise to real income. 2.1 The Ld. CIT( 2.1 The Ld. CIT(A) failed to appreciate that provision A) failed to appreciate that provision towards restructured debts and standard assets are only towards restructured debts and standard assets are only towards restructured debts and standard assets are only provision made for bad and doubtful debts referred to in provision made for bad and doubtful debts referred to in provision made for bad and doubtful debts referred to in section 36(1)(via) and hence deduction thereof ought to section 36(1)(via) and hence deduction thereof ought to section 36(1)(via) and hence deduction thereof ought to have been allowed. have been allowed. 2.2 The Ld. CIT(A) erred in n 2.2 The Ld. CIT(A) erred in not granting deduction us ot granting deduction us 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)(via), advances as specified in Explanation to section 36(1)(via), advances as specified in Explanation to section 36(1)(via), but restricting the same to incremental advances by an but restricting the same to incremental advances by an but restricting the same to incremental advances by an artificial construction of statute. artificial construction of statute.

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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.

Order pronounced in the open Court on Order pronounced in the open Court on 31/03/2023. 03/2023. Sd/- sd/ sd/- (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT Mumbai; Dated: 31/03/2023 Rahul Sharma, Sr. P.S.

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Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai