THE COMMISSIONER OF INCOME-TAX, TVM. vs. STATE BANK OF TRAVANCORE, POOJAPPURA,

ITA/214/2010HC KeralaKLHC01026906201008 August 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON7 pages
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What were the facts?

The appeals concern the assessment years related to the allowance of bad debts written off and adjustments to provisions for bad and doubtful debts. For urban branches, the assessee claimed over Rs. 115 crores as bad debts written off, with a provision of Rs. 45 lakhs under Section 36(1)(viia). The Assessing Officer reduced the claim by the provision, allowing Rs. 70 crores. The CIT(Appeals) reversed this, allowing the full claim. The revenue appealed to the Tribunal only on a ground permitted by the Committee On Disputes (COD) under Section 14A, not on the allowance of urban bad debts. For rural branches, the assessee claimed Rs. 24,53,972/- as written off bad debts. The Assessing Officer adjusted this against the provision made under Section 36(1)(viia). The Tribunal upheld the disallowance.

What did the High Court hold?

The High Court held that for rural branches, the proviso to Section 36(1)(vii) of the Income Tax Act is applicable. This proviso states that if a provision has been made under Section 36(1)(viia), the deduction under Section 36(1)(vii) shall be limited to the amount by which the claim exceeds the credit balance in the provision for bad and doubtful debts. In this case, the provision for rural advances (Rs. 117,86,00,000/-) far exceeded the claim for actual write-off (Rs. 24,53,000/-). Therefore, the claim for actual write-off had to be restricted to the amount exceeding the provision, which meant no claim could be raised as the provision was higher. The Court found that the First Appellate Authority and the Tribunal had correctly disallowed the claim under Section 36(1)(vii) for rural branches due to the excess provision made under Section 36(1)(viia). The appeal concerning urban branches (ITA 214/2010) was rejected as the issue was not agitated before the Tribunal.

What were the issues?

1. Whether the Tribunal erred in upholding the disallowance of the assessee's claim for written off bad debts relating to rural branches amounting to Rs. 24,53,972/- (Question of law and fact, concerning Section 36(1)(vii) and Section 36(1)(viia)). 2. Whether the Tribunal's finding was perverse due to non-consideration of relevant facts and based on surmises and conjectures (Question of fact). Assessee's arguments: The assessee bank relies on the Supreme Court judgment in Catholic Syrian Bank Ltd. v. Commissioner of Income Tax, which held that deductions under Section 36(1)(vii) and Section 36(1)(viia) are independent. The assessee argues that the disallowance of the written-off bad debts for rural branches was incorrect. Revenue's arguments: The revenue contends that the proviso to Section 36(1)(vii) applies, limiting the deduction for actual write-off of bad debts to the extent it exceeds the provision made under Section 36(1)(viia). Since the provision for rural advances exceeded the actual write-off, no claim could be raised.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 36(1)(viia),Section 14A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNE AY, THE 8TH DAY OF AUGUST 2018 / 17TH SRAVANA, 1940 AGAINST THE ORDER IN ITA 373/COCH/2007 of INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 10-09-2009 APPELLANT/RESPONDENT THE COMMISSIONER OF INCOME-TAX, THIRUVANANTHAPURAM. BY ADV.SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: STATE BANK OF INDIA,POOJAPPURA, THIRUVANANTHAPURAM. R BY ADV. SRI.P.BALAKRISHNAN (E) R BY ADV. SRI.V.SREEKUMAR ADV. SRI.JOSE JOSEPH - STANDING COUNSEL.

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ALONG WITH I.T.APPEAL NO.278/2010 ON 08-08-2018,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

APPENDIX ANNEXURE-A:OF THE ASSESSMENT ORDER U/S143(3) DATED 24/03/2006. ANNEXURE-B:OF THE ORDER OF THE CIT (APPEALS) DATED 16/03/2007 ANNEXURE-C:OF THE ORDER OF THE INC

The order continues below.

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