THE COMMISSIONER OF INCOME TAX. vs. THE FEDERAL BANK LTD

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 13TH DAY OF JULY 2021 / 22ND ASHADHA, 1943 ITA NO. 239 OF 2009 AGAINST THE ORDER IN ITA 36/2000 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX. COCHIN. BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: THE FEDERAL BANK LTD FEDERAL TOWERS, ALWAYE-1. THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 13.07.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T.A. No.239/2009 -2- J U D G M E N T S.V. Bhatti, J. Heard learned Standing Counsel Mr.Jose Joseph and learned Senior Advocate Mr.Joseph Markos for the parties. 2. Commissioner of Income Tax, Cochin/Revenue is the appellant. The Federal Bank Ltd, Federal Towers, Alwaye/assessee is the respondent. The appeal is directed against the order of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A 36/Coch/2000 dated 30.06.2003. The appeal deals with the issues arising from the tax returns filed by the assessee for the assessment year 1987-88. 2.1 The Assessing Officer through the assessment order in Annexure-A, disallowed the claim of the assessee under Section 36(1)(viia). The assessee filed appeal before the

I.T.A. No.239/2009 -3- Commissioner of Income Tax (Appeals) and the appeal was allowed in part. In the appeal filed by the assessee before Income Tax Appellate Tribunal, through Annexure-C order, allowed the claim of the assessee under Section 36(1)(viia). Hence, the instant Income Tax Appeal, at the instance of the Revenue under Section 260A of the Income Tax Act (for short 'the Act'). The following substantial question of law is raised by the revenue: “Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in reversing the decision of the Commissioner of Income Tax(Appeals) on the issue regarding the debiting of bad debts relating to the non rural branches in the provisions for bad debt account created in accordance with the provisions of Section 36(1) (viia) of the Act? ” 3. The question is regarding the eligible deduction under Section 36(1)(viia) of the Act. The counsel appearing for parties state that the question concerning bad debts and provision for bad debts falling under Section 36(1)(vii) and 36(1)

I.T.A. No.239/2009 -4- (viia) is covered in favour of the assessee in reported judgment of the Supreme Court in Catholic Syrian Bank v. Commissioner of Income Tax1 and had answered the point in favour of assessee and against the Revenue. We are referring to the decision by the Apex Court with a view to comprehensively advert to the outcome on all the substantial questions raised by the Revenue in the instant appeal. The operative portion in Catholic Syrian Bank Ltd judgment reads thus: “Firstly, the Full Bench ignored the significant expression appearing in both the proviso to Section 36(1) (vii) clause (v) of Section 36(2) i.e ., 'assessee to which clause (viia) sub-section(1) applies'. In other words, if the case of the assessee does not fall under Section 36(1)(viia) proviso/limitation would not come into play.” xxx xxxx xxxxx “Consequently, while answering the question in favour of 1 (2012) 343 ITR 270 (SC)

I.T.A. No.239/2009 -5- the assessee, we allow the appeals of the assessee and dismiss the appeals preferred by the revenue. Further, we direct that all matters be remanded to the Assessment Officer for computation in accordance with law, in light of the law enunciated in this judgment.” Thus the question is answered by the Supreme Court in favour of assessee and against the Revenue. The question of law framed, by following the judgment referred to above, is answered in favour of the assessee and against the Revenue. Income Tax Appeal stands dismissed accordingly. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE jjj

I.T.A. No.239/2009 -6- APPENDIX OF ITA 239/2009 PETITIONER ANNEXURE ANNEXURE A COPY OF ORIGINAL ASSESSMENT ORDER U/S. 143 (3) R.W.S 147 DATED 31.3.1997 ISSUED BY THE ASSESSING OFFICER FOR THE ASST. YEAR 1987-88 ANNEXURE B COPY OF THE ORDER DATED 3.11.1999 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NOS 35,36 ND 37/COCH/2000 AND ITA NO. 31/COCH/97 DATED 30.6.2003.