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Income Tax Appellate Tribunal, DELHI BENCH: “F”, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 02/10/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-1, Gurgaon [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds: 1. That on the facts and circumstances of the case and provision of the law, the order U/s 143(3) dated 31.03.2013 passed by the Ld. A.O. and confirmed by the Ld. CIT (A), being beyond the jurisdiction of the Ld. A.O., is bad in law and is needs to be quashed.
2. That without prejudice to the ground No.1 above and on the facts and circumstances of the case and provision of the law, the Ld AO as well as Ld. CIT (A) erred in not allowing the deduction u/s 36(1 )(viia) to the extent of Rs. 68,91,000/- by not fully accepting the provision for bad & doubtful debts made by the bank for the purpose of deduction u/s 36(1 )(viia) of IT Act, 1961.
3. That the appellants request be allowed to add, modify and delete any other ground (s) of appeal.
2. Briefly stated facts of the case are that the assessee is a Regional Rural Bank (RRB) established under the RRB Act. The assessee was engaged in the business of providing banking services. For the year under consideration, the assessee filed return of income on 28/09/2010, declaring total income of Rs.95,17,14,936/-. The case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (in short ‘the Act’) was issued and complied with. The assessment under section 143(3) of the Act was completed on 31/03/2013 after making disallowance of deduction claimed under section 36(1)(viia) of the Act to the extent of Rs.68,91,000/- and other disallowances. On further appeal, the Ld. CIT(A) dismissed the appeal of the assessee rejecting the grounds raised
. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above only on the issue of disallowance of deduction under section 36(1)(viia) of the Act to the extent of Rs.68,91,000/- .
3. We have heard both the parties on the issue in dispute. In the case, the assessee is a rural cooperative bank and entitled for deduction under section 36(1)(viia) of the Act in respect of provision for bad and doubtful debt. The said provision has specified the limit of deduction which could be allowed to the eligible assessee. Under the provisions, the deduction in respect of any provision for bad and doubtful debts made by the co- operative bank, of an amount not exceeding seven and one half percentile (7½%) of the total income and an amount not exceeding 10% of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. The Rule 6ABA of the Income Tax Rules, 1962 has provided the manner of computing the aggregate average advances as under: “[Computation of aggregate average advances for the purposes of clause (viia) of sub-section (1) of section 36. 6ABA. For the purposes of clause (viia) of sub-section (1) of section 36, the aggregate average advances made by the rural branches of a scheduled bank shall be computed in the following manner, namely :— (a) the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year shall be aggregated separately ; (b) the sum so arrived at in the case of each such branch shall be divided by the number of months for which the outstanding advances have been taken into account for the purposes of clause (a) ; (c) the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank. Explanation : In this rule, “rural branch” and “scheduled bank” shall have the meanings assigned to them in the Explanation to clause (viia) of sub-section (1) of section 36.]”
4. In view of the Rules, the assessee computed the amount of provision as under:
(Amount in thousands) S.No. Particulars Balance O/s Amount of Provision Standard Advances 14751401 6891 1. Sub Standard Adv. 110097 6572 2. 3. Doubtful Adv. 58065 11664 4. Loss Assets 10556 1647 14930119 26774
According to the Assessing Officer, the provision of standard advances of Rs.68,91,000/- was not eligible for deduction as the said asset was not in the nature of bad and doubtful date as the assessee was receiving regular interest on said assets. The Ld. CIT(A) following the decision of the coordinate bench of the Tribunal dated 28/08/2012, including the decision in the case of Bharat Overseas Bank in ITA No.1191/Mds./2012 held that provision for bad and doubtful debt on a standard advances of the bank are not permitted under section 36(1)(viia) of the Act.
Before us, however, the Ld. counsel of the assessee submitted that issue in dispute in the case of the assessee itself for assessment year 2011-12 has been decided in favour of the assessee by the Tribunal. We find that the Tribunal in in the case of the assessee has decided the issue in dispute following the decision of the coordinate bench of the Tribunal in the case of DCIT versus The Little Kancheepuram cooperative Urban bank limited in ITA No. 23 & 24/Mds/2013 decided on 21/03/2013 and decision of the Amritsar bench of the Tribunal in the case of DCIT Vs M/s Punjab Gramin bank in ITA No. 583 and 584 (Asr)/2015, observing as under: “ 7. In view of this settled legal position, we are of the considered opinion that deduction of the provision under section 36(l)(viia) is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets and the deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(l)(viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. Hence, we find that the orders of the authorities below cannot be sustained and the addition of Rs. 84,70,000/- is directed to be deleted.”
As the issue in dispute involved in the year under consideration is identical to the issue in the appeal of the assessee for assessment year 2011-12, thus, respectfully following the decision of the Tribunal in for assessment year 2011-12, the addition in dispute in the year under consideration is also deleted. The grounds of appeal
of the assessee are allowed.
8. In result, the appeal of the assessee is allowed. Order pronounced in the open court on 28th March, 2019.