DEPUTY COMMISSIONER OF INCOME TAX NON CORP CIRCLE II MADURAI, MADURAI vs. VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED, VIRUDHUNAGAR

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1. ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED

1. Quantum of deduction allowable Quantum of deduction allowable u/s.36(1)(viia) of the Income of the Income-

tax Act, 1961 (“the Act”); and tax Act, 1961 (“the Act”); and

2. Non-allowance of brought forward losses allowance of brought forward losses of earlier assessment of earlier assessment

1. years on the ground that reassessment p years on the ground that reassessment proceedings for those roceedings for those years were pending. years were pending.

1. Upon Upon Upon being being being confronted, confronted, confronted, the the the assessee assessee assessee furnished furnished furnished a a a revised revised revised computation of income restricting the deduction computation of income restricting the deduction u/s. 36(1)(viia) 36(1)(viia) to the amount of provision actually made in the books. The AO the amount of provision actually made in the books. The AO the amount of provision actually made in the books. The AO accepted the revised computation and allowed deduction of accepted the revised computation and allowed deduction of accepted the revised computation and allowed deduction of Rs.3,19,12,660/-, while disallowing set , while disallowing set-off of brought forward off of brought forward losses. The assessment was completed determining a net profit of losses. The assessment was completed determining a net profit of losses. The assessment was completed determining a net profit of Rs.7,31,89,990/- from banking business. from banking business.

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ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED Aggrieved, the assessee carried the matter in appeal before the Ld. Aggrieved, the assessee carried the matter in appeal before the Ld. Aggrieved, the assessee carried the matter in appeal before the Ld.

CIT(A). The Ld. CIT(A) allowed the appeal. Against the relief so CIT(A). The Ld. CIT(A) allowed the appeal. Against the relief so CIT(A). The Ld. CIT(A) allowed the appeal. Against the relief so granted, the Revenue is in appeal before the Tribunal, while the granted, the Revenue is in appeal before the Tribunal, while the granted, the Revenue is in appeal before the Tribunal, while the assessee has filed cross- -objections.

Whether the deduction Whether the deduction u/s. 36(1)(viia) is to be allowed 36(1)(viia) is to be allowed strictly with reference to the provision actually made in the books of with reference to the provision actually made in the books of with reference to the provision actually made in the books of account, subject to the statutory ceiling, or whether it can be , subject to the statutory ceiling, or whether it can be , subject to the statutory ceiling, or whether it can be allowed independently based on the statutory percentages independently based on the statutory percentages, independently based on the statutory percentages irrespective of the quantum of provision made irrespective of the quantum of provision made ?

4. The learned counsel for the assessee submitted that section The learned counsel for the assessee submitted that section The learned counsel for the assessee submitted that section 36(1)(viia) provides for a 36(1)(viia) provides for a statutory deduction, the quantum of which statutory deduction, the quantum of which is determined by the prescribed percentages of total income and is determined by the prescribed percentages of total income and is determined by the prescribed percentages of total income and aggregate average rural advances. According to the assessee, the aggregate average rural advances. According to the assessee, the aggregate average rural advances. According to the assessee, the deduction is an incentive provision deduction is an incentive provision, independent of the actual , independent of the actual provision recorded in the books, and reflects a deliberate legislative the books, and reflects a deliberate legislative the books, and reflects a deliberate legislative departure from accounting principles governed by RBI norms.It was departure from accounting principles governed by RBI norms.It was departure from accounting principles governed by RBI norms.It was argued that RBI provisioning norms regulate financial reporting, argued that RBI provisioning norms regulate financial reporting, argued that RBI provisioning norms regulate financial reporting, whereas tax deductions are governed exclusively by the Income-tax whereas tax deductions are governed exclusively by the Income whereas tax deductions are governed exclusively by the Income

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ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED Act. The assessee traced the legislative history of section 36(1)(viia) ssessee traced the legislative history of section 36(1)(viia) ssessee traced the legislative history of section 36(1)(viia) through successive Finance Acts to demonstrate the consistent through successive Finance Acts to demonstrate the consistent through successive Finance Acts to demonstrate the consistent intent of Parliament to incentivise rural banking. intent of Parliament to incentivise rural banking.Reliance was placed Reliance was placed on decisions such as Syndicate Bank v. DCIT (ITAT Bangalore), on decisions such as Syndicate Bank v. DCIT (ITAT Bangalore), on decisions such as Syndicate Bank v. DCIT (ITAT Bangalore), Southern Technologies Ltd. v. JCIT (SC), and Prathma Bank, Southern Technologies Ltd. v. JCIT (SC), and Prathma Bank, Southern Technologies Ltd. v. JCIT (SC), and Prathma Bank, Moradabad v. ACIT, to contend Moradabad v. ACIT, to contend that the deduction is not restricted that the deduction is not restricted to the book provision. It was emphasised that the Supreme Court in to the book provision. It was emphasised that the Supreme Court in to the book provision. It was emphasised that the Supreme Court in Southern Technologies Southern Technologies recognised section 36(1)(viia) as an recognised section 36(1)(viia) as an incentive-based deduction and observed that provisioning for NPAs based deduction and observed that provisioning for NPAs based deduction and observed that provisioning for NPAs is first required to be added back and only thereafter deduction is to is first required to be added back and only thereafter deduction is to is first required to be added back and only thereafter deduction is to be granted as per the statute. be granted as per the statute.

The assessee further submitted that restricting deduction to book The assessee further submitted that restricting deduction to book The assessee further submitted that restricting deduction to book provision would amount to provision would amount to importing accounting standards into tax importing accounting standards into tax law, which is impermissible unless expressly mandated by statute. law, which is impermissible unless expressly mandated by statute. law, which is impermissible unless expressly mandated by statute.

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ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED made is less than the statutory ceiling, the deduction cannot exceed made is less than the statutory ceiling, the deduction cannot exceed made is less than the statutory ceiling, the deduction cannot exceed the provision made.

The learned DR relied heavily on the The learned DR relied heavily on the jurisdictional co-ordinate Bench nate Bench decision in the assessee’s own case decision in the assessee’s own case for AYs 2009-10, 2010 10, 2010-11, 2012-13 and 2014-15 in to 2793/Chny/2024 dated 15 in to 2793/Chny/2024 dated 15 in to 2793/Chny/2024 dated 21.03.2025, wherein it was categorically held that deduction u/s. 21.03.2025, wherein it was categorically held that deduction 21.03.2025, wherein it was categorically held that deduction 36(1)(viia) is restricted to the actual provision made i 36(1)(viia) is restricted to the actual provision made in the books, n the books, subject to the ceiling prescribed under the Act. subject to the ceiling prescribed under the Act.

Reliance was also placed on binding High Court judgments, including Reliance was also placed on binding High Court judgments, including Reliance was also placed on binding High Court judgments, including CIT v. Syndicate Bank (Karnataka HC), CIT v. Vijaya Bank, and CIT v. Syndicate Bank (Karnataka HC), CIT v. Vijaya Bank, and CIT v. Syndicate Bank (Karnataka HC), CIT v. Vijaya Bank, and State Bank of Patiala v. CIT (P&H), State Bank of Patiala v. CIT (P&H), all of which hold that the all of which hold that the language of section 36(1)(viia) is clear and unambiguous and does anguage of section 36(1)(viia) is clear and unambiguous and does anguage of section 36(1)(viia) is clear and unambiguous and does not permit deduction in excess of the provision actually created. not permit deduction in excess of the provision actually created. not permit deduction in excess of the provision actually created.

Deduction u/s. 36(1)(viia) 36(1)(viia)

The issue before us is no longer res integra. A co The issue before us is no longer res integra. A co-ordinate Bench of ordinate Bench of this Tribunal, in the assessee’s own case this Tribunal, in the assessee’s own casefor AYs 2009-10, 2010 10, 2010-11,

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ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED 2012-13 & 2014-15 in to 2793/Chny/2024 dated 15 in to 2793/Chny/2024 dated 15 in to 2793/Chny/2024 dated 21.03.2025 which held as under: 21.03.2025 which held as under:

5. Brief facts of the case are as follows: 5. Brief facts of the case are as follows:- The assessee is a co is a co-operative bank engaged in the business of banking. For the assessment years 2009- bank engaged in the business of banking. For the assessment years 2009 bank engaged in the business of banking. For the assessment years 2009 10 to 2012-13 and 2014 13 and 2014- 15, the assessments were reopened by issuance 15, the assessments were reopened by issuance of notice u/s.148 of the Act. The reason for issuance of notice u/s.148 of of notice u/s.148 of the Act. The reason for issuance of notice u/s.148 of of notice u/s.148 of the Act. The reason for issuance of notice u/s.148 of the Act was that asse the Act was that assessee had claimed deduction u/s.36(1)(viia) of the ssee had claimed deduction u/s.36(1)(viia) of the Act, which is not correct and not as per provision debited for bad and Act, which is not correct and not as per provision debited for bad and Act, which is not correct and not as per provision debited for bad and doubtful debts in the profit and loss account. The assessments were doubtful debts in the profit and loss account. The assessments were doubtful debts in the profit and loss account. The assessments were completed u/s.143(3) r.w.s 147 of the Act by disallowing claim of the completed u/s.143(3) r.w.s 147 of the Act by disallowing claim of t completed u/s.143(3) r.w.s 147 of the Act by disallowing claim of t assessee u/s.36(1)(viia) of the Act, for the assessment years 2009-10 to assessee u/s.36(1)(viia) of the Act, for the assessment years 2009 assessee u/s.36(1)(viia) of the Act, for the assessment years 2009 2012-13 and 2014-15. In the above assessment years, the AO disallowed 15. In the above assessment years, the AO disallowed 15. In the above assessment years, the AO disallowed deduction as it did not represent actual provision for bad and doubtful deduction as it did not represent actual provision for bad and doubtful deduction as it did not represent actual provision for bad and doubtful debts created in the books of accounts debts created in the books of accounts of the assessee co-operative bank. operative bank. Aggrieved, the assessee filed an appeal before the First Appellate Aggrieved, the assessee filed an appeal before the First Appellate Aggrieved, the assessee filed an appeal before the First Appellate Authority. The CIT(A) dismissed the appeals filed by the assessee. Authority. The CIT(A) dismissed the appeals filed by the assessee. Authority. The CIT(A) dismissed the appeals filed by the assessee. Aggrieved, the assessee filed further appeal before the ITAT., Chennai. Aggrieved, the assessee filed further appeal before the ITAT., Chennai. Aggrieved, the assessee filed further appeal before the ITAT., Chennai. The Tribunal by consolidated order in to 291/Chny/2018 y consolidated order in to 291/Chny/2018 y consolidated order in to 291/Chny/2018 (order dated 04.07.2018) restored the matter back to the files of AO (order dated 04.07.2018) restored the matter back to the files of AO (order dated 04.07.2018) restored the matter back to the files of AO observing that none of the authorities below have carefully gone through observing that none of the authorities below have carefully gone through observing that none of the authorities below have carefully gone through nature of provisions. The Tribunal directed to identity whether nature of provisions. The Tribunal directed to identity wheth nature of provisions. The Tribunal directed to identity wheth “provisions” created by the assessee bank are actual “provisions” made “provisions” created by the assessee bank are actual “provisions” made “provisions” created by the assessee bank are actual “provisions” made for bad and doubtful debts or something like creation of reserve. for bad and doubtful debts or something like creation of reserve. for bad and doubtful debts or something like creation of reserve. Subsequent to remand by the ITAT, Chennai, assessments were Subsequent to remand by the ITAT, Chennai, assessments were Subsequent to remand by the ITAT, Chennai, assessments were completed by the AO for the assessment years 2009 completed by the AO for the assessment years 2009-10 to 2012 2012-13 and 2014-15 by restricting the claim of deduction to the provisions made by 15 by restricting the claim of deduction to the provisions made by 15 by restricting the claim of deduction to the provisions made by the assessee bank in its books of account, as per RBI norms and not to the the assessee bank in its books of account, as per RBI norms and not to the the assessee bank in its books of account, as per RBI norms and not to the maximum deduction mentioned u/s.36(1)(viia) of the Act, (i.e. 7.5% of maximum deduction mentioned u/s.36(1)(viia) of the Act, (i.e. 7.5% of maximum deduction mentioned u/s.36(1)(viia) of the Act, (i.e. 7.5% of total income and 10% of agg total income and 10% of aggregate of average rural advances of the regate of average rural advances of the bank).

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ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED 6. Aggrieved by the orders of assessments for the assessment years 2009- 6. Aggrieved by the orders of assessments for the assessment years 2009 6. Aggrieved by the orders of assessments for the assessment years 2009 10 to 2012-13 and 2014 13 and 2014-15, (subsequent to the ITAT order) the assessee 15, (subsequent to the ITAT order) the assessee preferred appeals before First Appellate Authority. The CIT(A) preferred appeals before First Appellate Authority. The CIT(A) preferred appeals before First Appellate Authority. The CIT(A) confirmed the view taken by the AO. The CIT(A) distinguished case laws nfirmed the view taken by the AO. The CIT(A) distinguished case laws nfirmed the view taken by the AO. The CIT(A) distinguished case laws relied on by the assessee and held claim of deduction u/s.36(1)(viia) of relied on by the assessee and held claim of deduction u/s.36(1)(viia) of relied on by the assessee and held claim of deduction u/s.36(1)(viia) of the Act, should be limited to actual provision created for bad and doubtful the Act, should be limited to actual provision created for bad and doubtful the Act, should be limited to actual provision created for bad and doubtful debts made in the books of account, su debts made in the books of account, subject to ceiling provided bject to ceiling provided u/s.36(1)(viia) of the Act. The CIT(A) in this context, relied on Mumbai u/s.36(1)(viia) of the Act. The CIT(A) in this context, relied on Mumbai u/s.36(1)(viia) of the Act. The CIT(A) in this context, relied on Mumbai Bench of the Tribunal order in the case of Yes Bank Vs. DCIT in ITA Bench of the Tribunal order in the case of Yes Bank Vs. DCIT in ITA Bench of the Tribunal order in the case of Yes Bank Vs. DCIT in & 3239/Mum/2018 (order dated 30.06.2023). The relevant No.3501 & 3239/Mum/2018 (order dated 30.06.2023). The relevant No.3501 & 3239/Mum/2018 (order dated 30.06.2023). The relevant finding of the CIT(A) read finding of the CIT(A) reads as follows:- “Decision on Ground Nos.1, 2 and 3: These grounds are taken up “Decision on Ground Nos.1, 2 and 3: These grounds are taken up “Decision on Ground Nos.1, 2 and 3: These grounds are taken up together as they are related to each other. The reliance of the together as they are related to each other. The reliance of the together as they are related to each other. The reliance of the Appellant on Southern Technologies Vs JCIT 228 ITR 440 Appellant on Southern Technologies Vs JCIT 228 ITR 440 Appellant on Southern Technologies Vs JCIT 228 ITR 440 (Supreme Court) is misplaced. The issue in this case was whether (Supreme Court) is misplaced. The issue in this case was w (Supreme Court) is misplaced. The issue in this case was w the benefit of section 36(i)(viia) can be extended to NBFCs. The the benefit of section 36(i)(viia) can be extended to NBFCs. The the benefit of section 36(i)(viia) can be extended to NBFCs. The appellant is selectively quoting a paragraph from the order to appellant is selectively quoting a paragraph from the order to appellant is selectively quoting a paragraph from the order to reinforce its point. The paragraph being relied upon by the reinforce its point. The paragraph being relied upon by the reinforce its point. The paragraph being relied upon by the Appellant is as follows: "Lastly, as stated above, even in the case of Appellant is as follows: "Lastly, as stated above, even in th Appellant is as follows: "Lastly, as stated above, even in th banks the provision for NPA has to be added back and only after banks the provision for NPA has to be added back and only after banks the provision for NPA has to be added back and only after such add back that deduction u/s. 36(1)(viia) can be claimed by the such add back that deduction u/s. 36(1)(viia) can be claimed by the such add back that deduction u/s. 36(1)(viia) can be claimed by the banks." Vide submission dated 03/02/2021 and 03/07/2023 banks." Vide submission dated 03/02/2021 and 03/07/2023 banks." Vide submission dated 03/02/2021 and 03/07/2023 Appellant maintains the fact that the Hon'ble Supreme Court has Appellant maintains the fact that the Hon'ble Supreme Cour Appellant maintains the fact that the Hon'ble Supreme Cour said that the amount needs to be added back and then deduction said that the amount needs to be added back and then deduction said that the amount needs to be added back and then deduction u/s 36(1)(viia) claimed. The relevant paragraph of the submission u/s 36(1)(viia) claimed. The relevant paragraph of the submission u/s 36(1)(viia) claimed. The relevant paragraph of the submission is quoted below "The point to be highlighted is that in the case of is quoted below "The point to be highlighted is that in the case of is quoted below "The point to be highlighted is that in the case of banks, by way of incentive, a provision for bad and d banks, by way of incentive, a provision for bad and doubtful debt is oubtful debt is given the benefit of deduction, however, subject to the ceiling given the benefit of deduction, however, subject to the ceiling given the benefit of deduction, however, subject to the ceiling prescribed as stated above. Lastly, the provision for NPA created prescribed as stated above. Lastly, the provision for NPA created prescribed as stated above. Lastly, the provision for NPA created by scheduled bank is added back and only thereafter deduction is by scheduled bank is added back and only thereafter deduction is by scheduled bank is added back and only thereafter deduction is made permissible u/s. 36(1)(viia) as claimed" made permissible u/s. 36(1)(viia) as claimed". As pointed out . As pointed out above, matter before the Supreme Court in the case of Southern above, matter before the Supreme Court in the case of Southern above, matter before the Supreme Court in the case of Southern Technologies Vs JCIT was whether in the case of NBFC Technologies Vs JCIT was whether in the case of NBFC Technologies Vs JCIT was whether in the case of NBFC section36(1)(viia) is applicable. Whereas in the present case the section36(1)(viia) is applicable. Whereas in the present case the section36(1)(viia) is applicable. Whereas in the present case the issue to be decided is whether the allowable sum is the actual issue to be decided is whether the allowable sum is the a issue to be decided is whether the allowable sum is the a provision for bad and doubtful debts made in the books of account provision for bad and doubtful debts made in the books of account provision for bad and doubtful debts made in the books of account subject to the ceiling provided u/s 36(1)(viia) or whether the subject to the ceiling provided u/s 36(1)(viia) or whether the subject to the ceiling provided u/s 36(1)(viia) or whether the allowable sum is the one determined u/s 36(1)(viia) irrespective of allowable sum is the one determined u/s 36(1)(viia) irrespective of allowable sum is the one determined u/s 36(1)(viia) irrespective of :-9-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED the provision made. AO has relied on a decision of the Hon'ble the provision made. AO has relied on a decision of th the provision made. AO has relied on a decision of th Punjab and Haryana High Court where the issue was exactly the Punjab and Haryana High Court where the issue was exactly the Punjab and Haryana High Court where the issue was exactly the same and was the subject matter of appeal. In the case of Southern same and was the subject matter of appeal. In the case of Southern same and was the subject matter of appeal. In the case of Southern Technologies Vs JCIT it was not the subject matter of appeal and Technologies Vs JCIT it was not the subject matter of appeal and Technologies Vs JCIT it was not the subject matter of appeal and the context in which the above statement was made is also the context in which the above statement was made is the context in which the above statement was made is different. Even in the case of Southern Technologies vs JCIT on different. Even in the case of Southern Technologies vs JCIT on different. Even in the case of Southern Technologies vs JCIT on which reliance is placed by the Appellant the fact that Hon'ble SC which reliance is placed by the Appellant the fact that Hon'ble SC which reliance is placed by the Appellant the fact that Hon'ble SC has mentioned that the actual provision be added back before has mentioned that the actual provision be added back before has mentioned that the actual provision be added back before allowing deduction u/s 36(1)(viia) is to ensure that Appellant does allowing deduction u/s 36(1)(viia) is to ensure that Appel allowing deduction u/s 36(1)(viia) is to ensure that Appel not get the benefit of double deduction. Also the amount u/s not get the benefit of double deduction. Also the amount u/s not get the benefit of double deduction. Also the amount u/s 36(1)(viia) will vary as the Total Income itself will change 36(1)(viia) will vary as the Total Income itself will change 36(1)(viia) will vary as the Total Income itself will change depending on whether actual provision is added back or not. depending on whether actual provision is added back or not. depending on whether actual provision is added back or not. Moreover, the Hon'ble Supreme Court in the same case i.e Moreover, the Hon'ble Supreme Court in the same case i.e Moreover, the Hon'ble Supreme Court in the same case i.e Southern Technologies Vs JCIT 228 ITR 440(SC) on Page 55 of the n Technologies Vs JCIT 228 ITR 440(SC) on Page 55 of the n Technologies Vs JCIT 228 ITR 440(SC) on Page 55 of the order has observed as follows order has observed as follows- "So also, as stated above, Section "So also, as stated above, Section 36(1) (viia) provides for a deduction not only in respect of written 36(1) (viia) provides for a deduction not only in respect of written 36(1) (viia) provides for a deduction not only in respect of written off bad debt but in case of banks it extends the allowance also to off bad debt but in case of banks it extends the allowance also off bad debt but in case of banks it extends the allowance also any Provision for bad and doubtful debts 'made' by banks which any Provision for bad and doubtful debts 'made' by banks which any Provision for bad and doubtful debts 'made' by banks which incentive is not given to NBFCs. Therefore the judgement incentive is not given to NBFCs. Therefore the judgement incentive is not given to NBFCs. Therefore the judgement unequivocally emphasizes that provision for bad and doubtful unequivocally emphasizes that provision for bad and doubtful unequivocally emphasizes that provision for bad and doubtful debts has to be "made" by banks. In the absence of any provision debts has to be "made" by banks. In the absence of any provision debts has to be "made" by banks. In the absence of any provision for bad and doubtful debt made there would be no allowance u/s and doubtful debt made there would be no allowance u/s and doubtful debt made there would be no allowance u/s 36(1)(viia). Going by the appellant's logic even in cases where no 36(1)(viia). Going by the appellant's logic even in cases where no 36(1)(viia). Going by the appellant's logic even in cases where no provision is made by the banks for bad and doubtful debts provision is made by the banks for bad and doubtful debts provision is made by the banks for bad and doubtful debts allowance u/s 36(i)(viia) will still be available. This is clearly not allowance u/s 36(i)(viia) will still be available. This is clearly not allowance u/s 36(i)(viia) will still be available. This is clearly not the case as pointed out above. The appellant has conveniently case as pointed out above. The appellant has conveniently case as pointed out above. The appellant has conveniently omitted this part of the judgement. The appellant vide submission omitted this part of the judgement. The appellant vide submission omitted this part of the judgement. The appellant vide submission dated 18/07/2024 relied on a decision of Hon'ble ITAT Bangalore dated 18/07/2024 relied on a decision of Hon'ble ITAT Bangalore dated 18/07/2024 relied on a decision of Hon'ble ITAT Bangalore in the case of Syndicate Bank Vs Deputy Commissioner of Income in the case of Syndicate Bank Vs Deputy Commissioner of Income in the case of Syndicate Bank Vs Deputy Commissioner of Income tax 78 ITD(BANG). However as quoted above the Hon'ble Punjab 8 ITD(BANG). However as quoted above the Hon'ble Punjab 8 ITD(BANG). However as quoted above the Hon'ble Punjab and Haryana High Court in the case of State Bank of Patiala vs and Haryana High Court in the case of State Bank of Patiala vs and Haryana High Court in the case of State Bank of Patiala vs CIT[2005] 272 ITR 54 has clearly held that "9. We are, therefore, CIT[2005] 272 ITR 54 has clearly held that "9. We are, therefore, CIT[2005] 272 ITR 54 has clearly held that "9. We are, therefore, satisfied that the Tribunal was right in holding that since the satisfied that the Tribunal was right in holding that since the satisfied that the Tribunal was right in holding that since the assessee had made a provision of Rs. 1,19,36,000 for bad and e had made a provision of Rs. 1,19,36,000 for bad and e had made a provision of Rs. 1,19,36,000 for bad and doubtful debts, its claim for deduction u/s. 36(1) (viia) of the Act doubtful debts, its claim for deduction u/s. 36(1) (viia) of the Act doubtful debts, its claim for deduction u/s. 36(1) (viia) of the Act had to be restricted to that amount only. Since the language of the had to be restricted to that amount only. Since the language of the had to be restricted to that amount only. Since the language of the statute is clear and is not capable of any other interpretation, we statute is clear and is not capable of any other interpretation, statute is clear and is not capable of any other interpretation, are satisfied that no substantial question of law arises in this are satisfied that no substantial question of law arises in this are satisfied that no substantial question of law arises in this appeal for consideration by this court." The Hon'ble ITAT at appeal for consideration by this court." The Hon'ble ITAT at appeal for consideration by this court." The Hon'ble ITAT at :-10-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED Mumbai had an occasion to deal with this issue in the case of Yes Mumbai had an occasion to deal with this issue in the case of Yes Mumbai had an occasion to deal with this issue in the case of Yes Bank Vs DCIT for AY 2014 Bank Vs DCIT for AY 2014-15. The relevant portion of the orde 15. The relevant portion of the order dated 30/06/2023 is quoted below 17. The ground Nos. 9 to 14 of dated 30/06/2023 is quoted below 17. The ground Nos. 9 to 14 of dated 30/06/2023 is quoted below 17. The ground Nos. 9 to 14 of the appeal of the assessee and ground No. 3 of the appeal of the the appeal of the assessee and ground No. 3 of the appeal of the the appeal of the assessee and ground No. 3 of the appeal of the Revenue are connected with the issue of deduction u/s Revenue are connected with the issue of deduction u/s Revenue are connected with the issue of deduction u/s 36(1)(1)(viia) of the Act. 17.1 Briefly stated facts qua the issue in 36(1)(1)(viia) of the Act. 17.1 Briefly stated facts qua the issue in 36(1)(1)(viia) of the Act. 17.1 Briefly stated facts qua the issue in dispute are that the ground pertains to disallowance of provision of ispute are that the ground pertains to disallowance of provision of ispute are that the ground pertains to disallowance of provision of bad and doubtful debts claimed by the assessee u/s 36(1)(visa) of bad and doubtful debts claimed by the assessee u/s 36(1)(visa) of bad and doubtful debts claimed by the assessee u/s 36(1)(visa) of Rs. 135,21,64,723/ Rs. 135,21,64,723/-with respect to non-performing assets (NPA). performing assets (NPA). The Assessing Officer disallowed the same on the premises that the The Assessing Officer disallowed the same on the premises The Assessing Officer disallowed the same on the premises same pertain to Standard Assets and hence should not be allowed. same pertain to Standard Assets and hence should not be allowed. same pertain to Standard Assets and hence should not be allowed. The Ld. CIT(A) remanded the issue back to the file of the AO for The Ld. CIT(A) remanded the issue back to the file of the AO for The Ld. CIT(A) remanded the issue back to the file of the AO for examining whether claim pertain to Rural v. non examining whether claim pertain to Rural v. non-rural branches. rural branches. Before us, the Ld. Counsel of the assessee submitted Before us, the Ld. Counsel of the assessee submitted that the claim that the claim pertains to only NPA and not standard assets. He submitted that pertains to only NPA and not standard assets. He submitted that pertains to only NPA and not standard assets. He submitted that provision for standard advances is a separate line of item in provision for standard advances is a separate line of item in provision for standard advances is a separate line of item in computation of income (COI) and the claim u/s 36(1)(viia) of the computation of income (COI) and the claim u/s 36(1)(viia) of the computation of income (COI) and the claim u/s 36(1)(viia) of the assessee purely pertains to NPAs and claim has not assessee purely pertains to NPAs and claim has not been made for been made for standard advances. He further submitted the there is no such standard advances. He further submitted the there is no such standard advances. He further submitted the there is no such requirement that u/s. 36(1)(viia) of the Act deduction can be requirement that u/s. 36(1)(viia) of the Act deduction can be requirement that u/s. 36(1)(viia) of the Act deduction can be claimed only with respect to rural branches. The Ld. Counsel claimed only with respect to rural branches. The Ld. Counsel claimed only with respect to rural branches. The Ld. Counsel further submitted that the issue in dispute is covered in assessee's further submitted that the issue in dispute is covered in further submitted that the issue in dispute is covered in own case for AY 2011 own case for AY 2011-12 to 2013-14. The Ld. DR also could not 14. The Ld. DR also could not controvert this fact.

18. We have heard rival submission of the controvert this fact.

18. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on parties on the issue in dispute and perused the relevant material on parties on the issue in dispute and perused the relevant material on record. The identical issue has been decided by t record. The identical issue has been decided by the Tribunal in he Tribunal in favour of the assessee for AY 2011 favour of the assessee for AY 2011-12 to 2013-14. The relevant 14. The relevant finding of the Tribunal is reproduced as under: "085. We have finding of the Tribunal is reproduced as under: "085. We have finding of the Tribunal is reproduced as under: "085. We have carefully considered the rival contention and perused the orders of carefully considered the rival contention and perused the orders of carefully considered the rival contention and perused the orders of the lower authorities. The only reason why the deduction is the lower authorities. The only reason why the d the lower authorities. The only reason why the deduction is disallowed to the assessee is that assessee does not have any rural disallowed to the assessee is that assessee does not have any rural disallowed to the assessee is that assessee does not have any rural branches, we find that deduction u/s 36 (1) (viia) of the act is not branches, we find that deduction u/s 36 (1) (viia) of the act is not branches, we find that deduction u/s 36 (1) (viia) of the act is not restricted to the banks only having the rural branches. This has restricted to the banks only having the rural branches. This has restricted to the banks only having the rural branches. This has been dealt with in 42 taxmann.com 303 as u been dealt with in 42 taxmann.com 303 as under :- "34. It can be "34. It can be seen from the history of Sec.36(1)(vita) of the Act that at stage-l the seen from the history of Sec.36(1)(vita) of the Act that at stage seen from the history of Sec.36(1)(vita) of the Act that at stage deduction was allowed in respect of any provision for bad and deduction was allowed in respect of any provision for bad and deduction was allowed in respect of any provision for bad and doubtful debts made by a scheduled bank in relation to the doubtful debts made by a scheduled bank in relation to the doubtful debts made by a scheduled bank in relation to the advances made by its rural branches. At advances made by its rural branches. At this stage the PBDD had this stage the PBDD had to be linked to the advances made by Bank's rural branches. At to be linked to the advances made by Bank's rural branches. At to be linked to the advances made by Bank's rural branches. At :-11-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED stage-ll of Sec. 36(1) (vita), the deduction while computing the ll of Sec. 36(1) (vita), the deduction while computing the ll of Sec. 36(1) (vita), the deduction while computing the taxable profits was allowed of an amount not exceeding ten per taxable profits was allowed of an amount not exceeding ten per taxable profits was allowed of an amount not exceeding ten per cent of the total income (computed before cent of the total income (computed before making any deduction making any deduction under the proposed new provision) or two per cent of the under the proposed new provision) or two per cent of the under the proposed new provision) or two per cent of the aggregate average advances made by rural branches of such aggregate average advances made by rural branches of such aggregate average advances made by rural branches of such banks, whichever is higher. At this stage also the PBDD had to be banks, whichever is higher. At this stage also the PBDD had to be banks, whichever is higher. At this stage also the PBDD had to be created and debited to the profit and loss account bu created and debited to the profit and loss account but it was not t it was not required to be done in relation to advances made by Bank's rural required to be done in relation to advances made by Bank's rural required to be done in relation to advances made by Bank's rural branches and can be in relation to any debt. PBDD need not be in branches and can be in relation to any debt. PBDD need not be in branches and can be in relation to any debt. PBDD need not be in relation to rural advances but can be in relation to any advances relation to rural advances but can be in relation to any advances relation to rural advances but can be in relation to any advances both rural and non both rural and non-rural advances. The two percent AAA made by ent AAA made by rural branches of such banks had to be computed and the PBDD rural branches of such banks had to be computed and the PBDD rural branches of such banks had to be computed and the PBDD made in books has to be in relation to rural advances. The other made in books has to be in relation to rural advances. The other made in books has to be in relation to rural advances. The other eligible sum which can be considered for deduction u/s.36(1) (viia) eligible sum which can be considered for deduction u/s.36(1) (viia) eligible sum which can be considered for deduction u/s.36(1) (viia) of the Act viz., ten per cent of the total inc of the Act viz., ten per cent of the total income (computed before ome (computed before making any deduction under the proposed new provision) does not making any deduction under the proposed new provision) does not making any deduction under the proposed new provision) does not require computation in relation to rural advances. Nevertheless the require computation in relation to rural advances. Nevertheless the require computation in relation to rural advances. Nevertheless the debit of PBDD to Profit and Loss account is necessary of the debit of PBDD to Profit and Loss account is necessary of the debit of PBDD to Profit and Loss account is necessary of the higher of the two sums to claim deduction higher of the two sums to claim deduction u/s.36(1)(viia) of the Act. u/s.36(1)(viia) of the Act. If the concerned bank does not have rural branches then they could If the concerned bank does not have rural branches then they could If the concerned bank does not have rural branches then they could not claim the deduction. Therefore the deduction was confined only not claim the deduction. Therefore the deduction was confined only not claim the deduction. Therefore the deduction was confined only to banks that had rural branches.

35. At Stage to banks that had rural branches.

:-12-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED branches.

36. Therefore after 1.4.1987, scheduled or non- branches.

36. Therefore after 1.4.1987, scheduled or non branches.

37. Thou accounts is necessary.

7. Aggrieved by the order of the CIT(A), the assessee has filed present 7. Aggrieved by the order of the CIT(A), the assessee has filed present 7. Aggrieved by the order of the CIT(A), the assessee has filed present appeals before the Tribunal. The learned AR has filed paper book appeals before the Tribunal. The learned AR has filed paper book appeals before the Tribunal. The learned AR has filed paper book enclosing therein the memorandum explaining provision of introduction enclosing therein the memorandum explaining provision of introduction enclosing therein the memorandum explaining provision of introduction

:-13-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED of section 36(1)(viia) of the Act an of section 36(1)(viia) of the Act and various amendments made to the d various amendments made to the said section over the period of time etc. The learned AR reiterated said section over the period of time etc. The learned AR reiterated said section over the period of time etc. The learned AR reiterated submissions made before the AO and CIT(A). submissions made before the AO and CIT(A).

8. The learned DR, on the other hand, submitted that issue whether 8. The learned DR, on the other hand, submitted that issue whether 8. The learned DR, on the other hand, submitted that issue whether deduction u/s.36(1)(viia) of the Act is to be deduction u/s.36(1)(viia) of the Act is to be allowed to the extent of 7.5% allowed to the extent of 7.5% of the total income and 10% of aggregate of average total advance, of the total income and 10% of aggregate of average total advance, of the total income and 10% of aggregate of average total advance, irrespective of the amount of provisions debited to the profit & loss irrespective of the amount of provisions debited to the profit & loss irrespective of the amount of provisions debited to the profit & loss account as per RBI norms is no longer res integra, as the same is covered account as per RBI norms is no longer res integra, as the same is covered account as per RBI norms is no longer res integra, as the same is covered in favour of the Revenue by the judgements of the Hon’ble Karnataka he Revenue by the judgements of the Hon’ble Karnataka he Revenue by the judgements of the Hon’ble Karnataka High Court in the case of CIT Vs.Syndicate Bank reported in (2020) 422 High Court in the case of CIT Vs.Syndicate Bank reported in (2020) 422 High Court in the case of CIT Vs.Syndicate Bank reported in (2020) 422 ITR 460 (Kar), in the case of CIT Vijaya Bank in of 2008 ITR 460 (Kar), in the case of CIT Vijaya Bank in of 2008 ITR 460 (Kar), in the case of CIT Vijaya Bank in of 2008 (judgement dated 21.10.2024) and judgement of the Hon’ble Punjab & (judgement dated 21.10.2024) and judgement of the Hon’ble Punj (judgement dated 21.10.2024) and judgement of the Hon’ble Punj Haryana High Court in the case of State Bank of Patiala Vs.CIT reported Haryana High Court in the case of State Bank of Patiala Vs.CIT reported Haryana High Court in the case of State Bank of Patiala Vs.CIT reported in (2005) 272 ITR 54 (P&H). in (2005) 272 ITR 54 (P&H).

9. We have heard rival submissions and perused material on record. As 9. We have heard rival submissions and perused material on record. As 9. We have heard rival submissions and perused material on record. As mentioned earlier, the solitary issue that has raised for our adjudication is mentioned earlier, the solitary issue that has raised for our adjudication is mentioned earlier, the solitary issue that has raised for our adjudication is whether deduction u/s.36(1)(viia) of the Act is actual provision for bad ether deduction u/s.36(1)(viia) of the Act is actual provision for bad ether deduction u/s.36(1)(viia) of the Act is actual provision for bad and doubtful debts made in the books of account, subject to ceiling and doubtful debts made in the books of account, subject to ceiling and doubtful debts made in the books of account, subject to ceiling provided u/s.36(1)(viia) of the Act, or whether allowable sum is the same provided u/s.36(1)(viia) of the Act, or whether allowable sum is the same provided u/s.36(1)(viia) of the Act, or whether allowable sum is the same as determined u/s.36(1)(viia) of the Act, i as determined u/s.36(1)(viia) of the Act, irrespective of the provision rrespective of the provision made by the assessee in its books of account. The claim of the assessee made by the assessee in its books of account. The claim of the assessee made by the assessee in its books of account. The claim of the assessee before us is that irrespective of quantum of “provision” made, it should before us is that irrespective of quantum of “provision” made, it should before us is that irrespective of quantum of “provision” made, it should be allowed as deduction based on the maximum amount prescribed be allowed as deduction based on the maximum amount prescribed be allowed as deduction based on the maximum amount prescribed u/s.36(1)(viia) of the Act. The case laws relied on by the assessee has the Act. The case laws relied on by the assessee has the Act. The case laws relied on by the assessee has been distinguished by the CIT(A) in the impugned orders at page 39 to 44 been distinguished by the CIT(A) in the impugned orders at page 39 to 44 been distinguished by the CIT(A) in the impugned orders at page 39 to 44 and we approve the CIT(A) order in distinguishing the same. The and we approve the CIT(A) order in distinguishing the same. The and we approve the CIT(A) order in distinguishing the same. The Hon’ble Karnataka High Court in the case of CIT Vs Syndicate Bank Hon’ble Karnataka High Court in the case of CIT Vs Syndicate Bank Hon’ble Karnataka High Court in the case of CIT Vs Syndicate Bank reported in (2020) 422 ITR 460 (Kar) considered an identical issue and reported in (2020) 422 ITR 460 (Kar) considered an identical issue and reported in (2020) 422 ITR 460 (Kar) considered an identical issue and has categorically held that conditions precedent for claiming deduction has categorically held that conditions precedent for claiming deduction has categorically held that conditions precedent for claiming deduction u/s.36(1)(viia) of the Act is that there should have been “provision” made u/s.36(1)(viia) of the Act is that there should have been “provision” made u/s.36(1)(viia) of the Act is that there should have been “provision” made and if the “provision” so made is exce and if the “provision” so made is excess of prescribed limit made u/s., ss of prescribed limit made u/s., then deduction will be allowed only to the extent of limit so prescribed. then deduction will be allowed only to the extent of limit so prescribed. then deduction will be allowed only to the extent of limit so prescribed. However, if the “provision” made is lower than the prescribed limit, then However, if the “provision” made is lower than the prescribed limit, then However, if the “provision” made is lower than the prescribed limit, then deduction can be only to the extent of “provision” made. It was further deduction can be only to the extent of “provision” made. It was further deduction can be only to the extent of “provision” made. It was further held by Hon’ble High Court that language employed in section ld by Hon’ble High Court that language employed in section ld by Hon’ble High Court that language employed in section 36(1)(viia) of the Act is very clear and unambiguous and there is no need 36(1)(viia) of the Act is very clear and unambiguous and there is no need 36(1)(viia) of the Act is very clear and unambiguous and there is no need to go into intention or object behind said section. It was concluded by the to go into intention or object behind said section. It was concluded by the to go into intention or object behind said section. It was concluded by the :-14-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED Hon’ble Court that in absence of any “provision Hon’ble Court that in absence of any “provision” made, deduction ” made, deduction u/s.36(1)(viia) of the Act cannot be allowed. The relevant finding of the u/s.36(1)(viia) of the Act cannot be allowed. The relevant finding of the u/s.36(1)(viia) of the Act cannot be allowed. The relevant finding of the Hon’ble Karnataka High Court reads as follows: Hon’ble Karnataka High Court reads as follows:- “8. Thus, a conjoint reading of provision contained in section “8. Thus, a conjoint reading of provision contained in section “8. Thus, a conjoint reading of provision contained in section 36(1)(viia) and explanatory note dated 30 36(1)(viia) and explanatory note dated 30-6-1982 it is evident that is evident that deduction provided in section 36(1)(viia) shall be allowed in deduction provided in section 36(1)(viia) shall be allowed in deduction provided in section 36(1)(viia) shall be allowed in respect of the matters dealt therein in computing the income. The respect of the matters dealt therein in computing the income. The respect of the matters dealt therein in computing the income. The condition precedent for elaiming deduction u/s. 36(1)(viia) of the condition precedent for elaiming deduction u/s. 36(1)(viia) of the condition precedent for elaiming deduction u/s. 36(1)(viia) of the Act is that a provision for bad and doubtful Act is that a provision for bad and doubtful debt should be made in debt should be made in the accounts of the assessee. The aforesaid section mentions the the accounts of the assessee. The aforesaid section mentions the the accounts of the assessee. The aforesaid section mentions the maximum amount for which such a provision should be made. If a maximum amount for which such a provision should be made. If a maximum amount for which such a provision should be made. If a provision is made in excess of the limits prescribed under the provision is made in excess of the limits prescribed under the provision is made in excess of the limits prescribed under the section, the assessee would not be entitle section, the assessee would not be entitled to deduction of the d to deduction of the excess amount. Once a provision is made and the amount of excess amount. Once a provision is made and the amount of excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee deduction is within the limit prescribed under the Act, the assessee deduction is within the limit prescribed under the Act, the assessee would be entitled to deduction of the amount for which provision is would be entitled to deduction of the amount for which provision is would be entitled to deduction of the amount for which provision is made in the books of accounts. made in the books of accounts.

9. The language employed in section 36(1)(viia) of the Act is clear language employed in section 36(1)(viia) of the Act is clear language employed in section 36(1)(viia) of the Act is clear and unambiguous. It is well established Rule of interpretation and unambiguous. It is well established Rule of interpretation and unambiguous. It is well established Rule of interpretation stated by LORD CAIRNS that "if the person sought to be taxed stated by LORD CAIRNS that "if the person sought to be taxed stated by LORD CAIRNS that "if the person sought to be taxed comes within the letter of the law he must be taxed, however great comes within the letter of the law he must be taxed, however great comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hardship may appear to the judicial mind to be. On the other hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the hand, if the Crown seeking to recover the tax, cannot bring the hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however subject within the letter of the law, the subject is free, however subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear apparently within the spirit of law the case might otherwise app apparently within the spirit of law the case might otherwise app to be. It is equally well settled legal proposition that "in a taxing to be. It is equally well settled legal proposition that "in a taxing to be. It is equally well settled legal proposition that "in a taxing act once has to look merely as what is said There is no room for act once has to look merely as what is said There is no room for act once has to look merely as what is said There is no room for any intendment. There is no equity about a tax. There is no any intendment. There is no equity about a tax. There is no any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be presumption as to tax. Nothing is to be read in, nothing presumption as to tax. Nothing is to be read in, nothing implied. One can only look fairly at the language used." [SEE: CIT implied. One can only look fairly at the language used." [SEE: CIT implied. One can only look fairly at the language used." [SEE: CIT v. Kasturi & Sons Ltd. [1999] 103 Taxman 342/237 ITR 24 (SC) v. Kasturi & Sons Ltd. [1999] 103 Taxman 342/237 ITR 24 (SC) v. Kasturi & Sons Ltd. [1999] 103 Taxman 342/237 ITR 24 (SC) and Mahim Patram (P.) Ltd. v. Union of India 2008 taxmann.com and Mahim Patram (P.) Ltd. v. Union of India 2008 taxmann.com and Mahim Patram (P.) Ltd. v. Union of India 2008 taxmann.com 1074 (SC)] [See: Principles of statutory interpretation, 1074 (SC)] [See: Principles of statutory interpretation, justice G.P. justice G.P. Singh, 14th edition, page 879). Therefore, the question of going Singh, 14th edition, page 879). Therefore, the question of going Singh, 14th edition, page 879). Therefore, the question of going into intention or object behind the provision viz., section 36(1) into intention or object behind the provision viz., section 36(1) into intention or object behind the provision viz., section 36(1) (viia) of the Act does not arise. (viia) of the Act does not arise.

:-15-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED 10. The submission that even in the absence of any provision, the 10. The submission that even in the absence of any provision, the 10. The submission that even in the absence of any provision, the assessee is entitled to deduction cannot be accepted. The assessee entitled to deduction cannot be accepted. The assessee entitled to deduction cannot be accepted. The assessee is entitled to deduction to the extent provision made in the accounts is entitled to deduction to the extent provision made in the accounts is entitled to deduction to the extent provision made in the accounts subject to limit mentioned in section 36(viia) of the Act.” subject to limit mentioned in section 36(viia) of the Act.” subject to limit mentioned in section 36(viia) of the Act.”

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED accordance with law and the judgment of the Tribunal rendered in accordance with law and the judgment of the Tribunal rendered in accordance with law and the judgment of the Tribunal rendered in Syndicate Bank's case on which reliance is placed runs counter to Syndicate Bank's case on which reliance is placed runs counter to Syndicate Bank's case on which reliance is placed runs counter to the statutory provision and therefore, the said order passed by the the statutory provision and therefore, the said order passed by the the statutory provision and therefore, the said order passed by the Tribunal does not Tribunal does not lay down the correct law.”

7. This also clearly shows that making of provision equal to the 7. This also clearly shows that making of provision equal to the 7. This also clearly shows that making of provision equal to the amount claimed as deduction in the account books is necessary for mount claimed as deduction in the account books is necessary for mount claimed as deduction in the account books is necessary for claiming deduction u/s. 36(1)(viia) of the Act. The Tribunal has claiming deduction u/s. 36(1)(viia) of the Act. The Tribunal has claiming deduction u/s. 36(1)(viia) of the Act. The Tribunal has distinguished various authorities relied upon by the assessee distinguished various authorities relied upon by the assessee distinguished various authorities relied upon by the assessee wherein deductions had been allowed under various provisions wherein deductions had been allowed under various provisions wherein deductions had been allowed under various provisions which also required creation of reserve after the assessee had ch also required creation of reserve after the assessee had ch also required creation of reserve after the assessee had created such reserve in the account books before the completion of created such reserve in the account books before the completion of created such reserve in the account books before the completion of the assessment. It has been correctly pointed out that in all those the assessment. It has been correctly pointed out that in all those the assessment. It has been correctly pointed out that in all those

:-17-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED cases, reserves/provisions had been made in the books of account cases, reserves/provisions had been made in the books of acco cases, reserves/provisions had been made in the books of acco of the same assessment year and not of the subsequent assessment of the same assessment year and not of the subsequent assessment of the same assessment year and not of the subsequent assessment year.

8. In the present case, the assessee has not made any provision in 8. In the present case, the assessee has not made any provision in 8. In the present case, the assessee has not made any provision in the books of account for the assessment year under consideration, the books of account for the assessment year under consideration, the books of account for the assessment year under consideration, ie., 1985-86, by making supplementary entries a 86, by making supplementary entries and by revising its nd by revising its balance-sheet. The provision has been made in the books of sheet. The provision has been made in the books of sheet. The provision has been made in the books of account of the subsequent year. account of the subsequent year.

:-18-:

ITA 2699 & 2700 Chny 2025 FY 2013-14, 2015-16 ITA 2699 & 2700 Chny 2025 FY 2013 In CO-92 Cheny 2025 in Chny 2025 2025 in Chny 2025 CO OP BANK LIMITED DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL DCIT NON CIRCLE II MADURAI VS VIRUDHUNAGAR DISTRICT CENTRAL CO OP BANK LIMITED clearly linking the deduc clearly linking the deduction to the existence and quantum of such tion to the existence and quantum of such provision. While the provision is undoubtedly incentive provision. While the provision is undoubtedly incentive-oriented, the oriented, the statutory incentive operates statutory incentive operates within the framework expressly laid within the framework expressly laid down by Parliament, which requires a provision to be made as a , which requires a provision to be made as a , which requires a provision to be made as a condition precedent.

Therefore, the order of the Ld.CIT(A) allowing deduction beyond the Therefore, the order of the Ld.CIT(A) allowing deduction beyond the Therefore, the order of the Ld.CIT(A) allowing deduction beyond the book provision cannot be sustained. book provision cannot be sustained.

9. The appeals filed by the Revenue are allowed appeals filed by the Revenue are allowed. The cross The cross- objections filed by the assessee are objections filed by the assessee are dismissed.

Order pronounced on the 28th day of January, 2026, in Chennai. Order pronounced on the , in Chennai.