THE COMMISSIONER OF INCOME TAX vs. M/S CANARA BANK

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside claim of assessee relating to unrealized gains on revaluation of forward contracts when assessing authority rightly denied the same by holding that as the bank accounts were admittedly prepared on accrual basis and revenue was recognized by following mercantile method except for certain items which were accounted on cash basis?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in allowing

Whether on the facts and in the circumstances of the case the Tribunal is right in law in setting aside disallowances made under section 36(1) (viia) of the Act by the assessing authority by placing reliance on its earlier judgment in the case of Vijaya Bank even though the said judgment has not reached finality and assessing authority had rightly observed that only incremental advances has to be considered for computing ‘Agreegate Rural Advances’ as per Rule 6ABA of Income Tax Rules?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the disallowance made under section 14A of the Act by even when the conditions for invoking said provisions as fully satisfied in the case of the assessee?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside disallowances on account of AFS and HFT category of investments by relying upon the decisions which has not reached finality and even when the assessing authority rightly disallowed the depreciation on investment of Available for Sale (AFS) and held for trading (HFT) category investment and added to the taxable income?"

Heard Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue and Shri T.Suryanarayana, learned Senior Advocate for the assessee.

At the outset, Shri Suryanarayana submitted • that questions No.1 and 2 have been answered in favour of the assessee and against the Revenue in ITA No.268/20181; • that questions No.3 and 6 have been answered in favour of the assessee and against the Revenue in ITA No.27/20172; • that question No.4 has been covered in favour of the assessee and against the Revenue in the decision of High Court of Calcutta in Principal Commissioner of Income Tax, Jalpaiguri Vs. Uttarabanga Kshetriya Gramin Bank3 ; and • that question No.5 has been answered in favour of the assessee and against the Revenue in the decision of Supreme Court of India in South Indian Bank Ltd. vs. Commissioner of Income-Tax4;

Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue, in his usual fairness, does not dispute the submissions of learned Senior Advocate with regard to questions No.1, 2, 3, 5 and 6. 5. Accordingly, questions No.1, 2, 3, 5 and 6 are answered in favour of the assessee and against the Revenue. 6. In so far as question No.4 is concerned, adverting to Section 36(1)(viia) of the Income Tax Act, 1961, Shri Aravind submitted that the word used in the statute is aggregate average advances "made" by the rural branches. To quote an example, he submitted that for A.Y. is 2013-14 (F.Y. 2012-13) if the bad debt as on 31.03.2012 is considered to be as Rs.1 Crore by virtue of making provisions subsequently, the assessee will be entitled for double benefit because provisions in respect of 10% of the bad debt of provisions of Rs.1 Crore towards bad debt was already made as on 31.03.2012. Therefore, if the same amount is carried forward for the next F.Y., the assessee will be entitled

In Para 7.2 of the impugned order, the Tribunal has recorded thus, "7.2 Before us, the learned Authorised Representative for the assessee reiterated the submission that the language of Rule 6ABA is very clear and does not mandate that only incremental advances has to be considered and nothing can be read into it as has been done by the authorities below. It was submitted that this issue has been considered and decided in favour of the assessee by the co-ordinate bench of this Tribunal in the case of Canara Bank Vs. JCIT (2017) 60 ITR (Trib) 1 [ITAT (Bang)]" 10. It is further held that the said decision has been followed in Vijaya Bank case. The manner in which the computation has been made has been given in the case of Vijaya Bank Case. Order passed by the Tribunal in Canara Bank's case followed in Vijaya Bank case has attained finality and the Revenue has not challenged the said order. Further, the High Court of Calcutta, while considering an identical situation as recorded thus, "Mr. Khaitan, learned senior Advocate appeared on behalf of the assessee and submitted that the computation to be made as prescribed by Rule 6ABA is for the purpose of fixing the limit of the deduction available under section 36(1)(viia). Clauses (a) and (b) in Rule 6ABA cannot be given the restricted interpretation. The amounts of advances as outstanding at the last day of