M/S JILA SAHAKARI KENDRIYA BANK MARYADIT,RAIPUR vs. DY.. C.I.T.-1(1), RAIPUR

Brief facts of the case are that the assessee a co-operative bank, filed its return of income for the assessment year under consideration declaring the total income of Rs. 96,88,880/-. The case was selected for scrutiny. In response to the notice issued u/s 143 (2) and 142 (1) of the Act, the authorized representative of the assessee appeared before the AO

Aggrieved by the impugned order passed by the Ld. CIT (A), the assessee has preferred this appeal before the Tribunal on the following effective ground:- “In the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming addition of Rs. 25,69,45,585/- made by the AO on account of denial of deduction u/s 36(I)(viia). He erred in holding that deduction u/s 36(I)(viia) claimed by the appellant is not admissible. The order of the AO and of CIT (A) is illegal and not sustainable.”

Before us, the Ld. counsel submitted that after the introduction of prudential norms in the year 1993, all the banks whether scheduled or non scheduled including cooperative on which Banking Regulation Act, 1949 applies are compulsorily required to make provisions under the RBI guidelines. During the year under consideration, the assessee had made provisions for bad debts as per RBI guidelines. The provision for bad and doubtful debts appearing in the books of account of the assessee is 3 Assessment Year: 2010-11

On the other hand, the Ld. Departmental Representative (DR) relied on the findings of the Ld. CIT (A).

We have heard the rival submissions and also perused the material on record. The Ld. counsel for the assessee submitted that the deduction u/s 36(1)(viia) are statutory deductions allowable under the Act and the deductions have to be allowed whether the provisions is made or not. However, in our considered view there is no merit in the argument of the Ld. counsel. We agree with the Ld. CIT(A) that in order to claim deduction under section 36(viiia) of the Act, the assessee is required to make provision and debit the same from the P & L account. Hence, the assessee was required to make the provision in accordance with the Act. The copy of P & L account submitted by the Ld. counsel prima facie shows that the assessee bank had made the provision for bad and doubtful advances to the extent of Rs. 45,84,000/-. Accordingly, deduction to that extent cannot be denied under the provisions of section 36(viia) of the Act. Since there is no reference of this document in the orders passed by the authorities below, in our considered view the same needs verification by the AO. Hence, in the interest of justice, we set aside the findings of the Ld. CIT(A) and restore the sole ground of appeal