State Bank of Patiala, Patiala v. ACIT, Patiala

ITA 136/CHANDI/2009 | 2003-2004
Pronouncement Date: 30-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 13621514 RSA 2009
Assessee PAN EPORT1991F
Bench Chandigarh
Appeal Number ITA 136/CHANDI/2009
Duration Of Justice 2 year(s) 1 month(s) 17 day(s)
Appellant State Bank of Patiala, Patiala
Respondent ACIT, Patiala
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 30-03-2011
Date Of Final Hearing 22-11-2012
Next Hearing Date 22-11-2012
Assessment Year 2003-2004
Appeal Filed On 12-02-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI N.BARATHVAJA SANKAR VICE PRESIDENT AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NOS. 593 136 328 594 & 595/CHD/2009 ASSESSMENT YEARS: 2002-03 TO 2006-07 STATE BANK OF PATIALA VS. THE ACIT CIRCLE PATIALA PATIALA PAN NO. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ JAIN / SHRI D.K.GOYAL & MS. KRISHNA BHANDARI RESPONDENT BY: SHR S.K.MITTAL ORDER PER SUSHMA CHOWLA JM THESE FIVE APPEALS BY THE SAME ASSESSEE ARE AGAINST DIFFERENT ORDERS OF CIT(A) PATIALA DATED 31.3.2009/8.12.2008/11.2.2 009/24.3.2009 & 31.3.2009 RESPECTIVELY RELATING TO ASSESSMENT YEARS 2002-03 TO 2006-07 AGAINST THE ORDERS PASSED UNDER SECTION 143(3) / 14 8 OF THE I.T. ACT 1961. 2. VARIOUS GROUNDS OF APPEAL HAVE BEEN RAISED IN AL L THE APPEALS BY THE ASSESSEE FOR THE DIFFERENT ASSESSMENT YEARS. ALL T HE APPEALS RELATING TO THE SAME ASSESSEE ON IDENTICAL ISSUES WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE 2 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET P OINTED OUT THAT COD APPROVAL HAS NOT BEEN GIVEN IN RESPECT OF THE FOLLO WING GROUNDS OF APPEAL RAISED FOR THE RECEPTIVE ASSESSMENT YEARS WHICH AR E AS UNDER:- A) FOR ASSESSMENT YEAR 2002-03 GROUND NOS. 1 & 3 B) FOR ASSESSMENT YEAR 2003-04 GROUND NOS. 2 3 & 4 C) FOR ASSESSMENT YEAR 2004-05 - GROUND NOS. 3 TO 5& 8 D) FOR ASSESSMENT YEAR 2005-06 - GROUND NOS 1 & 5 TO 8 E) FOR ASSESSMENT YEAR 2006-07- GROUND NOS 1 6 & 7 4. THE LEARNED AR POINTED OUT THAT COD APPROVAL HAD BEEN GRANTED FOR THE BALANCE GROUNDS. IN THE ABSENCE OF COD APPROVA L ALL THE ABOVESAID GROUNDS RAISED BY ASSESSEE ARE DISMISSED. ACCORDING LY THE AFORESAID GROUNDS OF APPEAL RELATING TO THE RESPECTIVE ASSES SMENT YEARS AS INDICATED ABOVE FILED BY THE ASSESSEE ARE DISMISSED FOR TE CHNICAL REASONS. 5. CONSEQUENTLY THE FOLLOWING GROUNDS OF APPEAL AR E LEFT FOR ADJUDICATION BY THE TRIBUNAL IN RESPECT OF THE ASSE SSMENT YEARS INDICATED AGAINST EACH:- ASSESSMENT YEAR 2002-03 GROUND NO.3 THAT THE LEARNED COMMISSIONER OF INCO ME-TAX (APPEALS) PATIALA HAS ERRED IN UPHOLDING THE ADDITI ON OF RS.2 93 24 755/- ON ACCOUNT OF BAD DEBTS RECOVERED DURING THE YEAR. ASSESSMENT YEAR 2003-04: GROUND NO.1 THAT THE LD. CIT(A) PATIALA HAS ERRE D IN UPHOLDING THE DISALLOWANCE OF RS. 66 44 710/- U/S 1 4A OF THE ACT AGAINST TAX FREE INCOME IN SPITE OF THE FACT TH AT THE ISSUE HAS BEEN DECIDED IN FASVOUR OF THE APPELLANT BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL. GROUND NO. 5 THAT THE LD. CIT(A) PATIALA HAS ERR ED IN UPHOLDING THE ADDITION OF RS. 4 52 49 350/- ON ACCO UNT OF BAD DEBTS RECOVERED DURING THE YEAR. 3 GROUND NO. 6 THAT THE LD. CIT(A) PATIALA HAS ERR ED IN HOLDING THAT CENSUS REPORT 2001 IS APPLICABLE INST EAD OF CENSUS REPORT 1991 FOR PURPOSES OF DETERMINATION OF RURAL BRANCHES FOR ALLOWING DEDUCTION U/S 36(1)(VIIA). ASSESSMENT YEAR 2004-05 1. THAT THE LD. CIT(A) PATIALA HAS ERRED IN ALLOCATIN G 2.5% OF THE EXEMPT INCOME TOWARDS EXPENDITURE U/S 14A 2. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOCAT E 2.5% OF THE TOTAL INCOME OF RS. 50 91 63 800/- TOWA RDS EXPENDITURE U/S 14A INSTEAD OF THE INCOME OF RS. 46 72 68 518/-. 6. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 21 42 84 122/- ON ACCOUNT OF BAD DE BTS RECOVERED DURING THE YEAR. 7. THAT THE LD. CIT(A) PATIALA HAS ERRED IN HOLDIN G THAT CENSUS REPORT 2001 IS APPLICABLE INSTEAD OF CENSUS REPORT 1991 FOR PURPOSES OF DETERMINATION OF RURAL BRANCHES FOR ALLOWING DEDUCTION U/S 36(1)(VIIA). ASSESSMENT YEAR 2005-06 2. THAT THE LD. CIT(A) PATIALA HAS ERRED IN ALLOCATIN G 2.5% OF THE EXEMPT INCOME TOWARDS EXPENDITURE U/S 14A 3. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) H AS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOCAT E 2.5% OF THE TOTAL INCOME OF RS. 45 35 83 861/- TOWA RDS EXPENDITURE U/S 14A INSTEAD OF THE INCOME OF RS. 44 53 83 861/-. 4. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 31 43 52 408/- ON ACCOUNT OF BAD DE BTS RECOVERED DURING THE YEAR. ASSESSMENT YEAR 2006-07 2. THAT THE LD. CIT(A) PATIALA HAS ERRED IN ALLOCATIN G 2.5% OF THE EXEMPT INCOME U/S 10 TOWARDS EXPENDITU RE U/S 14A. 3. WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT(A) H AS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOCAT E 2.5% OF THE TOTAL INCOME OF RS. 41 31 79 851/- TOWA RDS EXPENDITURE U/S 14A INSTEAD OF THE INCOME OF RS. 40 42 25 695/- AS INTEREST ON INFRASTRUCTURE LOAN I N THE CASE OF ATLANTA LTD OF RS. 89 54 156/- HAS NOT BEEN 4 ALLOWED AS A DEDUCTION U/S 10(23G) FOR WANT OF ALLOCATION. 4. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 46 60 00 000/- ON ACCOUNT OF BAD DE BTS RECOVERED DURING THE YEAR. 5. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT PRIOR PERIOD EXPENSE AND PRIOR PERIOD INCOME AS PER TAX AUDIT REPORT PERTAINS TO RESPECTIVE PREVIOUS YEARS WITHOUT FOLLOWING THE ORDER OF THE HON'BLE ITAT AND AS SUCH RETAINING THE ADDITION OF RS. 41 58 174/-. 6. WE PROCEED TO TAKE UP THE APPEAL IN ITA NO.136/C HD/2009 RELATING TO A.Y. 2003-04 TO DISPOSE OFF THE GROUNDS OF APPEA L FOR WHICH APPROVAL HAS BEEN GRANTED. 7. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE U/S 14A OF THE I.T.ACT. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME DECLARING NET INCOME OF RS.543.72 CR. CA SE WAS PICKED UP FOR SCRUTINY IN VIEW OF THE BOARDS CIRCULAR. THE ASSESSEE FILED A REVISED RETURN ON 22.12.2004 DECLARING INCOME OF RS .538.97 CR. THE REASONS FOR REVISING THE RETURN OF INCOME AS PER T HE ASSESSEE WERE (A) REVISED CLAIM OF DEDUCTION U/S 10(23G); (B) CRE DIT FOR TDS ON ACCOUNT OF 57 TDS CERTIFICATES RECEIVED LATE; (C) A LL DEBITS WRITTEN OFF IN EARLIER YEAR RECOVERED DURING THE YEAR HAVE BEEN REDUCED FROM THE INCOME; (D) PRIOR PERIOD EXPENSES NOT ADDED BACK TO THE INCOME; AND (E) THE REVISED AMOUNT OF REFUND DUE TO THE ASSESSEE. THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE RECEIVED THE FOL LOWING EXEMPT INCOME: 5 (I) DIVIDEND INCOME EXEMPT U/S 10(33) 9 65 65 584 (II) NET INTEREST INCOME EXEMPT U/S 5 11 13 698 10(15)(IV)(H) (III) NET INTEREST EXEMPT 1) U/S 10(23)(G) ON SECURITIES 1 31 08 620 2) ON TERM LOAN 10 50 00 511 TOTAL EXEMPTED INCOME CLAIMED IN THE RETURN 26 57 88 413 9. THE ASSESSEE HAD DEDUCTED ON ESTIMATE BASIS A SU M OF RS.43 62 190/- BEING THE EXPENSES ATTRIBUTED TO THE EXEMPT INCOME UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. WH EN SHOW CAUSED THE ASSESSEE EXPLAINED THAT IT HAD RS.1412.18 CR NON IN TEREST BEARING FUNDS AVAILABLE AND OUT OF THESE RS.272.21 CR WERE INVES TED TO ACQUIRE TAX FREE BONDS AND SECURITIES ETC. IT WAS ALSO CLAIMED THAT THERE WAS NO INTEREST COST IN RESPECT OF INVESTMENT PORT-FOLIO INCOME OF WHICH WAS EXEMPT AND HENCE NO EXPENDITURE COULD BE ATTRIBUTED TO THE SAID INCOME. THE ASSESSING OFFICER ALSO OBSERVED THAT A DDITION MADE ON ACCOUNT OF DEDUCTION U/S 80M OF THE ADMINISTRATIVE EXPENSE OF FUND DIVISION HAD BEEN PARTLY CONFIRMED IN THE PRECEDING YEAR. THE A.O. COMPUTED THE PROPORTIONATE EXPENDITURE IN RELATION TO THE TAX FREE INCOME OWNED BY THE ASSESSEE ON THE BASIS OF DETAIL S AVAILABLE AND DISALLOWED A SUM OF RS.22 52 08 661/- ON ACCOUNT OF SAID EXPENSES. THE CIT(APPEALS) HELD THAT INTEREST EXPANDED AMOUNT ING TO RS.974 61 21 000/- COULD NOT BE CONSIDERED FOR THE PURPOSE OF WORKING OUT THE PROPORTIONATE EXPENDITURE AGAINST EXEMPT IN COME AND THE SAME WAS DELETED. HOWEVER THE CIT(APPEALS) WAS OF THE VIEW THAT OUT OF THE OVERHEAD AND ADMINISTRATIVE EXPENSES SOME EXPE NDITURE MUST HAVE BEEN INCURRED FOR EARNING THE TAX FREE INCOME. IN THE ABSENCE OF ANY SEPARATE ACCOUNTS BEING MAINTAINED FOR TAXABLE AND TAX FREE INCOME THE 6 CIT(APPEALS) HELD THAT ESTIMATE HAS TO BE MADE IN T HIS REGARD. THE CIT(APPEALS) FURTHER AGREED WITH THE CONTENTION OF THE ASSESSEE THAT ONLY EXPENDITURE OF THE FUNDS DEPARTMENT DEALING IN INVESTMENT OF SHARES BONDS ETC. AND THE BRANCHES WHO HAD ADVANCE D INFRASTRUCTURE LOANS WERE REQUIRED TO BE CONSIDERED WHICH AS PER THE ASSESSEE WAS RS.44 15 657/-. THE CIT(APPEALS) DISALLOWED 2.5% O F THE TOTAL TAX FREE INCOME OF RS.26 57 88 413/- ON ACCOUNT OF OVERHEAD AND ADMINISTRATIVE EXPENSES RESULTING IN UPHOLDING OF ADDITION OF RS.6 6 44 710/-. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF CIT (APPEALS). 10. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THA T THE ASSESSEE BEING A BANKING COMPANY ITS MAIN BUSINESS WAS ACCE PTANCE OF DEPOSITS AND EARNING OF INCOME FROM FUNDS RECEIVED AS DEPOSI TS. HE FURTHER POINTED OUT THAT INVESTMENT IN SECURITIES WAS INCI DENTAL TO THE MAIN BANKING BUSINESS AND WAS ON ACCOUNT OF STATUTORY RE QUIREMENT OF BANKING REGULATION ACT FOR MAINTAINING STATUTORY LI QUIDITY RATIO. LEARNED AR FURTHER SUBMITTED THAT ONLY ITS ACTUAL E XPENDITURE COULD BE DISALLOWED AND NO DISALLOWANCE ON THE BASIS OF ESTI MATED EXPENDITURE COULD BE MADE. FURTHER IT CLAIMED THAT EXPENDITURE HAD BEEN INCURRED FOR THE PURPOSE OF EARNING BUSINESS INCOME WHICH WA S EXEMPT TO A CERTAIN EXTENT. RELIANCE WAS PLACED ON THE RATIO L AID DOWN BY THE KERALA HIGH COURT IN CIT V CATHOLIC SYRIAN BANK LTD . & ORS (2011) 49 DTR 57 (KER). 11. THE LEARNED DR FOR THE REVENUE PLACED RELIANCE ON THE UNDER MENTIONED DECISIONS : 7 I) GODREJ & BOYCE MFG.CO.LTD. V DCIT & ANR 234 CTR 1 (BOM) II) PUNJAB NATIONAL BANK V DCIT 103 TTJ 908 (DEL) III) PRADEEP KAR V ACIT 319 ITR 416 (KAR) IV) DCIT V TATA INVESTMENT CORPORATION LTD. 113 TTJ 512 (MUM.) V) DCIT V SEKSARIA BISWAN SUGAR FACTORY LTD. 14 SOT 66 (MUM.) 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RECORDS. THE CONSTITUTIONAL VALIDITY OF SECTION 14A(2)&(3) OF I. T.ACT AND RULE 8D OF THE INCOME TAX RULES WAS CHALLENGED BEFORE THE HON' BLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG.CO.LTD. (SUPRA). THE C OURT HELD THAT THE PROVISIONS OF RULE 8D WERE NOT ULTRA VIRUS THE PROV ISIONS OF SECTION 14A AND IT WAS ALSO HELD THAT THE SAME DO NOT OFFEN D ARTICLE 14 OF THE CONSTITUTION. IT WAS FURTHER HELD THAT THE PROVISI ON OF RULE 8D WAS TO BE APPLIED PROSPECTIVELY W.E.F. 01.04.2007 I.E. IN RELATION TO ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS AS THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2006 STATES THAT THI S AMENDMENT WOULD TAKE EFFECT FROM 01.04.2007. THE COURTS FURTHER HE LD THAT EVEN IN THE ABSENCE OF SUB-SECTION (2) AND (3) OF SECTION 14A A ND RULE 8D THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MAKING APP ORTIONMENT ON ACCOUNT OF EXPENDITURE RELATABLE TO EARNING OF EXEM PT INCOME. 13. BEFORE THE DELHI BENCH OF TRIBUNAL IN PUNJAB NA TIONAL BANK (SUPRA) THE ISSUE IN CONNECTION WITH DISALLOWANCE U/S 14A WAS RAISED. THE CONTENTION OF THE ASSESSEE BANK WAS THAT THE IN VESTMENTS ON WHICH TAX FREE INCOME WAS EARNED WERE MADE TO MAINTAIN M INIMUM STATUTORY LIQUIDITY RATIO AS REQUIRED U/S 24 OF THE BANKING R EGULATION ACT AND 8 HENCE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSES OF BUSINESS. THE TRIBUNAL HELD THE SAID CONTENTION OF THE ASSESSEE TO BE NOT SUSTAINABLE AND THE ASSESSING OFFICER WAS DIREC TED TO VERIFY THE AMOUNT OF EXPENDITURE QUANTIFIED BY THE ASSESSEE AS RELATING TO TAX FREE INCOME AND MAKE DISALLOWANCES ACCORDINGLY. THE TRI BUNAL FURTHER HELD THAT THE EXPENDITURE INCURRED ON RUNNING ITS VARIOU S BRANCHES COULD NOT BE CONSIDERED FOR MAKING A PROPORTIONATE DISALLOWAN CE U/S 14A AS THE SAME COULD NOT BE HELD TO BE INCURRED IN RELATION T O TAX FREE INCOME. THE TRIBUNAL THUS HELD THAT ONLY THE EXPENDITURE D IRECTLY ATTRIBUTABLE FOR MAKING THE CORRESPONDING INVESTMENTS ALONE COUL D BE CONSIDERED AS IN RELATION TO THE SAID INCOME FOR THE PURPOSE OF M AKING DISALLOWANCE ON PRO RATA BASIS FOR THE PURPOSE OF SECTION 14A. 14. IN DCIT V TATA INVESTMENT CORPORATION LTD. (OF WHICH THE JM IS THE AUTHOR) THE MUMBAI BENCH OF TRIBUNAL HELD THAT THE SOLE ACTIVITY OF THE ASSESSEE COMPANY WAS THAT OF AN INVESTMENT COMP ANY AND THE TOTAL INFRASTRUCTURE IS USED FOR THE PURPOSE OF ATTAINMEN T OF ITS OBJECTS WHICH INCLUDE INVESTMENT IN GROUP CONCERNS AND OTHER COMP ANIES. THE INCOME EARNED ON SUCH INVESTMENTS BY WAY OF DIVIDEND INCOM E WAS EXEMPT UNDER THE PROVISIONS OF SECTION 10(33) AND BY INVOK ING THE PROVISIONS OF S.14A SUCH EXPENDITURE ATTRIBUTABLE TO EARNING OF DIVIDEND INCOME WAS TO BE DISALLOWED UNDER THE PROVISIONS OF THE AC T. THEREFORE THE A.O. WAS DIRECTED TO DISALLOW THE PORTION OF SALARY EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION WHICH IN TURN H AD BEEN INCURRED FOR THE PURPOSE OF CARRYING OUT THE OBJECTS OF THE ASSE SSEE COMPANY. THE ASSESSEE WAS DIRECTED TO FURNISH THE BREAK UP OF SA LARY EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION WHERE SERVICES OF SUCH 9 EMPLOYEES HAD BEEN UTILIZED FOR THE PURPOSE OF CARR YING OUT THE OBJECTIVES OF THE ASSESSEE COMPANY. IN CASE OF FAI LURE ON THE PART OF THE ASSESSEE TO FURNISH THE REQUISITE DETAILS THE A.O. WAS LEFT WITH NO OPTION BUT TO ESTIMATE SUCH EXPENDITURE WHICH IS AT TRIBUTABLE TO EARNING OF DIVIDEND INCOME WHICH IN TURN CAN BE LIMITED TO THE EXTENT OF PERCENTAGE OF DIVIDEND INCOME EARNED VIS--VIS THE TOTAL INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. THE RATIO OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. V DCIT (200 6) 103 TTJ (CHD) (SB) 364: (2006) 102 ITD1 (CHD)(SB) WAS APPLIED. 15. THE HON'BLE KERALA HIGH COURT IN CIT V CATHOLIC SYRIN BANK LTD (SUPRA) HAD HELD THAT AS THERE WAS NO PRECISE FORMU LA FOR PREPARING DISALLOWANCE NO DISALLOWANCE WAS CALLED FOR OUT OF ADMINISTRATIVE EXPENDITURE UNTIL RULE 8D COMES INTO FORCE. 16. IN THE FACTS OF THE PRESENT CASE BEFORE US THE ASSESSEE HAD EARNED TAX FREE INCOME TOTALING RS.26.57 CR AS DETAILED IN PARAS HEREIN ABOVE. FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG.CO.LTD. (SUPRA) WE ARE OF THE V IEW THAT EXPENDITURE ATTRIBUTABLE TO SUCH EXEMPT INCOME MERI TS TO BE DISALLOWED. THE ASSESSING OFFICER HAD COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT ON ACCOUNT OF BOTH ON INTEREST EXPANDED FOR THE PURPOSE OF INVESTMENT IN THE SAID SECURITIES AND PROPORTIONATE OVERHEAD AND ADMINISTRATIVE EXPENSES INCURRED FOR EARNING THE SA ID INCOME. THE CIT(APPEALS) HAS DELETED THE ADDITION IN RESPECT OF THE INTEREST COMPONENT ATTRIBUTABLE TO SUCH INVESTMENTS AND SECU RITIES ON WHICH ASSESSEE'S INCOME IS EXEMPT FROM TAX. THE CIT(APPE ALS) HAD ESTIMATED 10 THE ADMINISTRATIVE EXPENSES TO THE EXTENT OF 2.5% O F THE TOTAL TAX FREE INCOME EARNED BY THE ASSESSEE. THE SAID ESTIMATE W AS MADE KEEPING IN VIEW THAT ONLY EXPENDITURE OF THE FUNDS DEPARTMENT DEALING IN INVESTMENT OF SHARES BONDS ETC. AND THE BRANCHES W HO HAD ADVANCED INFRASTRUCTURE LOANS WAS REQUIRED TO BE CONSIDERED. AS PER THE WORKING OF THE ASSESSEE AND AS NOTED BY CIT(APPEALS) IN PAR A 4.7 AT PAGE 8 THE EXPENDITURE OF RS.44 15 657/- IS ATTRIBUTABLE TO SU CH INCOME IN VIEW OF THE APPLICABILITY OF PROVISIONS OF SECTION 14A OF T HE ACT. IN VIEW OF THE TOTALITY OF THE FACTS AND THE SETTLED LEGAL PRE CEDENTS WE FIND NO MERIT IN THE SUBMISSION OF THE LEARNED AR FOR THE A SSESSEE THAT NO DISALLOWANCE IS WARRANTED OUT OF THE EXEMPT INCOME ON ACCOUNT OF OVERHEAD AND ADMINISTRATIVE EXPENSES. THE DELHI B ENCH OF TRIBUNAL IN PUNJAB NATIONAL BANK V DCIT HAD HELD THAT THE EXPEN DITURE RELATING TO EARNING OF TAX FREE INCOME NEEDS TO BE QUANTIFIED I N THE HANDS OF THE ASSESSEE KEEPING IN VIEW THE EXPENDITURE INCURRED ON THE SERVICE OF EMPLOYEES WHICH HAD BEEN UTILIZED FOR THE PURPOSE O F CARRYING OUT THE OBJECTS OF THE ASSESSEE. IN THE ENTIRETY OF THE ABO VESAID RATIOS LAID DOWN ON THE SUBJECT AND THE FACTS OF THE PRESENT CASE W E ARE IN CONFORMITY WITH THE ORDER OF THE CIT(APPEALS) THAT IN THE ABSE NCE OF THE DETAILS BEING MAINTAINED IN RESPECT OF EXPENDITURE INCURRED ON THE EXEMPT INCOME AND THE TAXABLE INCOME SEPARATELY THE EXPEN DITURE ATTRIBUTABLE TO EARNING OF TAX FREE INCOME NEEDS TO BE ESTIMATED . WE FIND THE CIT(APPEALS) HAD ESTIMATED THE SAID DISALLOWANCE AT 2.5% OF THE TAX FREE INCOME EARNED BY THE ASSESSEE. UPHOLDING THE SAME WE DISMISS THE GROUND NO.1 RAISED BY THE ASSESSEE. 11 17. THE ISSUE IN GROUND NO.5 IS AGAINST THE ADDITION ON ACCOUNT O F BAD DEBTS RECOVERED DURING THE YEAR. THE ASSESSEE IN THE REVISED RETURN FILED HAD REDUCED RS.4 52 49 330/- FROM ITS INCOME ON ACCOUNT OF BAD DEBTS WHICH WERE RECOVERED DURING THE YEAR O N THE PLEA THAT INCOME OF BAD DEBTS WAS NEITHER CLAIMED AND NOR ALL OWED AS A DEDUCTION IN THE YEARS IN WHICH IT WAS WRITTEN OFF AND HENCE ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 41(1) OF THE I.T.ACT. IN THE AUDIT REPORT AT SR.NO.18 OF COLUMN NO. 3CD THE CA HAD MENTIONED TH AT THE AMOUNT RECOVERED ON ACCOUNT OF ADVANCE WRITTEN OFF WAS CRE DITED TO THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER OBSERVED THE TWO I.E. THE ASSESSEE'S VERSION AND THE VERSION OF THE AUDITOR TO BE SELF CONTRADICTORY. THE REPLY FILED BY THE ASSESSEE IN THIS CONNECTION IS REPRODUCED UNDER PARA 8 AT PAGE 10 OF THE ASSESSMEN T ORDER. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO SPE CIFICALLY FILE THE YEARWISE BREAK-UP OF BAD DEBTS WRITTEN OFF IN THE E ARLIER ASSESSMENT YEARS AND RECOVERED DURING THE YEAR UNDER CONSIDERA TION. HOWEVER THE ASSESSEE FAILED TO FURNISH THE INFORMATION IN RESPE CT OF BAD DEBTS WRITTEN OFF IN THE EARLIER YEARS. THE ASSESSING OF FICER HELD THAT PROVISIONS OF SECTION 41(4) OF THE ACT WERE APPLICA BLE AND ASSESSEE HAD WRONGLY REDUCED ITS INCOME IN THE COMPUTATION CHART AND AS THE AMOUNT HAD BEEN RECOVERED DURING THE YEAR WHICH WAS WRITT EN OFF IN THE EARLIER ASSESSMENT YEARS MEANING THEREBY THAT THE DEDUCTIO N HAD BEEN CLAIMED IN THE YEAR IN WHICH IT WAS WRITTEN OFF THE SAME R ECOVERED IN THE PRESENT YEAR IS PROFIT CHARGEABLE TO TAX U/S 41(4) OF THE INCOME TAX ACT. THE CIT(APPEALS) OBSERVED ON THE PERUSAL OF T HE ASSESSMENT ORDER THAT IT HAD BEEN CATEGORICALLY RECORDED THAT THE AM OUNT RECOVERED DURING THE YEAR UNDER CONSIDERATION HAD BEEN WRITTE N OFF IN THE EARLIER 12 YEARS WHICH IMPLIES THAT THE DEDUCTION MUST HAVE B EEN CLAIMED IN THE SAID YEAR. THE CIT(APPEALS) FURTHER HELD AS UNDER : 11.5 TO ELABORATE FURTHER IT IS RELEVANT TO N OTE THAT BAD DEBTS RECOVERED DURING THE YEAR IS BASICALLY OF REV ENUE IN NATURE AND IN EARLIER YEAR EVEN IT HAS BEEN ALLOWED/CONSIDERED TO BE ADJUDICATED AGAINST THE PR OVISIONS TO BE CREATED IN THE CASE OF BANKING COMPANY EVEN T HEN THE SAME IS TO BE TAXED IN THE YEAR WHEN IT IS RECOVERE D. THE CASE OF BANKING COMPANY ARE PECULIAR IN NATURE THAT IN T HE CASE OF BANKING COMPANIES AS PER THE NORMS LAID DOWN BY THE REGULATOR I.E. RBI AND OTHER GOVERNMENT ACT EVEN PR OVISIONS FOR BAD DEBTS FOR OTHER NPA ARE CONSIDERED FOR ARRI VING AT THE CORRECT NET PROFIT. HENCE LOOKING TO THE TOTA LITY OF CIRCUMSTANCES AND AS DISCUSSED ABOVE IN MY OPINION THE A.O. HAS RIGHTLY TAXED THE ABOVE AMOUNT AND AS DISCUSSED ABOVE IN MY OPINION THE A.O. HAS RIGHTLY TAXED THE ABOVE AMO UNT AND ASSESSEE'S APPEAL ON THIS GROUND IS DISMISSED. 18. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. DU RING THE COURSE OF HEARING THE ASSESSEE WAS DIRECTED TO FURNISH THE DETAILS OF BAD DEBTS RECOVERED I.E. THE YEAR WHEN THE SAME WERE WRITTEN OFF AND WHETHER CLAIMED AS DEDUCTION OR NOT. THE LEARNED AR FAILED TO FURNISH THE REQUISITE DETAILS EXCEPT TO REITERATE ITS STAND BEF ORE THE AUTHORITIES BELOW. THE LEARNED DR PLACED RELIANCE ON THE ORDER S OF AUTHORITIES BELOW AND POINTED OUT THE SAME IS INCLUDIBLE IN THE HANDS OF ASSESSEE. 19. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ASSES SEE DURING THE YEAR HAD RECOVERED BAD DEBTS TOTALING RS. 4.52 CR. IN T HE ORIGINAL RETURN OF INCOME THE SAME WAS INCLUDED AS INCOME BY THE ASSE SSEE. HOWEVER THE ASSESSEE FILED REVISED RETURN OF INCOME AND VIDE NO TE NO.3 IT WAS CLAIMED AS UNDER : BAD DEBTS WRITTEN OFF EARLIER YEAR AND RECOVERED D URING THE YEAR AMOUNTING RS.4 52 49 329/- THOUGH CREDITED TO PROFIT AND LOSS ACCOUNT HAVE BEEN REDUCED FROM INCOME AS DEBTS HAVE BEEN NEITHER CLAIMED NOR ALLOWED AS DEDUCTION IN THE YEA R OF WRITING 13 OFF AND HENCE ARE NOR COVERED BY PROVISION OF SECTI ON 41(1) OF THE ACT. 20. THE RETURN OF INCOME WAS REVISED TO THE EXTENT OF BAD DEBTS RECOVERED TOTALING RS.4.52 CR. THE COPY OF REVISED COMPUTATION OF INCOME IS PLACED AT PAGES 5 TO 5 OF PB-1. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE EXPLANATION OF THE ASSE SSEE WAS AS UNDER : THE ASSESSEE BANK DURING THE YEAR UNDER CONSIDERAT ION RECOVERED BAD DEBTS AMOUNTING TO RS.4 52 49 330/- W RITTEN OFF EARLIER. THE AMOUNT WAS INCLUDED IN THE INCOME IN THE PROFIT & LOSS ACCOUNT BUT WHILE PREPARING THE RETURN THE AM OUNT OF BAD DEBTS RECOVERED DURING THE YEAR HAS BEEN REDUCED FR OM THE TAXABLE INCOME. THE ASSESSEE HAS BEEN CLAIMING DEDUCTION U/S 36(1)( VIIA). AS PER PROVISO TO SECTION 36(1)(VII) THE BAD DEBTS IN THE CASE OF THE ASSESSEE WHERE PROVISIONS OF SECTION 36(1)(VIIA) AR E APPLICABLE ARE ONLY ALLOWABLE TO THE EXTENT THE BAD DEBTS EXCE ED THE PROVISION U/S 36(1)(VIIA) IN VIEW OF THE PROVISO T O SECTION 36(1)(VII) THE BANK HAS NEITHER CLAIMED NOR WAS AL LOWED ANY DEDUCTION FOR BAD DEBTS WRITTEN OFF U/S 36(1)(VII). THE PROVISIONS OF SECTION 41(4) ARE ONLY APPLICABLE IN THE CASE OF BAD DEBTS RECOVERED WHICH HAVE BEEN ALLOWED AS DEDU CTION U/S 36(1)(VII) IN THE PAST. AS THE DEBTS RECOVERED DUR ING THE YEAR WERE NEITHER CLAIMED NOR ALLOWED AS A DEDUCTION U/S 36(1)(VII) THE PROVISIONS OF SECTION 41(4) ARE NOT APPLICABLE AND AS SUCH BAD DEBTS RECOVERED DURING THE YEAR HAVE BEEN REDUC ED FROM THE INCOME AND THE FACTS HAS BEEN FULLY DISCLOSED IN TH E SHAPE OF A NOTE ATTACHED WITH THE RETURN. 21. THE ASSESSING OFFICER NOTICED FROM THE REPORT O F THE AUDITOR IN FORM NO. 3CD AT SR.NO. (18) THERE IS MENTION THAT THE AMOUNT RECOVERED ON ACCOUNT OF ADVANCE WRITTEN OFF AT RS.4.52 CR WAS CREDITED TO PROFIT & LOSS ACCOUNT MEANING THEREBY THAT THE SAME ARE COVE RED U/S 41(1) OF THE ACT THOUGH THE CASE OF ASSESSEE IS THAT THESE ARE NOT COVERED U/S 41(4) OF THE ACT. THE ISSUE ARISING IN THE PRESENT CASE IS IN CONNECTION WITH THE BAD DEBTS RECOVERED. THE A.O. REQUISITIONED THE AS SESSEE TO FILE DETAILS OF BAD DEBTS WRITTEN OFF YEAR WISE AND RECOVERED DU RING THE YEAR. THE ASSESSEE HAS FAILED TO FURNISH ANY INFORMATION IN T HIS REGARD EITHER BEFORE 14 A.O. OR CIT(A). NO DETAILS HAVE BEEN FILED BY THE LEARNED AR FOR THE ASSESSEE BEFORE US DESPITE A SPECIFIC QUERY RAISE D IN THIS REGARD. THE LEARNED AR HAS PLACED RELIANCE ON THE RATIO LAID DO WN BY THE BANGALORE BENCH OF TRIBUNAL IN STATE BANK OF MYSORE VS DCIT ( 2009) 33 SOT 7 (BANG) WITHOUT BRINGING ON RECORD THE FACTUAL ASPEC TS ON RECORD. IN THE ABSENCE OF THE SAME AND IN VIEW OF THE REPORT OF AU DITOR AND THE ASSESSEE NOT DISCHARGING ITS ONUS WE ARE IN CONFORMITY WITH ORDER OF CIT(APPEALS) AND A.O. THAT BAD DEBTS RECOVERED DURING THE YEAR A RE TO BE INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 41(4) OF THE ACT. 22. THE ASSESSING OFFICER DURING THE ASSESSMENT PRO CEEDINGS CARRIED OUT PURSUANT TO NOTICE ISSUED U/S 148 OF THE ACT RE LATING TO ASSESSMENT YEAR 2002-03 IN RESPECT OF CLAIM OF BAD DEBTS RECO VERED NOT BEING CHARGEABLE TO TAX HAD ISSUED LETTER DATED 23.10.20 08 U/S 133(6) OF THE ACT TO THE AUDITOR G.S.GOEL &CO. AND IN RESPONSE IT WAS REPLIED AS UNDER:- WE ARE IN RECEIPT OF YOUR ABOVE REFERRED LETTER ON 29.10.2008 AND HAVE NOTED ITS CONTENTS. IN RESPONS E TO THE SAME WE WISH TO SUBMIT THE FOLLOWING REPLY. THE AMOUNT OF RS. 2 93 24 755.99 RECOVERED AGAINST BAD DEBTS WRITTEN-OFF AND ALLOWED AS EXPENDITURE IN EAR LIER YEARS U/S 36(1)(VII) OF THE ACT IS CHARGEABLE TO INCOME T AX U/S 41(4) OF THE INCOME TAX ACT 1961.. IN OUR TAX AUDIT REPORT IN REPLY TO POINT NO.20 RE GARDING AMOUNT CHARGEABLE TO TAX U/S 41 WE HAVE MENTIONED THAT AMOUNT RECOVERED IN RESPECT OF ADVANCES WRITTEN OFF IS RS. 2 93 24 755.99 AND IS CHARGEABLE TO TAX U/S 41 OF T HE INCOME TAX ACT 1961. HOWEVER THE SAME HAS BEEN CREDITED BY THE BANK TO ITS PROFIT AND LOSS ACCOUNT. IN OUR OPINIO N THIS AMOUNT IS CHARGEABLE TO TAX U/S 41 OF THE INCOME TA X ACT 1961. 15 23. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIR CUMSTANCES UPHOLDING THE ORDER OF CIT(APPEALS) WE DISMISS THE GROUND NO .5 RAISED BY THE ASSESSEE. 24. THE NEXT ISSUE RAISED VIDE GROUND NO.6 IS IN RE SPECT OF PROVISIONS OF SECTION 36(1)(VIIA). THE ASSESSEE HAD CLAIMED D EDUCTION OF RS.151.65 CR ON ACCOUNT OF 10% OF AVERAGE RURAL ADVANCES U/S 36(1)(VIIA) OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT VIDE PARA 9 AT PAGES 10 TO 12 OF THE ASSESSMENT ORDER HAD REDUCED THE DEDUCTION BY RS. 28.62 CRORES. THE LIST OF BRANCHES FOR WHICH DEDUC TION HAD BEEN WITHDRAWN IS INCORPORATED IN THE ASSESSMENT ORDER. BEFORE THE CIT(A) THE ASSESSING OFFICER HAD CHANGED THE LIST OF BRANC HES IN THE COUNTER COMMENTS DATED 13.12.2005 / 28.2.2006 AND THE FINAL ADDITION WAS WORKED OUT AT RS. 23.08 CRORE. THE REASON FOR THE DISCRE PANCY WAS NOT EXPLAINED BY THE ASSESSING OFFICER BEFORE THE CIT(A). THE C IT(A) OBSERVED AS UNDER:- 12.1 THE APPELLANT CLAIMED DEDUCTION OF RS.151 65 75 515.68 ON ACCOUNT OF 10% OF AVERAGE RURAL ADVANCES AS PROV IDED BY SECTION 36(1)(VIIA). THE ASSESSING OFFICER WHILE C OMPLETING THE ASSESSMENT HAS REDUCED THE DEDUCTION BY RS.28 62 93 900/- AS PER PARA 9 PAGES 10 TO 12 OF THE ASSESSMENT ORDER AND THEREBY MAKING ADDITION OF THE AMOUNT TO THE INCOME RETURNE D. THE LIST OF BRANCHES FOR WHICH DEDUCTION HAS BEEN WITHDRAWN IS GIVEN IN THE ASSESSMENT ORDER. SUBSEQUENTLY FOR REASONS BE ST KNOWN TO THE ASSESSING OFFICERS THE LIST OF BRANCHES HAS BE EN CHANGED IN THE COUNTER-COMMENTS DATED 13.12.2005/28.02.2006. AS PER THE COUNTER-COMMENTS OF THE ASSESSING OFFICER THE ADDI TION ON THE BASIS OF NEW BRANCHES AS NARRATED IN THE COUNTER-CO MMENTS WORKS OUT TO RS.23 08 52 400/- AS AGAINST RS.28 62 93 900/- AS PER THE ASSESSMENT ORDER. THE REASON FOR DISCREPAN CY HAS NOT BEEN EXPLAINED BY THE ASSESSING OFFICER. 16 25. THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE B EFORE THE CIT(A) ARE INCORPORATED IN PARA 12.4. THE CIT(A) VIDE P ARA 12.6 UPHELD THE ORDER OF ASSESSING OFFICER IN VIEW OF THE PROVISION AL DATA OF POPULATION TOWN AND DISTRICT WISE HAVING BEEN LEASED ON 10.7.2 001 CENSUS REPORT 2001 WAS HELD TO BE APPLICABLE FOR CATEGORIZATION O F RURAL BRANCHES UNDER THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT. HOWEVER THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE LIST O F BRANCHES SUBMITTED BY THE ASSESSEE AND WORKED OUT THE ADDITION ON THAT BA SIS. 26. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES AND PERUSED THE RECORDS. UNDER SECTION 36(1)(VIIA) OF THE ACT DED UCTION IS TO BE ALLOWED IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DE BTS MADE BY A SCHEDULED BANK OR NON SCHEDULED BANK OR SPECIFIED C -OPERATIVE BANK EQUAL TO AN AMOUNT NO EXCEEDING 7 % OF TOTAL INCOME COM PUTED BEFORE ALLOWING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTE R VI A AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRI BED MANNER. 27. FURTHER DEDUCTIONS ARE ENSHRINED IN THE VARIOUS PROVISOS UNDER THE SUB-SECTION. HOWEVER IN THE PRESENT CASE THE ISSU E I.E. IN CONNECTION WITH THE ADVANCES MADE BY RURAL BRANCHES. THE TE RM RURAL BRANCH FOR THE PURPOSE OF THIS CLAUSE HAS BEEN DEFINED UND ER EXPLANATION TO SECTION 36(1)(VIIA) CLAUSE (IA) WHICH PROVIDES AS UNDER : (IA ) RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK {OR A NON-SCHEDULED BANK ] SITUATED IN A PLACE WHICH HA S A POPULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR . 17 28. THE TERM USED IN THE ABOVE SAID DEFINITION OF R URAL BRANCH IS PUBLISHED IN CONNECTION WITH THE CENSUS FIGURES BEE N AVAILABLE BEFORE THE IST DAY OF THE PREVIOUS YEAR. AS PER WEBSTERS NEW TWENTIETH CENTURY DICTIONARY THE MEANING OF WORD PUBLISHED IS TO MAKE PUBLIC OR KNOWN EITHER BY WORDS WRITING OR PRINTING AS WHAT BEFOR E WAS PRIVATE OR UNKNOWN TO NOTIFY PUBLICLY; TO DIVULGE AS A PRIVA TE TRANSACTION; TO PROMULGATE OR PROCLAIM AS A LAW. 29. THE REQUIREMENTS OF THE PROVISIONS ARE THE RELE VANT FIGURES OF THE CENSUS TO HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. THE CONTENTION OF THE ASSESSEE IS THAT RELEVANT FI GURES OF CENSUS 2001 WERE NOT PUBLISHED BEFORE THE FIRST DAY OF PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003-04 I.E. ON 1.4.2002 AND ONLY P ROVISIONAL FIGURES WERE AVAILABLE HENCE THE FIGURES OF CENSUS 1991 WE RE APPLICABLE FOR DETERMINING THE LIST OF RURAL BRANCHES OF BANK SIT UATED IN A PLACE WITH POPULATION OF NOT MORE THAN 10000. THE REQUIREMENT OF THE SECTION IS THE RELEVANT FIGURES BEING PUBLISHED BEFORE THE FIRST D AY OF PREVIOUS YEAR. 30. THE ASSESSEE AT PAGE 40 OF THE PAPER BOOK HAS ANNEXED THE LETTER DATED 21.1.2001 ISSUED FROM THE OFFICE OF REGISTRAR GENERAL OF INDIA MINISTRY OF HOME AFFAIRS IN RESPECT OF CENSUS 2001 WHICH IS ADDRESSED TO THE CHIEF MANAGER OF THE ASSESSEE BANK AND STAT ES AS UNDER:- A) AT PRESENT ONLY PROVISIONAL RESULTS BASED ON 200 1 CENSUS HAVE BEEN PUBLISHED UPTO TOWN LEVEL. B) THE DATA HAVE NOT BEEN RELEASED AT VILLAGE LEVE L. 18 C) THE FINAL POPULATION BASED ON 2001 CENSUS AT VILLAGE/TOWN LEVEL WILL BE AVAILABLE AFTER ATLEAST SIX MONTHS. 31. ANOTHER LETTER DATED 10.5.2005 IS ENCLOSED AT P AGE 41 OF THE PAPER BOOK IN WHICH IT IS MENTIONED THAT THE FINAL VILL AGE AND TOWN WISE POPULATION DATA OF CENSUS 2001 WAS RELEASED IN THE MONTH OF DECEMBER 2003. 32. THE THIRD COMMUNICATION FROM THE OFFICE OF REGI STRAR GENERAL ADDRESSED TO THE ASSESSEE DATED 31.5.2006 IS PLACED AT PAGE 42 OF THE PAPER BOOK IN WHICH IT IS CLARIFIED THAT PROVISIONA L LIST IS RELEASED WITHIN ONE MONTH FOR THE COUNTRY AND THE SAME GIVES INDICA TIVE FIGURES OF POPULATION AND ONCE FINAL POPULATION IS DECLARED T HE PROVISIONAL IS NO MORE APPLICABLE AND LOSES RELEVANCE. IT IS FURTHER STATED THEREFORE WHILE CLASSIFYING TOWNS OR RURAL AREAS ONLY THE FINAL POPULATION TOTAL BE USED NOT THE PROVISIO NAL POPULATION TOTALS WHICH IN SOME CASES MAY VARY SIGNIFICANTLY FROM THE POPULATION. THIS FINAL POPU LATION FIGURES WERE RELEASED IN DECEMBER 2003 FOR USE BY D ATA. HENCE THE FINAL POPULATION FIGURES WERE RELEASED IN DECEMBER 2003. 33. THUS FOR THE PURPOSE OF 36(1)(VIIA) READ IN CO NJUNCTION WITH THE MEANING OF RURAL BRANCHES PROVIDED VIDE THE EXP LANATION UNDER THE SUB-SECTION IS THE BRANCH SITUATED IN A PLACE WITH POPULATION LESS THAN 10000 AS PER THE FIGURES OF CENSUS WHICH HAD BEEN PUBLISHED BEFORE THE 19 FIRST DAY OF THE PREVIOUS YEAR IS TO BE CONSIDERED FOR COMPUTING THE DEDUCTION. THE WORD USED IS PUBLISHED AND SAME R EFERS TO FINAL FIGURES OF POPULATION AND NOT THE PROVISIONAL FIGURES OF PO PULATION WHICH ADMITTEDLY ARE RELEASED WITHIN ONE MONTH. VIDE LET TER DATED 21.7.2001 ONLY PROVISIONAL RESULTS FOR CENSUS 2001 WERE PUBLI SHED UPTO TOWN LEVEL AND NO DATE WAS RELEASED AT VILLAGE LEVEL. THE FIN AL POPULATION FIGURES WERE RELEASED IN DECEMBER 2003 AS PER COMMUNICATIO N DATED 10.5.2008 AND 31.5.2006. IN THE ABOVE SAID FACTS AND CIRCUMS TANCES WE HOLD THAT A BANK FOR PREPARING THE LIST OF RURAL BRANCHES AS ON 1.4.2002 HAVING POPULATION LESS THAN 10000 HAD TO RELY UPON THE FIG URES OF CENSUS 1991 AS THE FIGURES OF CENSUS 2001 WERE RELEASED IN DECEMBE R 2003 AND HENCE WERE NOT AVAILABLE BEFORE THE FIRST DAY OF PREVIOUS YEAR I.E. BOTH ON 01.4.2002 AND ALSO ON 1.4.2003. ACCORDINGLY WE DI RECT THE A.O. TO COMPUTE THE DEDUCTION U/S 36(1)(VIIA) AFTER TAKING INTO CONSIDERATION THE RELEVANT DATA IN THIS REGARD. THE ASSESSEE SHALL F URNISH THE REQUISITE INFORMATION WITH REGARD TO ITS CLAIM OF ADVANCES WR ITTEN OFF OF RURAL BRANCHES. THE ASSESSING OFFICER SHALL AFFORD REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND HENCE GROUND NO.6 IS AL LOWED FOR STATISTICAL PURPOSES. 34. IN THE RESULT THE APPEAL OF THE ASSESSEE IN I TA NO. 136/CHD/2009 IS PARTLY ALLOWED. ASSESSMENT YEAR 2002-03 35. THE GROUND NO.3 RAISED BY THE ASSESSEE IS IN CONNECTION WITH T HE BAD DEBTS RECOVERED. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE 20 FACTS RAISED IN ASSESSMENT YEAR 2003-04. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH THE DETA ILS OF BAD DEBTS RECOVERED AND THE YEARS IN WHICH THE SAME WERE WRIT TEN OFF. FOLLOWING OUR ORDER IN CONNECTION WITH GROUND NO.5 RAISED IN ASSESSMENT YEAR 2003- 04 WE DISMISS THE PRESENT GROUND OF APPEAL RAISED IN ASSESSMENT YEAR 2002-03. 36. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO . 593/CHD/2009 IS DISMISSED. ASSESSMENT YEAR 2004-05. 37. THE GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE COMPUTED U/S 14A OF THE ACT. SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 VIDE GROUND NO.1. FOLLOWING OUR ORDER IN THE PARAS HEREINABOVE WE DISMISS THE PRES ENT GROUND NO.1 RAISED BY THE ASSESSEE. 38. THE ASSESSEE VIDE GROUND NO.2 HAD RAISED ANOTHE R PLEA OF THE TOTAL INCOME TO BE CONSIDERED FOR COMPUTING THE DISALLOWA NCE U/S 14A OF THE ACT. HOWEVER NO SUBMISSIONS WERE MADE BEFORE US WHILE ARGUING THE PRESENT APPEAL. ACCORDINGLY THE SAID GROUND NO.2 I S ALSO DISMISSED. 39. THE GROUND NO.6 RAISED BY THE ASSESSEE IS IN CONNECTION WITH T HE BAD DEBTS RECOVERED. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS RAISED IN ASSESSMENT YEAR 2003-04. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO FURNISH THE DETA ILS OF BAD DEBTS 21 RECOVERED AND THE YEARS IN WHICH THE SAME WERE WRIT TEN OFF. FOLLOWING OUR ORDER IN CONNECTION WITH GROUND NO.5 RAISED IN ASSESSMENT YEAR 2003- 04 WE DISMISS THE PRESENT GROUND OF APPEAL RAISED IN ASSESSMENT YEAR 2002-03. 40. THE GROUND NO.7 RAISED BY THE ASSESSEE IS IN CO NNECTION WITH THE COMPUTATION OF DEDUCTION U/S 36I)(VIIA) OF THE ACT. THE ASSESSEE HAD RAISED SIMILAR ISSUE VIDE GROUND NO.6 IN ASSESSMENT YEAR 2003-04 AND THE SAME HAS BEEN ALLOWED BY US IN THE PARAS HEREINABOV E WITH DIRECTIONS. THE FACTUAL ASPECTS BEING IDENTICAL IN THE YEAR UND ER APPEAL AS NO DATA WAS AVAILABLE ON 1.4.2003 THE CENSUS REPORT 1991 WAS APPLICABLE FOR DETERMINING THE RURAL BRANCHES FOR ALLOWING DEDUCTI ON U/S 36(1)(VIIA) OF THE ACT. HOWEVER WE REMIT THE ISSUE BACK TO THE ASSESSING OFFICER TO DETERMINE THE SAID DEDUCTION IN LINE WITH OUR DIREC TION VIS-A-VIS GROUND NO. 6 RAISED IN ASSESSMENT YEAR 2003-04. 41. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO . 328/CHD/2009 IS PARTLY ALLOWED. ASSESSMENT YEARS 2005-06 & 2006-07 42. THE ISSUE IN GROUND NOS. 2 & 3 IN BOTH THE YEA RS ARE IDENTICAL TO THE ISSUES RAISED VIDE GROUND NOS 1 & 2 IN ASSESSME NT YEAR 2004-05 AND THE FACTS BEING IDENTICAL THE SAME ARE ALSO DISMIS SED IN LINE WITH OUR ORDER IN PARAS HEREINABOVE. 22 43. THE ISSUE IN GROUND NO.4 IN BOTH YEARS IS AGAIN ST THE ADDITION ON ACCOUNT OF BAD DEBTS RECOVERED. FOLLOWING OUR ORDE R IN ASSESSMENT YEAR 2003-04 GROUND NO.5 WE DISMISS THIS GROUND ALSO R AISED BY THE ASSESSEE AS NO DETAILS IN RESPECT OF THE BAD DEBTS RECOVERED AND THEIR WRITE OFF WERE FURNISHED BY THE ASSESSEE. 44. THE ASSESSEE HAS RAISED GROUND NO.5 IN ASSESSME NT YEAR 2006-07 AGAINST THE DISALLOWANCE OF PRIOR PERIOD EXPENSES A ND PRIOR PERIOD INCOME. THE PLEA OF THE ASSESSEE IN THIS REGARD W AS THAT IN EARLIER YEARS SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL AND THE TRI BUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEAR 2002-03. FROM THE PERUSAL OF THE ORDER OF THE TRIBUNAL IN ITA NO. 490/CHANDI/200 5 WHICH WAS PASSED AS A CONSOLIDATED ORDER ALONG WITH THE LEAD ORDER I N ITA NO. 785/CHANDI/1999 RELATING TO ASSESSMENT YEAR 1996-97 ON 19 TH JUNE 2008. THE ISSUE OF ALLOWANCE OF PRIOR PERIOD EXPENSES WA S REMITTED BACK TO THE ASSESSING OFFICER WITH DIRECTION TO THE ASSESSEE TO FURNISH DETAILS OF PRIOR PERIOD EXPENSES ALONG WITH PROOF AS PER THE OBSERVA TIONS OF THE TRIBUNAL IN PARA 78. THE ASSESSEE HAS FURNISHED THE COPY O F THE ORDER OF THE TRIBUNAL WHICH IS AVAILABLE ON RECORD. FURTHER TH E ASSESSEE HAS ALSO FURNISHED THE ORDER GIVING EFFECT TO THE DIRECTION OF TRIBUNAL U/S 143(3) / 254 OF THE ACT RELATING TO ASSESSMENT YEAR 2002-03 AND THE ASSESSING OFFICER VIDE ORDER DATED 30.11.2009 HAD ADJUDICATED UPON THE ISSUE IN REFERENCE TO THE SUPPORTS PRODUCED BY THE ASSESSEE. IN LINE WITH THE DIRECTIONS OF THE TRIBUNAL IN THE EARLIER YEARS WE REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME AS DIRECTED IN ASSESSMENT YEAR 2001-02 AND 2002-03. THE ASSESSEE IS DIRECTED TO PRODUCE THE RELEVANT DETAILS ALONG WITH SUPPORTING PROOFS BEFOR E THE ASSESSING 23 OFFICER. A REASONABLE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE. THE ASSESSING OFFICER SHALL COMPUTE THE R ELIEF IN ACCORDANCE. 45. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO . 594/CHD/2009 IS DISMISSED AND IN 595/CHD/2009 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF MARCH 2011. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 30 TH MARCH 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR