DCIT RG 2(1), MUMBAI v. BANK OF INIDIA, MUMBAI

ITA 2443/MUM/2011 | 2002-2003
Pronouncement Date: 31-07-2012 | Result: Dismissed

Appeal Details

RSA Number 244319914 RSA 2011
Assessee PAN AAACB0472C
Bench Mumbai
Appeal Number ITA 2443/MUM/2011
Duration Of Justice 1 year(s) 4 month(s) 3 day(s)
Appellant DCIT RG 2(1), MUMBAI
Respondent BANK OF INIDIA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-07-2012
Date Of Final Hearing 24-07-2012
Next Hearing Date 24-07-2012
Assessment Year 2002-2003
Appeal Filed On 28-03-2011
Judgment Text
PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER & SHRI VIVEK VARMA JUDICIAL MEMBER I.T.A. NO. 2155/MUM/2011 ASSESSMENT YEAR : 2002-03 BANK OF INDIA 8 TH FLOOR STAR HOUSE TAXATION DEPARTMENT BANDRA-KURLA COMPLEX BANDRA (E) MUMBAI 400 051. PAN: AAACB 0472 C VS. DY. COMMISSIONER OF I. T. (2) 1 MUMBAI. AND I.T.A.NO. 2443/MUM/2011 ASSESSMENT YEAR : 2002-03 DY. COMMISSIONER OF I.T. 2(1) MUMBAI. VS. BANK OF INDIA MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVIN VARMA (CIT DR) RESPONDENT BY : SHRI C. NARESH. DATE OF HEARING:24-07-2012. DATE OF PRONOUNCEMENT: 31-07-2012. O R D E R PER VIVEK VARMA JM: THE CROSS APPEAL HAVE BEEN FILED BY THE ASSESSEE BA NK AND THE DEPARTMENT AGAINST THE ORDER OF CIT(A) 4 MUMBAI D ATED 17/02/2011. AS THE IMPUGNED ORDER IS THE SAME FOR THE SAKE OF CONVENIENCE WE ARE PASSING A CONSOLIDATED ORDER COVERING BOTH TH E APPEALS. ITA NO. 2155/MUM/2011 (APPEAL BY THE ASSESSEE) : 2. THE ASSESSEE HAS FILED THE FOLLOWING GROUNDS OF APPEAL : 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAD ERRED IN DETERMINING THE DISALL OWANCE U/S 14A AT 0.5% OF AVERAGE INVESTMENTS YIELDING TAX FREE INCOM E WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD NOT IN CURRED ANY PAGE 2 OF 11 EXPENDITURE TO EARN THE SAID INCOME. THE CIT (A) SH OULD HAVE FOLLOWED THE DECISION OF ITAT DELHI IN THE CASE OF MINDA INVESTMENTS LTD VS DCIT (ITA 4046/DEI/2009) WHEREIN IT WAS HELD THAT NO DISALLOWANCE CAN BE MADE ON ESTIMATED BASIS. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE CIT (A) OUGHT TO HAVE FOLLOWED THE DECISION OF JURISDICTIONAL ITAT MUMBAI IN THE CASE OF GODREJ AGROVAT LTD VS ACIT (2010-TIOL-616-ITAT-MUM) WHEREIN IT HAD BEEN HELD THAT THE DISALLOWANCE WILL BE 2% OF E XEMPT INCOME. 02. ON THE FACTS AND CIRCUMSTANCES OF THE CASE CIT( A) ERRED IN DISALLOWING A SUM OF RS. 19 67 140/- AS PRIOR PERIO D EXPENSES ON THE GROUND THAT EVIDENCE THAT THESE HAVE ACCRUED OR CRY STALLIZED DURING THE YEAR WAS NOT SUBMITTED. THE CIT(A) OUGHT TO HAV E APPRECIATED THAT IN THE CASE OF APPELLANT WHICH HAS BRANCHES TH ROUGHOUT INDIA AND ABROAD INCURRING OF EXPENDITURE IS A CONTINUOU S PROCESS AND THEREFORE NO AMOUNT CAN BE TREATED AS PRIOR PERIOD EXPENSES BASED ON DECISION OF JURISDICTIONAL ITAT IN THE CASE OF T OYO ENGG. INDIA LTD VS JCIT (100 TTJ 373) AND SAURASHTRA CEMENT AND CHE MICAL INDUSTRIES LTD VS CIT (213 ITR 623 GUJ). 03. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN DISALLOWING THE LEASE PREM IUM EXPENSES OF RS. 1 55 20 622/- ON THE GROUND THAT IT IS A CAPITA L EXPENDITURE. THE CIT(A) SHOULD HAVE NOTED THAT THE SAID SUM BEING AM ORTIZATION OF PREMIUM PAID ON LEASEHOLD PROPERTIES CANNOT BE TERM ED AS CAPITAL EXPENDITURE. THE CIT(A) OUGHT TO HAVE ALLOWED THE E NTIRE PREMIUM OF RS. 124 43 02 761/- AS HELD IN THE CASE OF CIT V S UCAL FUEL SYSTEMS LTD (296 ITR 702 MAD) AND AGAINST WHICH DEC ISION THE SUPREME COURT HAD DISMISSED THE SLP FILED BY THE DE PARTMENT (195 TAXMAN 52 STAT). WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE CIT( A) OUGHT TO HAVE ALLOWED AT LEAST THE PROPORTIONATE AMOUNT OF RS. 1 55 20 622/- CLAIMED BY THE APPELLANT. 04. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ERRED IN NOT DECIDING ON THE ISSUE OF EXCLUSION OF INCOME FROM FOREIGN BRANCHES BASED ON THE DOUBLE TA XATION AVOIDANCE AGREEMENT ENTERED INTO WITH THE RESPECTIV E COUNTRIES BASED ON VARIOUS JUDICIAL DECISIONS. 05. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT DECIDING ON THE ISSUE OF SHORT ALLOWANCE U/S 36(1)(VIIA) BASED ON TOTAL INCOME COMPUTED BY AO. 3. THE FACTS RELATING TO THE FIRST GROUND OF APPEAL IS THAT THE AO TAKING THE BASIS OF ADDITION MADE IN RESPECT OF INF RASTRUCTURE LENDING INTEREST @ 12% DISALLOWED A SUM OF RS. 10 08 67 68 0/- OF RS. PAGE 3 OF 11 84 05 64 006 BEING THE AGGREGATE FIGURE COMPUTED ON ACCOUNT OF DISALLOWANCE TO BE MADE UNDER SECTION 14A. THE CALC ULATIONS TAKEN BY THE AO WAS THE RESULT OF THE FOLLOWING : INTEREST ON INFRASTRUCTURE LENDING 50 58 33 237 DIVIDEND INCOME 22 40 38 574 INTEREST ON TAX FREE BONDS 11 06 92 195 TOTAL 84 05 64 006 4. AGGRIEVED THE ASSESSEE APPROACHED THE CIT(A) BE FORE WHOM THE ASSESSEE SUBMITTED AS UNDER (RELEVANT PORTIONS AS EXTRACTED FROM THE CIT(A)S ORDER) : THE AO OUGHT TO HAVE NOTED THAT THE APPELLANT IS HA VING SUBSTANTIAL OWN FUNDS REPRESENTED BY SHARE CAPITAL AND RESERVES AND NON INTEREST BEARING FUNDS IN THE FORM OF CURRENT ACCOU NT SUNDRY CREDITORS ETC. THE POSITION OF OWN FUNDS AND INVE STMENTS IN TAX FREE BONDS ON 31.03.2002 ARE AS UNDER: (RS. IN CRORES) CAPITAL 488.08 RESERVES AND SURPLUS 2356.96 CURRENT ACCOUNT 7193.61 OTHER LIABILITIES AND PROVISIONS 3902.49 OWN FUNDS 13 941.14 INVESTMENT IN ASSETS EARNING TAX FREE INCOME 53 2.22 FURTHER SINCE THESE ASSETS ARE HELD BY THE BANK IN THE COURSE OF ITS NORMAL BUSINESS FOR TRADING THE PROVISIONS OF SECTI ON 14A ARE NOT APPLICABLE. WITHOUT PREJUDICE TO THE ABOVE CONTENTION IF ANY DI SALLOWANCE IS TO BE MADE U/S 14A THE SAME CANNOT EXCEED THE PROPORTION ATE EXPENDITURE INCURRED BY THE TREASURY DEPARTMENT. THE AMOUNT REL ATING TO TAX FREE INCOME PROPORTIONATELY ARRIVED AT BASED ON EXEMPT I NCOME TO TOTAL INCOME AMOUNTS TO RS.8 16 657/-.THEREFORE IF AT ALL ANY DISALLOWANCE IS TO BE MADE THE SAME CANNOT EXCEED RS. 8 16 657/- . WITHOUT PREJUDICE TO THE ABOVE CONTENTION IF AT AL L ANY DISALLOWANCE IS WARRANTED THE SAME CANNOT EXCEED 2% OF THE TAX FREE INCOME. RELIANCE WAS PLACED FOR THIS VIEW ON THE DECISION O F JURISDICTIONAL ITAT MUMBAI IN THE CASE OF GODREJ AGROVET LTD VS. ACIT ( 2010 TIOL 616 ITAT MUM) AND ITAT CHENNAI IN THE CASE OF BHARAT O VERSEAS BANK PAGE 4 OF 11 LIMITED IN ITA NO. 2622/MDS/2005 FOR THE ASSESSMENT YEAR 2002-03 DATED 15.09.2006. 5. THE CIT(A) ON CONSIDERATION OF THE ASSESSEES S UBMISSIONS HELD THAT THE DISALLOWANCE MADE BY THE AO AT 12% OF 84.0 5 CRORES IS VERY HIGH AND AFTER REFERRING TO THE LATEST DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE HELD THAT REAS ONABLE DISALLOWANCE MAY BE MADE AND HE THEREFORE DIRECTED THE AO TO C OMPUTE THE DISALLOWANCE AT .5% OF THE AVERAGE OF INVESTMENT YI ELDING TAX FREE INCOME. 6. THE ASSESSEE STILL NOT SATISFIED IS NOW BEFORE THE ITAT ON THIS ISSUE. 7. BEFORE US THE AR REPRESENTING THE ASSESSEE BANK SUBMITTED THAT EVEN ON THIS DISALLOWANCE IDENTICAL GROUND WAS RAI SED IN THE PRECEDING YEAR IN THE ASSESSEES OWN CASE IN I.T.A. NO. 2781/ MUM/2011 WHEREIN THE COORDINATE BENCH AT MUMBAI HAD SET ASIDE THE IS SUE TO THE FILE OF THE AO FOR COMPUTING A REASONABLE DISALLOWANCE UNDE R SECTION 14A (COPY OF THE ORDER PLACED BEFORE US). 8. THE DR ALSO AGREED WITH THE SUBMISSIONS OF THE A UTHORISED REPRESENTATIVE. 9. WE HAVE HEARD THE ARGUMENTS FROM BOTH THE SIDES AND HAVE ALSO PERUSED THE MATERIAL AND CASE LAWS PLACED ON RECORD AND CITED BEFORE US. BUT WE HAVE NOT FOUND ANY WORKING ON THE DISALLOWANCE AND HOW THE AR HAS ARRIVED AT FIGURE OF RS. 8 16 65 7/- AND HOW AND WHY .5% OF AVERAGE OF INVESTMENT YIELDING TAX FREE INCOME WAS EXCESSIVE. IN THIS SENSE WE FEEL IT WOULD BE APPRO PRIATE TO RESTORE THE PAGE 5 OF 11 ISSUE TO THE FILE OF THE AO AS DONE IN THE PRECEDI NG YEAR WITH A DIRECTION THAT A REASONABLE DISALLOWANCE UNDER SEC TION 14A MAY BE ARRIVED AT AS PER LAW. 10. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A ) ON THIS ISSUE AND RESTORE THE ISSUE TO THE FILE OF THE AO WITH DI RECTIONS AS GIVEN IN THE ABOVE PARA. THE GROUND OF APPEAL IS THUS ALLOW ED IN PART. 11. THE NEXT GROUND IS AGAINST THE DISALLOWANCE OF RS. 19 67 140/- HELD TO BE PRIOR PERIOD EXPENSES DEBITED TO THE P& L ACCOUNT. 12. THE FACTS INVOLVED IN THIS ISSUE ARE THAT THERE ARE CLAIMS ON EXPENSES PERTAINING TO PRECEDING YEAR WHERE THE PA YMENTS MADE IN THE CURRENT YEAR. THE AO HELD THAT THESE ARE PRIOR PERIOD EXPENSES THE AO DISALLOWED THE SAME AND ADDED THESE TO THE INCOM E OF THE ASSESSEE. 13. AGGRIEVED THE ASSESSEE APPROACHED THE CIT(A) W HO SUSTAINED THE DISALLOWANCE SIMPLY BY OBSERVING THAT SINCE TH E ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE CLAIMS MADE ALONG WIT H EVIDENCE THAT THE EXPENSES HAVING ACCRUED OR CRYSTALLIZED IN THE CURR ENT YEAR. 14. AGGRIEVED THE ASSESSEE IS BEFORE THE ITAT. 15. BEFORE US THE AR REITERATED THE SUBMISSIONS MAD E BEFORE THE REVENUE AUTHORITIES AND SUBMITTED T HE EXPENDITURE STATED AS RELATING TO PRIOR PERIOD. THE CLAIMS IN RESPECT OF ALL THESE EX PENSES WERE RECEIVED ONLY DURING THE CURRENT ASSESSMENT YEAR AND HENCE THEY C ANNOT BE TREATED AS PRIOR PERIOD EXPENSES. FURTHER THE LIABILITY TO PAY THESE SUMS AROSE ONLY IN THE CURRENT YEAR AND THEREFORE THESE ARE NOT PRIOR PERIOD EXPENSES. IT IS ALSO PAGE 6 OF 11 SUBMITTED THAT IN THE CASE OF ASSESSES LIKE THAT OF THE APPELLANT WITH BRANCHES SPREAD ACROSS THE COUNTRY INCURRING OF EXPENDITURE IS A CONTINUOUS PROCESS AND NO PART OF THE EXPENSES CAN BE CUT OFF AND TREA TED AS PRIOR PERIOD EXPENSES. RELIANCE FOR THIS VIEW IS PLACED ON THE D ECISION OF ITAT MUMBAI IN THE CASE OF TOYO ENGINEERING INDIA LIMITED VS JCIT 100 TTJ 373 WHEREIN IT WAS HELD AS UNDER: EVEN THOUGH A PREVIOUS YEAR IS DIRECTLY CUT OFF ON 31ST MARCH OF EVERY YEAR THE ACTUAL CARRYING ON OF BUSINESS W HICH IS A LIVE PROCESS CANNOT BE CUT OFF AS EXACTLY ESPECIALLY I N AN ORGANIZATION LIKE THAT OF THE ASSESSEE WHERE ACTIVI TIES ARE CARRIED OUT THROUGH VARIOUS SITE OFFICES. THEREFORE IT IS QUITE NATURAL THAT THERE WOULD BE AN AMOUNT OF OVERFLOW O F IN FORMATION AFTER THE CLOSE OF THE ACCOUNTING YEAR. T HEREFORE TO CERTAIN EXTENT THE CLAIM OF THE ASSESSEE THAT THE DETAILS OF SUCH EXPENDITURE WERE RECEIVED ONLY AFTER THE CLOSE OF THE ACCOUNTING YEAR COULD BE ACCEPTED. IT IS A CONTINU OUS PROCESS TO INCUR EXPENDITURE AND TO ACCOUNT FOR IN THE BOOK S OF ACCOUNT. THEREFORE EVEN THOUGH THEY ARE TREATED TE CHNICALLY AS PRIOR PERIOD EXPENSES IT RELATES TO A CONTINUOU S FLOW OF EXPENDITURE. THEREFORE THERE IS NO JUSTIFICATION I N DISALLOWING THE EXPENDITURE OTHERWISE NORMALLY ELIGIBLE FOR DE DUCTION. RELIANCE IS ALSO PLACED ON THE DECISION IN THE CASE OF UNION BANK OF INDIA IN ITA NO. 4720 TO 4724/MUM/2010 FOR THE ASSESSMENT YEARS 2002-03 TO 2006-07 DATED 30/06/201 1 WHERE UNDER SIMILAR CIRCUMSTANCES THE CLAIM OF THE APPELLANT WAS ALLOWED. COPY OF THE ABOVE DECISION IS ENCLOSED IN ANNEXURE 6. RELIANCE IS ALSO PLACED ON THE DECISION OF SAURASTR A CEMENT AND CHEMICAL INDUSTRIES VS CIT 213 ITR 523 GUJ). THE AR THEREFORE SUBMITTED THAT SINCE THE ISSUE I S SETTLED NO DISALLOWANCE SHOULD BE SUSTAINED. IN THE PRECEDING YEAR AS WELL THE ISSUE HAD REACHED THE ITAT WHEREIN THE CO-ORDINATE BENCH HAD DELETED THE ADDITIONS MADE FOLLOWING THE DECISION IN THE PRECEDING YEAR. SINCE THE ISSUE NOW IS SETTLED ON IDENTICAL G ROUNDS BY THE COORDINATE BENCH ADDITION MADE BY THE REVENUE AUTH ORITIES ON THIS ISSUE HAS TO BE DELETED. PAGE 7 OF 11 16. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND HAVE ALSO PERUSED THE WRITTEN SUBMISSIONS MADE BEFORE US AND THE CASE LAWS CITED. WE FIND THAT COORDINATE BENCH AT MUMBAI IN T HE CASE OF UNION BANK OF INDIA VS ACIT MUMBAI ITA NO. 4720 & 4724/ MUM/2010 (APPEALS FILED BY THE DEPARTMENT) IT WAS HELD GROUND NO. 1 RAISED BY THE REVENUE (IN ITA NOS. 47 02 TO 4706/M/10 FOR A.YRS. 2002-03 TO 2006-07) IS WITH RE SPECT TO PRIOR PERIOD EXPENSES. THE EXPENDITURE DISALLOWED AS IN THE NATURE OF RENT MUNICIPAL TAXES ETC. WHERE USUALLY THE AMOUNTS ARE PAID AFTER DETAILED NEGOTIATIONS AND RECEIPT OF DEMAND OF THE ARREARS A MOUNT FROM THE PARTIES. THE LD. CIT(A) TAKING INTO CONSID ERATION THE NATURE OF EXPENDITURE HAD COME TO A CONCLUSION THAT SINCE THE BANK IS A NATIONALIZED BANK SUBJECTED TO AUDIT THE CLAIM THAT THE LIABILITY TO PAY THE EXPENSES AROSE IN THE RELE VANT ASSESSMENT YEAR WOULD NOT BE A MATTER OF DOUBT PART ICULARLY CONSIDERING THE NATURE OF EXPENDITURE. HE THEREFORE ALLOWED THE AMOUNT ON THE GROUND THAT NO INFALLIBLE OR DEMO NSTRABLE PROOF HAD TO BE NECESSARILY GIVEN TO ALLOW THE ABOV E SUM AS AN EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED AS FOLLO WS:FURTHER IN THE CASE OF ASSESSEE LIKE THAT OF THE RESPONDENT WHICH HAS BRANCHES ALL OVER INDIA INCURRING OF EXPENDITURE AS A CONTINUOUS PROCESS AND CANNOT BE CUT OFF AT ANY POI NT OF TIME TO BE CLASSIFIED AS PRIOR EXPENDITURE AND DISALLOWE D. WE FIND THAT THE DECISION OF THE JURISDICTIONAL COURT IN TH E CASE OF ENGG. INDIA LTD. VS JCIT 110 TTJ 373 WHEREIN IT HAS BEEN HELD AS FOLLOWS: IT IS QUITE NATURAL THAT THERE WOULD B E AN AMOUNT OF OVERFLOW OF INFORMATION AFTER THE CLOSE OF THE A CCOUNTING YEAR. THEREFORE TO CERTAIN EXTENT THE CLAIM OF TH E ASSESSEE THAT THE DETAILS OF SUCH EXPENDITURE WERE RECEIVED ONLY AFTER THE CLOSE OF THE ACCOUNTING R COULD BE ACCEPTED. IT IS A CONTINUOUS PROCESS TO INCUR EXPENDITURE AND TO ACCO UNT FOR IN THE BOOKS OF ACCOUNT. THEREFORE EVEN THOUGH THEY A RE TREATED TECHNICALLY AS PRIOR PERIOD EXPENSES IT RELATES TO A CONTINUOUS FLOW OF EXPENDITURE. THEREFORE THERE IS NO JUSTIFI CATION IN DISALLOWING THE EXPENDITURE OTHERWISE NORMALLY ELI GIBLE FOR DEDUCTION. RESPECTFULLY FOLLOWING THE ABOVE WE DISMISS THE GROUND RAISED BY THE REVENUE. PAGE 8 OF 11 SINCE THE ISSUE NOW IS SETTLED ON IDENTICAL GROUNDS BY THE COORDINATE BENCH RESPECTFULLY FOLLOWING THE DECISION IN THE C ASE OF UNION BANK OF INDIA AS ALSO OUR OWN ORDER WHERE WE HAVE DELETED THE IMPUGNED ADDITION WE DELETE THE ADDITION MADE BY THE REVENU E AUTHORITIES ON THIS ISSUE IN THE INSTANT YEAR. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE AO TO DELETE THE ADDITION OF RS. 19 76 140/-. 18. THE NEXT GROUND IS AGAINST THE DISALLOWANCE OF RS. 1 55 20 622/- WHEREIN THE AO HAS TREATED THE EXPENSES TO BE CAPIT AL IN NATURE. 19. THE AR CONCEDED THAT THE EXPENSES TREATED TO B E OF CAPITAL IN NATURE HAS BEEN DECIDED BY THE SPECIAL BENCH IN TH E CASE OF JCIT VS MUKUND LIMITED REPORTED IN 106 ITD 231 (MUM SB). T HE AR SUBMITTED THAT A VIEW MAY BE TAKEN BY THE BENCH. 20. THE DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES AND THE DECISION BY THE SPECIAL BENCH IN THE CASE OF MUKUND LIMITED. 21. WE HAVE HEARD BOTH THE SIDES. THE CLAIM OF EXPE NSES MADE BY THE ASSESSEE HAVE BEEN TREATED AS CAPITAL IN NATURE AND HENCE CANNOT BE ALLOWED HAS BEEN DECIDED BY THE SPECIAL BENCH AS CONCEDED BY THE AR. RESPECTFULLY FOLLOWING THE DECISION RENDERE D BY THE HONBLE SPECIAL BENCH WE SUSTAIN THE DISALLOWANCE OF RS. 1 55 20 622/- AS MADE BY THE REVENUE AUTHORITIES. THE GROUND OF APPEAL IS DISMISSED. PAGE 9 OF 11 22. GROUND NO. 4 AS AGREED BY THE AR DOES NOT ARIS E FROM THE IMPUGNED ORDER OF THE CIT(A) IN SUCH A SITUATION WE CANNOT ADJUDICATE THE SAME. THE GROUND THEREFORE IS REJECTED AS NON MAINTAINA BLE. 23. GROUND NO. 5 IT HAS BEEN PLEADED THAT CIT(A) E RRED IN NOT DECIDING ON THE ISSUE OF SHORT ALLOWANCE UNDER SECT ION 36(1)(VIIA) BASED ON TOTAL INCOME COMPUTED BY THE AO. WE THERE FORE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DECIDE THE ISSUE AFRESH AS CONSEQUENTIAL TO THE ORDER IN THE INSTAN T APPEALS AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 27. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 2443/MUM/2011 (APPEAL BY THE DEPARTMENT) : 28. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUMERATED BELOW : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A) ERRED IN ALLOWING THE WHOLE OF THE BAD DEBT CLAIMED IGNORING THE PROVISION FOR BAD DEBT MADE IN THE BEGINNING OF THE YEAR. THE LD. CIT(A) SHOULD HAVE ALLOWED ONLY THE EXCESS OF BAD DEBTS OVER THE PROVI SION ALREADY MADE. 29. THE SOLITARY GROUND OF APPEAL IS AGAINST THE AL LOWANCE OF WHOLE OF THE BAD DEBTS CLAIMED. 30. THE FACTS ARE THAT THE AO DISALLOWED RS. 522 14 44 550/- CLAIMED AS BAD DEBTS ON THE GROUND THAT THE ASSESS EE HAS NOT ACTUALLY WRITTEN OFF THE AMOUNT IN THE BOOKS. ACCORDING TO T HE AO THE BAD DEBT IS ALLOWABLE ONLY IF IT IS IRRECOVERABLE AND IS ACT UALLY WRITTEN OFF IN THE PAGE 10 OF 11 ACCOUNTS OF THE ASSESSEE. THE AO OBSERVED THAT ONLY PRUDENTIAL WRITE OFF AND NOT ACTUAL WRITE OFF AS IRRECOVERABLE CANNO T BE ALLOWED. 31. AGGRIEVED THE ASSESSEE APPROACHED THE CIT(A) WHO RELYING ON THE DECISION OF ASSESSEES OWN CASE IN ASSESSMENT YEAR 2000-01 BY THE CIT(A) AND ALSO BY FOLLOWING THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK V/S CIT REPORTED IN 323 ITR 166 WHEREIN THE HON'BLE APEX COURT HELD THOUGH A MERE DEBIT TO THE PROFIT AND LOSS ACCOUNT WOULD CONSTITUTE A PROVISION FOR A BAD AND DOUBTFUL DEBT YET THAT WOULD NOT CONSTITUTE ACTUAL WRITE OFF. BUT WHERE BESIDES DEBITING THE PROFIT AND LOSS ACCOUNT AND CREATING A PROVISION FOR BAD AND DOUBTFUL DEBT THE ASSESSEE HAS CORRESPONDINGLY /SIMULTANEOUSLY OBLITERATED THE SAID PROVISION FROM ITS ACCOUNTS BY REDUCING THE CORRESPONDING AMOUNT FROM LOANS AND ADVANCES/DEBTOR S ON THE ASSETS SIDE OF THE BALANCE-SHEET AND CONSEQUENTLY AT THE END OF THE YEAR THE FIGURE IN THE LOANS AND ADVANCES OR THE DEBTORS ON THE ASSETS SIDE OF THE BALANCE-SHEET IS SHOWN AS NET OF THE PROVISI ON FOR IMPUGNED BAD DEBT THE ASSESSEE WILL BE ENTITLED TO THE BEN EFIT OF DEDUCTION UNDER SECTION 36(1)(VII) AS THERE IS AN ACTUAL WRI TE OFF BY THE ASSESSEE IN HIS BOOKS. DISALLOWANCE CANNOT BE MADE ON AN APP REHENSION THAT IF THE ASSESSEE FAILED TO CLOSE EACH AND EVERY INDIVID UAL ACCOUNT OF ITS DEBTOR IT MAY RESULT IN THE ASSESSEE CLAIMING DEDU CTION TWICE OVER ALLOWED THE APPEAL OF THE ASSESSEE ALLOWING THE CL AIM OF BAD DEBTS. PAGE 11 OF 11 32. THE DR CONCEDED THAT THE ISSUE NOW STANDS SETTL ED IN FAVOUR OF THE ASSESSEE EVEN VIDE ITA NO. 3545/MUM/2011 ORDE R DATED 15.06.2012. 33. CONSIDERING THE SUBMISSIONS WE DO NOT FIND ANY REASON TO DISTURB THE DECISION OF THE CIT(A) WHEREIN HE HAS FOLLOWED THE DECISION OF HON'BLE SUPREME COURT. THE GROUND IS DISMISSED. 34. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ITA NO. 2155/MUM/2011 : APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED. ITA NO. 2443/MUM/2011 : APPEAL BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 31/07/2012. SD/- SD/- (R.S. SYAL) (VIVEK VARMA) ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI: 31/07/2012. P/-*