THE MALAD SAHAKARI BANK LTD, MUMBAI v. DCIT 1(3), MUMBAI

ITA 2579/MUM/2013 | 2009-2010
Pronouncement Date: 21-02-2019 | Result: Partly Allowed
Expert Summary: "Assessee being co-operative bank is eligible for deduction of provision for doubtful debt and loss assets u/s 36(1)(viia) to extent of 7.5 percent of business income. Depreciation on securities held as 'available for sale' was allowed to assessee which was computed and claimed consistently every year by assessee in its profit and loss account. Assessee was entitled to deduction u/s 36(1)(vii), where he has admittedly written off bad debts in its books of account from individual ledgers of borrowers/defaulters during relevant previous year."

Appeal Details

RSA Number 257919914 RSA 2013
Assessee PAN AAAAT0320R
Bench Mumbai
Appeal Number ITA 2579/MUM/2013
Duration Of Justice 5 year(s) 10 month(s) 16 day(s)
Appellant THE MALAD SAHAKARI BANK LTD, MUMBAI
Respondent DCIT 1(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-02-2019
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 21-02-2019
Last Hearing Date 12-10-2018
First Hearing Date 12-10-2018
Assessment Year 2009-2010
Appeal Filed On 04-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI R.C.SHARMA AM & SHRI RAM LAL NEGI JM ITA NO. 2579 /MUM/20 13 & 2469/MUM/2014 ( ASSESSMENT YEAR : 2009 - 10 & 2010 - 11 ) THE MALAD SAHAKARI BANK LTD. 6 SUJATA 1 ST FLOOR RANI SATI MAR G MALAD (E) MUMBAI 400 097 VS. THE DY. COMMISSIONER OF INCOME TAX - 1(3) MUMBAI PAN/GIR NO. AAAAT0320R ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY MS. AARTI SATHE REVENUE BY SHRI ABDUL HAKEEM DATE OF HEARING 27 / 12 /2018 DATE OF PRONOUNCEMENT 21 / 02 /201 9 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2 MUMBAI DATED 01/01/2013 FOR A.Y.2009 - 10 & 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. FOLLOWING GROUN DS HAVE BEEN TAKEN IN THE A.Y.2009 - 10: - 1) THE COMMISSIONER OF INCOME - TAX (APPEALS) - 2 MUMBAI (HEREAFTER REFERRED TO AS (CIT(A)] ERRED IN NOT APPRECIATING THE FACTS AND LAW IN THE PRESENT CASE AND THEREBY PASSING THE IMPUGNED ORDER. THE SAME THEREFORE NEE DS TO BE SET ASIDE. 2) THE CIT(A) ERRED IN NOT APPRECIATING THAT AS PER THE PROVISIONS OF SECTION 36(1) (VIIA) OF THE INCOME - TAX ACT 1961 (HEREAFTER THE 'ACT') THE APPELLANT WAS ENTITLED TO CLAIM A DEDUCTION OF 7 L /2% OF THE TOTAL INCOME (COMPUTED BEFORE M AKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI A) AND THEREFORE THE APPELLANT WAS ENTITLED TO CLAIM A DEDUCTION OF RS. ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 2 11 65 236/ - (RUPEES ELEVEN LAKHS SIXTY FIVE THOUSAND TWO HUNDRED THIRTY SIX ONLY) WHICH HAS NOT BEEN ALLOWED BY THE CIT(A) ON A MI S - APPLICATION OF THE LEGAL PROVISIONS. 3) THE C.I.T. (A) ERRED IN NOT APPRECIATING THAT IN RESPECT OF RS.84 59 648.81 (RUPEES EIGHTY FOUR LAKHS FIFTY NINE THOUSAND SIX HUNDRED FORTY EIGHT & EIGHTY ONE PAISA ONLY) AMOUNT WHICH WAS RECEIVED IN RESPECT OF S HARES OF JIK INDUSTRIES WHICH THE APPELLANT RECEIVED SUBSEQUENT TO THE BIFR ORDER THE APPELLANT HAD SUBMITTED ALL THE DETAILS IN RESPECT THEREOF AND HAD ALSO FOLLOWED THE RBI GUIDELINES FOR WORKING OUT THE DEPRECIATION. THE IMPUGNED ORDER HAS BEEN PASSED ON A COMPLETE NON APPRECIATION OF THE FACTS OF THE CASE AND IS THEREFORE LIABLE TO BE SET ASIDE. 4) THE C.I.T (A) ERRED IN NOT APPRECIATING THAT AN AMOUNT OF RS.84 59 648.81 (RUPEES EIGHTY FOUR LAKHS FIFTY NINE THOUSAND SIX HUNDRED FORTY EIGHT & EIGHTY O NE PAISA ONLY) WAS CLAIMED BY THE APPELLANT ON ACCOUNT OF DEVALUATION OF SHARES OF JIK INDUSTRIES WHICH WAS RECEIVED BY THE APPELL ANT AS PER THE ORDER OF THE HONBL E BIFR. THE APPELLANT HAD NO OTHER ALTERNATIVE BUT TO RECEIVE THE SHARES OF JIK INDUST RIES AFTER THE ORDER OF THE HON BLE BIFR. THE APPELLANT SUBMITS THAT BECAUSE OF REDUCTION IN VALUATION OF SHARES OF JIK INDUSTRIES IN STOCK EXCHANGE THE CLAIM AMOUNT WAS NOT RECOVERABLE. THE C.I.T. (A) FAILED TO APPRECIATE VARIOUS JUDICIAL DECISIONS CITED AT TH E TIME OF HEARING BEFORE THE C.I.T. (A) WHICH INDICATED THAT THE DEVALUATION OF SHARES IS ALLOWABLE DEDUCTION. THEREFORE THE IMPUGNED ORDER HAS BEEN PASSED ON A COMPLETE NON APPRECIATION OF THE FACTS OF THE CASE AND IS THEREFORE LIABLE TO BE SET ASIDE. 5) THE APPELLANT SUBMITS THAT WITHOUT PREJUDICE TO GROUNDS (3) AND (4) THE LOSS SUFFERED BY THE APPELLANT OF RS.84 59 648.81 (RUPEES EIGHTY FOUR LAKHS FIFTY NINE THOUSAND SIX HUNDRED FORTY EIGHT & EIGHTY ONE PAISA ONLY) ON ACCOUNT OF DEVALUATION OF SHARES O F JIK INDUSTRIES IF NOT ALLOWED IN THE PRESENT ASSESSMENT YEAR SHOULD BE ALLOWED AS A BAD DEBT UNDER SECTION 36(2) OF THE ACT IN THE YEAR IN WHICH IT IS WRITTEN OFF I.E. A.Y. 2015 - 16. 6) THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND / AND /MODIFY THE A BOVE GROUNDS OF APPEAL. 3 . GROUNDS TAKEN IN THE A.Y.2010 - 11 READS AS UNDER: - 1) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING AN ADDITION OF RS. 75 76 011/ - BEING 5% OF THE DOUBTFUL & LOS S ASSETS WITHOUT UNDERSTANDING THE FACTS & CIRCUMSTANCES OF THE CASE & THE REASONS ASSIGNED FOR DOING SO ARE WRONG & CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT & THE RULES MADE THERE UNDER. WITHOUT PREJUDICE IF IT IS ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 3 ASSUMED WITHOUT ADMITTING THAT T HE DEDUCTION U/S 36(VIIA) OF 5% OF THE DOUBTFUL & LOSS ASSETS IS NOT ADMISSIBLE FOR THE APPELLANT BANK THEN THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE GRANTED DEDUCTION OF 7 % OF TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THI S CLAUSE AND CHAPTER VIA) AS PE R THE PROVISION OF SECTION 36(1 )(VIIA) OF THE INCOME TAX ACT 1961. 2) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 2 10 50 040 / - BEI NG IN THE NATURE OF BAD DEBTS WRITTEN OFF WITHOUT UNDERSTANDING THE FACTS & CIRCUMSTANCES OF THE CASE & THE REASONS ASSIGNED FOR DOING SO ARE WRONG & CONTRARY TO THE PROVISIONS OF THE INCOME TAX ACT & THE RULES MADE THERE UNDER. 3) THE APPELLANT CRAVES LEA VE TO ADD ALTER AMEND AND/ OR MODIFY ALL OR ANY OF THE ABOVE GROUND OF APPEAL ON OR BEFORE THE DATE OF HEARING 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS A CO - OPERATIVE BANK. FOR THE A.Y.2009 - 10 ASSESSEE FILED THE RETURN OF INCOME DECLARING T OTAL INCOME OF RS. 54 51 100 / - ON 26/09/2009. IN THE ASSESSMENT ORDER DATED 31/10/2011 PASSED U/S. 143(3 ) OF THE I.T. ACT THE A.O. ADDED THE FOLLOWING AMOUNTS WITH THE RETURNED INCOME: 1. DISALLOWANCE OF THE DEDUCTIO N U/S 36(1) (VIIA] OF THE I.T. ACT RS. 74 00 214 / - 2. DISALLOWANCE UNDER THE HEAD 'PROVISION AND CONTINGENCY (INVESTMENT] RS.1 09 99 341/ - 5. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER A PPEAL BEFORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 4 AS WELL AS CITED BY THE LD . AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FOUND THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME HAS REDUCED AN AMOUNT O F RS.85 65 450/ - U/S. 36(L)(VIIA) BEING 5% OF DOUBTFUL AND LOSS ON ASSETS I.E. 5% OF RS.17 13 09 000/ - . HOWEVER THE A.O. HAS ALLOWED RS. 11 65 236/ - WHICH IS 7.5% OF THE BUSINESS INCOME AS PER INCOME TAX ACT. THUS THE A.O. HAS DISALLOWED RS. 74 00 214/ - (85 65 450 - 11 65 236). AS PER THE A.O. T HE RELEVANT SECTION PROVIDE S FOR DEDUCTION NOT EXCEEDING 7.5 % OF THE TOTAL INCOME [COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA]. THE INCOME COMPUTED BEFORE MAKING ABOVE REFERRED DEDUCTION I S RS.1 55 36 475/ - AND 7 % OF THE ABOVE SUM WORKS OUT TO RS.11 65 236/ - . 7. HOWEVER AS PER THE LD AR TH E ABOVE REFERRED SECTION FURTHER PROVIDES THAT AN ASSESSEE AT ITS OPTION IS ENTITLED TO CLAIM 5% OF DOUBTFUL ASSETS AND LOSS ASSETS CLASSIFIED IN ACCO RDANCE WITH THE GUIDELINES ISSUED BY RESERVE BANK OF INDIA IN THIS BEHALF. HE FURTHER INVITED OUR ATTENTION TO T HE TOTAL DOUBTFUL AND LOSS ASSETS WHICH ARE RS.17 13 09 000/ - . A S PER GUIDELINES ISSUED BY RESERVE BANK OF INDIA AND 5% OF SUCH AMOUNT WORKS OUT TO RS.85 65 450/ - . AS PER LD AR THE ASSESSEE HAD ATTACHED THE DETAILS AS CERTIFIED BY STATUTORY AUDITORS IN RESPECT OF CLASSIFICATION OF ASSETS AND PROVISION MADE AGAINST THE NON - PERFORMING ASSETS AS ON 31 ST ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 5 MARCH 2009. MOREOVER THE PROVISO TO SEC. 36[ VIIA] SPECIFICALLY GIVE OPTION TO THE ASSESSEE TO CLAIM DEDUCTION @ 5% OF ITS DOUBTFUL AND LOSS ASSETS WORKED OUT IN ACCORDANCE TO THE GUIDELINES ISSUED BY RESERVE BANK OF INDIA . 8. IT WAS ALSO CONTENTION OF THE LD AR THAT ALL THE AFORESAID DOUBTFUL DEBTS + LOSS ASSETS ARE NON - PERFORMING ASSETS FOR A PERIOD OF MORE THAN 3 YEARS. THUS THE SAID DOUBTFUL + LOSS ASSETS ARE MORE IN THE NATURE OF STICKY LOANS WHICH CAN BE ALLOWED U/S 37(1) OF I.T. ACT. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 36(1)(VIIA) OF THE ACT TO THE EXTENT OF 7.5% OF THE BUSINESS INCOME WHICH WORKS OUT TO BE RS. 11 65 236/ - . FROM THE RECORD WE FOUND THAT THE AFORESAI D DOUBTFUL DEBTS AND LOSS ASSETS ARE NON - PERFORMING ASSET S FOR A PERIOD MORE THAN THREE YEARS WHICH ARE ESSENTIAL LY IN THE NATURE OF STICKY LOANS AND CAN BE CONSIDERED FOR ALLOWANCE U/S 37(1) OF THE ACT. HOWEVER THIS ASPECT OF THE ISSUE HAS NOT BEEN CONSI DERED BY THE LOWER AUTHORITIES THEREFORE IN THE SUBSTANTIAL INTEREST OF JUSTICE WE RESTORE THE MATTER BACK TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THE NATURE OF STICKY LOANS AND ITS ALLOWABILITY U/S 37(1) OF THE ACT. ACCORDINGLY BALANCE CLAI M OF RS. 74 00 214/ - (85 65 450 - 11 65 236) IS TO BE DECIDED AFRESH BY THE A.O. IN TERMS OF DIRECTION GIVEN HEREINABOVE. ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 6 10 . IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11 . IN RESPECT OF GROUND TAKEN BY THE ASSESSEE FOR THE DI SALLOWANCE ON ACCOUNT OF 'PROVISIONS AND CONTINGENCY (INVESTMENT)' THE LD. CIT(A) VIDE HIS APPELLATE ORDER DATED 01.01.2013 ALLOWED AN AMOUNT OF RS. 25 39 693/ - BEING THE AMOUNT OF AMORTIZATION FOR INVES TMENTS 'HELD TO MATURITY. FOR THE BALANCE AMOUNT OF RS. 84 59 648/ - (BEING RS. 1 09 99 341/ - MINUS RS. 25 39 693/ - ) THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 1 2 . IN THIS REGARD WE OBSERVED THAT T HE ASSESSEE BANK HAD ADVANCED A LOAN AMOUNT OF RS. 90 00 000/ - TO M/S JIK INDUSTRIES IN THE YEAR 2002. SUBSEQUENTLY JIK INDUSTRIES BECAME SICK AND WAS UNABLE TO REPAY THE LOAN TO THE ASSESSEE BANK. THE BIFR VIDE ITS ORDER DATED 03.01.2006 ALLOTTED 82 75 922 NUMBER OF SHARES TO THE ASSESSEE BANK VALUED AT RS. 1 11 72 495/ - AS THE FINAL SETTLEMENT OF THE OUTSTANDING LOAN BY M/S JIK INDUSTRIES. COPY OF THE SAID ORDER DATED 03.01.2006 OF THE BIFR ISSUED VIDE A COVERING LETTER DATED 08.01.2007 WAS SUBMITTED BEFORE THE LD. CIT( A). SUBSEQUENT TO THE ORDER OF THE BIFR THE COMPANY JIK INDUSTRIES ISSUED 82 75 922 NUMBERS OF ITS SHARES TO THE ASSESSEE BANK ON 10.01.2007 VIDE AN ALLOTMENT LETTER NO. 03/07. A COPY OF THE LETTER OF ALLOTMENT WAS ALSO SUBMITTED BEFORE THE LD . CIT(A). ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 7 1 3 . FROM THE RECORD WE FOUND THAT T HE AM OUNT OF RS.1 11 72 492/ - WAS REFLECTED IN THE BALANCE SHEET OF THE BANK AS ON 31.03.2007 (ITEM 5(B) UNDER THE HEAD INVESTMENTS (AT BOOK VA L UE ) THE ASSESSEE - BANK CLASSIFIED THE SH ARES OF M/S JIK INDUSTRIES IN THE 'AVAILABLE FOR SA L E' CATEGORY. AS PER THE 'MASTER CIRCULAR ON INVESTMENT BY PRIMARY (URBAN) COOPERATIVE BANKS' ISSUED BY THE RBI ON 01.07.2 008 DULY SUBMITTED BEFORE THE LD. CI T(A) AND ATTACHED HEREWITH AS ANNEXURE - C THE ASSESSEE WAS ENTITLED TO CLAIM AMORTIZATION ON SECURITIES 'HELD TO MATURIT Y' AND DEPRECIATION ON SECURITIES 'HELD FOR T RADING' OR 'AVAILABLE FOR SALE' SUCH A COMPUTATION FOR AMORTIZATION AND DEPRECIATION WAS BEING COMPUTED BY THE ASSESSEE - BANK EVERY YEAR AND WAS BEING CLAIMED IN ITS PROFIT & LOSS ACCOUNT. THIS WAS THE CONSISTENT PRACTICE OF THE ASSESSEE - BANK. THE SAME IS EVIDENT FROM THE FOLLOWING TABLE: AMOUNT DEBITED IN THE P&L ACCOUNT AS PROVISIONS AND CONTINGENCIES (INVESTMENT) DURING THE FY 2007 - 08 (AY 2008 - 09) AN AMOUNT OF RS. 66 65 592.04 WAS DEBITED IN THE P&L ACCOUNT U NDER THE HEAD 'PROVISIONS AND CONTINGENCIES (INVESTMENTS)'. THE COMPUTATION OF THE ABOVE AMOUNT WAS SUBMITTED BEFORE THE LD. CIT(A). THE SAME IS REPRODUCED AS UNDER: PARTICULARS AMORTIZATION FOR FY 2007 - 08 (AY 2008 - 09) JUL 2007 SEP 2007 DEC 2007 MAR 2008 TOTAL HELD TO MATURITY CENTRAL GOVT. SECURITY 5 33 231.25 5 33 231.25 5 33 231.25 533 231.25 2132325 STATE GOVT. SECURITY 95 372.50 95 372.50 95 372.50 9537250 3 8 1 490 BONDS 6 319.50 6 319.50 6 319.50 6 319.50 25773 TOTAL AMORTIZATION 6 34 923.25 6 34 923.25 6 34 923.25 6 34 923.25 2539 693 ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 8 AVAILABLE FOR SALE/HELD FOR TRADING CENTRAL GOVT. SECURITY 25 12 875.00 STATE GOVT. SECURITY 14 07 827.0 0 JIK INDUSTRY 55 01 105.41 TOTAL 94 21 807.41 IDR HELD * 83 01 418.40 DEPRECIATION REQUIRED 11 20 389.01 11 20 389.01 AMOUNT PROVIDED FOR IN IFR** 30 05 510.03 TOTAL AMOUNT DEBITED IN P&L ACCOUNT 66 65 592.04 * IDR (INVESTMENT DEPRECIATION RESERVE) AS ON 01.04.2007 WAS RS. 83 01 418.40. ITS CLOSING BALANCE AS ON 31.03.2008 WAS RS. 94 21 807.41 (PLEASE REFER THE BALANCE SHEET OF THE ASSESSEE - BANK). ** BY PROVIDING FOR IFR (INVES TMENT FLUCTUATION RESERVE) THE AMOUNT WHICH WAS RS. 9 46 752.93 AS ON 01.04.2007 INCREASED TO RS 39 52 262.96 AS ON 31.03.2008 SHOWING INCREASE OF RS. 30 05 510.03. 5.7 DURING THE FY 2008 - 09 (AY 2009 - 10) THE PRESENT ASSESSMENT YEAR AN AMOUNT OF RS. 1 09 99341 . 81 WAS DEBITED IN THE P&L ACCOUNT UNDER THE HEAD 'PROVISIONS AND CONTINGENCIES (INVESTMENTS)'. PARTICULARS AMORTIZATION FOR FY 2008 - 09 (AY 2009 - 10) JUL 2008 SEP 2008 DEC 2008 |MAR 2009 TOTAL HELD TO MATURITY CEN TRAL GOVT. SECURITY 5 33 231.25 5 33 231.25 5 33 231.25 5 33 231.25 21 32 925 STATE GOVT. SECURITY 95 372.50 953725 95 372.50 9537250 3 81 490 ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 9 BONDS 6 319 50 6 319.50 6 319.50 6 319.50 25 278 TOTAL AMORTIZATION 634 923.25 634 923.25 6 34 923.25 6 34 923.25 25 39 693 AVAILABLE FOR SALE/HELD FOR TRADING CENTRAL GOVT. SECURITY 49 03 218.75 46 34 812.50 1 94 531.25 8 91 750.00 STATE GOVT. SECURITY 23 59 125.50 24 07 584.00 4 18 761.50 1 10 543.00 MUTUAL FUNDS 4 56 956.99 62 800.53 12 22 608.1 9 12 08 965.27 JIK INDUSTRY 70 14 477.41 102 15 295.19 93 56 420.5 8 95 25 160.14 TOTAL 147 32 878.65 173 20 456.22 111 92 321. 52 117 36 418.41 IDR HELD * 94 21 807.41 141 71 878 .65 178 81 456. 22 178 81 456.22 DEPRECIATION REQUIRED 53 11 071.24 31 48 577.57 ML NIL 84 59 648.81 TOTAL AMOUNT DEBITED IN P&L ACCOUNT 10939 341 - S1 * IDR (INVESTMENT DEPRECIATION RESERVE) AS ON 01.04.2008 WAS RS. 94 21 807.41. ITS CLOSING BALANCE AS ON 31.03.2009 WAS RS. 178 81 456.22. DEPRECIATION WAS DEBITED IN THE P&L ACCOUNT WHEN ADDITIONAL AMOUNT WAS REQUIRED IN EXCESS OF IDR HELD AT THE END OF THE QUARTER. SUCH COMPUTATION WAS DONE AS PER THE MASTER CIRC ULAR OF THE RBI IN THIS REGARD. ** IFR REMAINED UNCHANGED. 1 4 . WE FURTHER OBSERVED THAT D URING THE FY 2009 - 10 (AY 2010 - 11) AN AMOUNT OF RS. 25 39 693/ - WAS DEBITED IN THE P&L ACCOUNT UNDER THE HEAD 'PROVISIONS AND CONTINGENCIES (INVESTMENTS)'. DETAILS AR E AS UNDER PARTICULARS AMORTIZATION FOR FY 2009 - 10 (AY 2010 - 11) JUL 2009 SEP 2009 DEC 2009 MAR 2010 TOTAL ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 10 HELD TO MATURITY CENTRAL GOVT. SECURITY 5 33 231.25 5 33 231.25 5 33 231.25 5 33 231.25 21 32 925 STATE GOVT. SECURITY 95 372.50 95 372.50 95 372.50 95 372.50 3 81 490 BONDS 6 319.50 6 319.50 6 319.50 6 319.50 25 278 TOTAL AMORTIZATION 6 34 923.25 6 34 923.25 6 34 923.25 6 34 923.25 25 39 693 AVAILABLE FOR SALE/ HELD FOR TRADING CENTRA L GOVT. SECURITY 18 05 625.00 STATE GOVT. SECURITY 2 72 579.00 MUTUAL FUNDS 0.00 JIK INDUSTRY 90 65 098.70 TOTAL 111 43 302.70 IDR HELD* 178 81 456. 22 114 31 456.72 DEPRECIATION REQUIRED NIL NIL NIL NIL NIL TOTAL A MOUNT DEBITED IN P & L ACCOUNT 25 39 693 IDR INVE STMENT DEPRECIATION RESERVE) AS ON 01.04.2008 WAS RS. 178 81 456.22. ITS CLOSING BALANCE AS ON 31.03.2009 WAS RS. 114 31 456.22. NIL DEPRECIATION WAS DEBITED IN THE P&L ACCOUNT AS THE AMOUNT OF IDR HELD AT THE END OF EVERY QUARTER WAS MORE THAN THE DEPRECIATION REQUIRED (FOR THE QUARTER). SUCH COMPUTATION WAS DONE AS PER THE MASTER CIRCULAR OF THE RBI IN THIS REGARD.' 15 . FROM THE RECORD IT IS CLEAR THAT THE ASSESSEE - BANK HAS BEEN CONSISTENTLY FOLLOWIN G THE PRACTICE AS LAID DOWN IN THE MASTER CIRCULAR OF THE RBI. THE LD. CIT(A) ALLOWED THE CLAIM OF AMORTIZATION (ON SECURITIES ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 11 'HELD TO MATURITY') AS COMPUTED BY THE ASSESSEE - BANK AS PER THE PRESCRIPTION OF THE RBI. HOWEVER HE HAS ERRONEOUSLY NOT ALLOWED THE CLAIM OF DEPRECIATION (ON SECURITIES 'AVAILABLE FOR SALE') WHICH WAS COMPUTED AND CLAIMED AS PER THE SAME MASTER CIRCULAR OF THE RBI. WE ACCORDINGLY DIRECT THE A.O. TO ALLOW ASSESSEES CLAIM OF DEPRECIATION ON SECURITIES AVAILABLE FOR SALE AMOUNTING TO R S . 84 59 648/ - 1 6 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ITA NO. 2469/MUM/2014 (A.Y.2010 - 11) 1 7 . IN THIS YEAR ASSESSEE IS AGGRIEVED BY THE ACTION OF CIT(A) SUSTAINING ADDITION OF RS.75 76 011/ - BEING 5% OF DOUBTFUL AND LOSS ASSETS. 1 8 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT ASSESSEE HAS MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS' AS PER THE PROVISIONS OF SECTION 36(L)(VIIA) OF TH E ACT. THE SAID PROVISION READS AS FOLLOWS: 'SECTION 36(L)(VIIA) : - IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON - SCHEDULED BANK OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK AN AMOUNT NOT EXCEEDING 7.5 [SEVEN AND ONE - HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER: [PROVIDED THAT A SCHEDULED BANK OR A NON - SCHEDULED BANK REFERRED TO IN THIS SUB - CLAUSE SHALL AT ITS OPTION BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 12 YEARS DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINE S ISSUED BY IT IN THIS BEHALF FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR) 19 . ON A PLAIN READING OF THE AFORESAID PROVISIONS IT IS CLEAR THAT THE MANDATE OF SECTION 36(L)(VIIA) WAS APPLICABLE TO THE ASSESSEE BEING A CO - OPERATIVE BANK WITH EFFECT FROM 1 ST APRIL 2007. THE ASSESSEE WAS THEREFORE ENTITLED FOR A DEDUCTION OF 7.5% OF THE TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CL AUSE AND CHAPTER VIA. ACCORDINGLY ASSESSEE IS ENTITLED TO CLAIM RS. 14 93 051/ - (RUPEES FOURTEEN LAKHS NINETY THREE THOUSAND AND FIFTY ONE ONLY) AS DEDUCTION UNDER SECTION 36(L)(VIIA) OF THE ACT. WITH RESPECT TO BALANCE DISALLOWANCE OF RS. 60 82 960/ - (75 76 011 14 93 051) WE RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR DECIDING AFRESH IN TERMS OF DIRECTION GIVEN BY US IN A.Y. 2009 - 10 AT PARA 9 HEREINABOVE. WE DIRECT ACCORDINGLY. 20 . NEXT GRIEVANCE OF ASSESSEE RELATES TO SUSTAINING DISALLOWANCE O F RS.2 10 50 040/ - BEING IN THE NATURE OF BAD DEBTS WRITTEN OFF. 2 1 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT T HE ASSESSEE A CO - OPERATIVE BANK FILED THE RETURN OF INCOME DECLARING LOSS OF RS. 2 20 18 089/ - (RUPEES TWO CRORES TWENTY LAKHS EIGHTEEN THOUSAND AND EIGHTY NINE ONLY) ON 25/09/2010. IN THE ASSESSMENT ORDER THE AO DISALLOWED THE AMOUNT OF RS. 2 10 50 040/ - (RUPEES TWO CRORES TEN ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 13 LAKHS FIFTY THOUSAND AND FORTY ONLY) BEING IN THE NATURE OF BAD DEBTS WRITTEN OFF UNDER SECTION 36(L)(VII) OF THE ACT . 22 . THE SAID ORDER OF THE AO WAS UPHELD BY THE CIT(A) ON THE GROUND THAT THE ASSESSEE BANK HAS NOT AFFECTED ANY WRITE OFF OF ANY BAD DEBTS IN THE BOOKS OF ACCOUNTS AS REQUIRED UNDE R SECTION 36(2) OF THE ACT. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2 3 . IT WAS ARGUED BY THE LD AR OF THE ASSESSEE THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS OF THE CASE. THE ASSESSEE - BANK FOLLOWS A CONSISTENT PRACTICE FOR WRITE - OFF OF BAD DEBTS EVERY YEAR WHICH IS SUMMARISED AS UNDER: 4.1 AN OUTSTANDING LOAN AMOUNT IS WRITTEN OFF DURING A YEAR WHEN THE BORROWER REQUESTS FOR PARTIAL WAIVER/CONCESSION IN PAYMENT DEPENDING UPON CIRCUMSTANCES LIKE DEATH OF HEAD MEMBER OF THE FAMILY LOSS OF SECURITY INABILITY TO PAY DUE TO ECONOMIC CONDITIONS ETC. THE WRITE - OFF IS DONE BY PLACING NOTE BEFORE AN APPROPRIATE AUTHORITY IN THE BANK AND AFTER OBTAINING AN ORDER THEREFROM. 4.2 AT THE END OF THE YEAR THE MANAGEMENT DECIDES WHICH ACCOUNTS ARE NOT REALIZABLE AND A DETAILED NOTE IS PLACED BEFORE THE BOARD OF DIRECTORS OF THE BANK AT THE END OF EACH FINANCIAL YEAR. AFTER THE MATTER RECEIVES APPROVAL FROM THE BOARD IT IS PLACED IN THE ANNUAL GENERAL MEETING (AGM) WHERE THE MEMBERS/SHAREHOLDERS VOTE F OR PASSING A RESOLUTION APPROVING DECISION OF THE MANAGEMENT IN APPROVING THE WRITE - OFF. THE DECISION OF THE BOARD AND THE RESOLUTION PASSED IN THE AGM IN RESPECT OF THE BAD DEBTS WRITTEN OFF IS EXAMINED BY THE AUDITOR OF THE APPELLANT BANK WHICH FINDS AN APPROPRIATE MENTION IN THE ANNUAL REPORT OF THE BANK. ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 14 4.3 FOR THE FY 2009 - 10 (AY 2010 - 11) AN AMOUNT OF RS. 2 10 50 039.50 WAS DEBITED IN THE P&L ACCOUNT OF THE APPELLANT BANK AS 'BAD DEBTS WRITTEN OFF. OUT OF THIS AMOUNT APPROVAL FOR WRITE - OFF FOR RS. 2 02 49 982.50 WAS OBTAINED IN THE ANNUAL GENERAL MEETING OF THE MEMBERS/SHAREHOLDERS OF THE BANK ON 14.08.2010. VARIOUS SMALL AMOUNTS TOTALLING TO RS. 8 00 057.00 WAS WRITTEN OFF DURING THE YEAR 2009 - 10 DEPENDING UPON THE MERIT OF EACH INDIVIDUAL CASE. 4 .4 A CERTIFIED COPY OF THE APPROVAL OBTAINED IN THE AGM DULY CERTIFIED BY THE STATUTORY AUDITOR FOR WRITE - OFF OF RS. 2 02 49 982.50 IS ATTACHED HEREWITH FOR READY REFERENCE AS ANNEXURE - A. 4.5 AS A CONSISTENT ACCOUNT PRACTICE THE AMOUNT PROPOSED TO BE W RITTEN - OFF AS BAD DEBTS FOR A FINANCIAL YEAR IS FIRST TRANSFERRED FROM THE 'RESERVE OF BAD & DOUBTFUL DEBTS' TO P&L ACCOUNT AS 'BDDR WRITE BACK'. SIMULTANEOUSLY AN EQUAL AMOUNT IS DEBITED FROM THE P&L ACCOUNT AS 'BAD DEBTS WRITTEN OFF'. AS A RESULT THE 'RESERVE OF BAD & DOUBTFUL DEBTS' GETS REDUCED AND 'LOANS AND ADVANCES' ACCOUNT AND 'INTEREST RECEIVABLE (LOANS AND ADVANCES (NPA))' ALSO GET REDUCED. THEREFORE THE P&L ACCOUNT MAY GIVE AN IMPRESSION OF AN INFLATED INCOME. HOWEVER THE ACTUAL INCOME OF TH E BANK CAN ONLY BE INFERRED FROM THE COMPUTATION OF INCOME SUBMITTED ALONG WITH THE INCOME TAX RETURN. THE BDDR WRITE BACK' AMOUNT IS NOT AN INCOME RECEIVED OR RECEIVABLE RATHER IT IS THE AMOUNT TRANSFERRED FROM THE 'RESERVE FOR BAD & DOUBTFUL DEBTS' F OR THE PURPOSE OF DEBITING AN EQUAL AMOUNT AS 'BAD DEBTS WRITTEN OFF'. THIS IS THE ACCOUNTING PRACTICE BEING CONSISTENTLY FOLLOWED BY THE APPELLANT BANK AS CAN BE GATHERED FROM THE BALANCE SHEET AND P&L ACCOUNT OF THE BANK FOR ANY FINANCIAL YEAR. 4.6 IN THE INSTANT ASSESSMENT YEAR 2010 - 11 (FY 2009 - 10) THE 'BAD DEBTS WRITTEN OFF WAS REFLECTED IN THE ACCOUNTS OF THE APPELLANT BANK IN THE FOLLOWING MANNER: LOANS AND ADVANCES LOANS AND ADVANCES AS ON 01.04.2009 : RS. 90 61 93 467.00 LESS : WRITTEN OFF DU RING THE FY 2009 - 10 : RS. 2 10 50 039.50 ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 15 : RS. 88 51.43 427.50 LOAN ACCOUNT CLOSED DURING THE YEAR (NET) * : RS. 6 05 15 640.62 LOANS AND ADVANCES AS ON 31.03.2010 : RS. 82 46 27 786.88 * THE REDUCTION IN LOANS AND ADVANCES WAS PREDOMINANTLY IN THE 'MEDIUM TERM LOAN' SEGMENT OF RS. 10 89 65 930.16 (PLEASE REFER TO THE BALANCE SHEET FOR THE FY 2009 - 10). INTEREST RECEIVABLE (IR) IR ON LOANS AND ADVANCES (NPA) AS ON 01.04.2009 : RS.16 45 32 303.50 LESS : WRITTEN OFF DURING THE FY 2009 - 10 : RS. 4 27 39 881.87 :RS.12 17 92 421.63 ADDITION IN IR ON LOANS AND ADVANCES (NPA) : RS. 1 53 69 880.04 IR ON LOANS AND ADVANCES (NPA) AS ON 31.03.2010 :RS 13 71 62 301.67 4.7 THE TOTAL AMOUNT OF 'BAD DEBTS WRITTEN OFF' DURING THE F Y 2009 - 10 WAS RS. 2 10 50 039.50. OUT OF THIS AMOUNT RS. 2 02 49 982.50 WAS APPROVED BY THE BOARD OF DIRECTORS OF THE APPELLANT BANK IN THE ANNUAL GENERAL MEETING HELD ON 14.08.2010. A COPY OF THE INDIVIDUAL LEDGER ACCOUNTS OF THE BORROWERS/DEFAULTERS IN RESPECT OF WHOM THE AMOUNTS OF LOANS WERE ACTUALLY WRITTEN OFF IS ATTACHED HEREWITH FOR KIND PERUSAL AS ANNEXURE - B. IT MAY KINDLY BE SEEN THAT THE TOTAL PRINCIPAL COMPONENT OF RS. 2 02 49 982.50 HAS BEEN REDUCED FROM THE 'LOANS AND ADVANCES (NPA)' ACCOUNT OF THE APPELLANT BANK WHEREAS THE INTEREST COMPONENT OF RS. 4 27 39 881.87 HAS BEEN REDUCED FROM THE 'INTEREST RECEIVABLE' ACCOUNT IN THE BALANCE SHEET FOR THE FY 2009 - 10. THUS THE AMOUNT OF RS. 2 02 49 982.50 (WHICH IS A PART OF RS. 2 10 50 039.50) IS ACTUALLY WRITTEN OFF FROM THE BOOKS OF ACCOUNT OF THE APPELLANT BANK. 4.8 AS A CONSISTENT ACCOUNTING PRACTICE IN THE IMMEDIATE NEXT YEAR FY 2010 - 11 (AY 2011 - 12) THE AMOUNT OF RS. 1 45 76 191.56 BEING 'BAD DEBTS WRITTEN OFF' WAS SIMILARLY REFLECTED IN THE ACCOUNTS OF THE BANK. A CORRESPONDING AMOUNT HAS BEEN DEBITED TO THE P&L ACCOUNT OF THE BANK FOR THE AY 2011 - 12 AS 'BAD DEBTS WRITTEN OFF'. IT MAY ALSO BE ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 16 NOTED THAT IN THE YEARS WHEN NO SUCH BAD DEBTS WERE WRITTEN OFF BY THE APPELLANT BANK THERE HAS BEEN NO 'BDDR WRITE BACK' IN THE P&L ACCOUNT. DURING THE APPELLATE PROCEEDING BEFORE THE LD. CIT(A) THE BALANCE SHEET AND P&L ACCOUNT OF THE APPELLANT BANK FOR THE FYS 2007 - 08 2008 - 09 AND 2009 - 10 FOR THE AYS 2008 - 09 2009 - 10 AND 2010 - 11 RESPECTIVELY WE RE SUBMITTED WHICH REFLECTED THE ABOVE FACTS OF THE CASE. H OWEVER THE LD. CIT(A) DID NOT APPRECIATE THE ENTIRE GAMUT OF FACTS. NOR DID HE CALL FOR PROPER EXPLANATION IF HE WAS NOT SATISFIED WITH THE COMPUTATION OF INCOME SUBMITTED BY THE ASSESSEE. 4.9 IT IS THEREFORE HUMBLY SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN OBSERVING THAT THE APPELLANT BANK HAS 'NOT EFFECTED ANY WRITE OFF OF BAD DEBTS IN ITS BOOKS OF ACCOUNT'. THE LD. CIT(A) HAS ERRED IN APPRECIATING THE ACCOUNTING PRACTICE CONSISTENTLY FOLLOWED BY THE BANK. THE 'BDDR WRITE BACK' AMOUNT IS NOT AN INCOME RECEIVED OR RECEIVABLE OF THE BANK. IT IS THE AMOUNT TRANSFERRED FROM THE 'RESERVE FOR BAD & DOUBTFUL DEBTS' FOR THE PURPOSE OF DEBITING AN EQUAL AMOUNT AS 'BAD DEBTS WRITTEN OFF. SIMULTANEOUSL Y AMOUNTS CORRESPONDING TO THE PRINCIPAL AND INTEREST COMPONENT OF BAD DEBTS ARE REDUCED FROM 'LOANS AND ADVANCES' ACCOUNT AND 'INTEREST RECEIVABLE (LOANS AND ADVANCES (NPA))' RESPECTIVELY. THE 'BDDR WRITE BACK' THEREFORE HAS NO EFFECT ON THE ACTUAL INC OME OF THE BANK THOUGH IT MAY RESULT INTO AN INFLATED FIGURE OF PROFIT IN THE P&L ACCOUNT. THE AMOUNTS ARE ACTUALLY WRITTEN OFF FROM THE INDIVIDUAL LEDGER ACCOUNTS OF THE BORROWERS/DEFAULTERS. THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE INDIVIDUAL LEDGE R ACCOUNTS OF THE BORROWERS/DEFAULTERS WHICH SHOWS AMOUNTS OF BAD DEBTS ACTUALLY WRITTEN OFF AND WHICH HAS BEEN APPROVED BY THE BOARD OF DIRECTORS IN THE ANNUAL GENERAL MEETING. THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE EXPLANATION GIVEN BY THE APPEL LANT FOR DEDUCTION OF THE 'BAD DEBTS WRITTEN OFF' AMOUNT IN THE COMPUTATION OF INCOME AND HAS ALSO ERRED IN MAKING AN INCORRECT OBSERVATION REGARDING THE 'BDDR WRITE BACK' ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 17 AMOUNT WITHOUT APPRECIATING THE CONSISTENT ACCOUNTING PRACTICE OF THE APPELLANT BANK . 4.10. IT IS REQUESTED THAT SUCH ERRONEOUS DECISION OF THE LD. CIT(A) MAY BE SET ASIDE AND THE ASSESSEE BE ALLOWED THE AMOUNT OF 'BAD DEBTS WRITTEN OFF' U/S 36(L)(VII) OF THE ACT AS THE ENTIRE AMOUNT HAS BEEN ACTUALLY WRITTEN OFF FROM THE INDIVIDUAL LEDGE RS OF THE BORROWERS/DEFAULTERS AND THE SAME IS ALSO REFLECTED IN THE CORRESPONDING 'LOANS AND ADVANCES (NPA) ACCOUNT AND 'INTEREST RECEIVABLE' ACCOUNTS IN THE BALANCE SHEET OF THE APPELLANT BANK. 24 . ON THE OTHER HAND THE LD DR HAS RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 25 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WEL L AS CITED BY THE LD. AR AND LD. DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. HOWEVER W E DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES IN SO FAR AS BOTH THE AO AND CIT (A) HAVE OVERLOOKED THE FACT TH AT THE ASSESSEE HAS WRITTEN BACK THE PROVISION FOR BAD & DOUBTFUL DEBTS WHICH HAS BEEN CREATED AS PER THE RBI GUIDELINES. RELEVANT PORTION OF THE RBI MASTER CIRCULAR NO. DBOD.NO.BP.BC. 7/21.04.048/2009 - 10 DATED 01.07.2009 IS REPRODUCED AS UNDER: 'THE PROV ISIONING REQUIREMENT IN RESPECT OF LOAN. ADVANCES AND OTHER CREDIT FACILITIES INCLUDING BILLS PURCHASED AND DISCOUNTED SHALL BE AS UNDER: ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 18 (I) SUB STANDARD ASSETS A GENERAL PROVISION OF 10 PERCENT ON TOTAL OUTSTANDING SHOULD BE MADE WITHOUT MAKING ANY ALL OWANCE FOR ECGC GUARANTEE ' COVER AND SECURITIES AVAILABLE. (II) DOUBTFUL ASSETS A) 100 PERCENT OF THE EXTENT TO WHICH THE ADVANCE IS NOT COVERED BY THE REALISABLE VALUE OF THE SECURITY TO WHICH THE BANK HAS A VALID RECOURSE AND THE REALISABLE VALUE IS ES TIMATED ON A REALISTIC BASIS. B) IN REGARD TO THE SECURED PORTION PROVISION MAY BE MADE ON THE FOLLOWING BASIS AT THE RATES RANGING FROM 20 PERCENT TO 100 PERCENT OF THE SECURED PORTION DEPENDING UPON THE PERIOD FOR WHICH THE ASSET HAS REMAINED DOUBTFUL ; PERIOD FOR WHICH THE ADVANCE HAS REMAINED IN 'DOUBTFU L 9 CATEGORY PROVISION R EQUIREMENT (%} UP TO ONE YEAR 20 ONE TO THREE YEARS 30 MORE THAN THREE YEARS 100 C) BANKS ARE PERMITTED TO PHASE T HE ADDITIONAL PROVISIONING CONSEQUENT UPON THE REDUCTION IN THE TRANSITION PERIOD FROM SUBSTANDARD TO DOUBTFUL ASSET FROM 18 TO 12 MONTHS OVER A FOUR YEAR PERIOD COMMENCING FROM THE YEAR ENDING MARCH 31 2005 WITH A MINIMUM OF 20 % EACH YEAR. (III) LOSS ASSETS THE ENTIRE ASSET SHALL BE WRIT TEN OFF. IF LOSS ASSETS ARE PERMITTED TO REMAIN IN THE BOOKS FOR ANY REASON 100 PERCENT OF THE OUTSTANDING SHOULD BE PROVIDED FOR. ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 19 2 6 . AS PER RBI GUIDELINES EVERY CO - OPERATIVE BANK HAS TO CREATE PROVISION FOR BAD & DOUBTFUL DEBT BASED ON THE CLASSIFICAT ION OF ADVANCES . AS PER NORMAL ACCOUNTING PROCEDURE WHENEVER THERE ARE ACTUAL BAD DEBTS WRITTEN OFF IN BOOKS OF ACCOUNTS EQUIVALENT AMOUNT HAS TO BE TRANSFERRED FROM THE PROVISION WHICH HAS BEEN CREATED ON YEAR TO YEAR BASIS AS PER THE RBI GUIDELINES. OWIN G TO THIS THE ASSESSEE HAS TRANSFERRED EQUIVALENT AMOUNT WRITTEN OFF AS BAD DEBTS FROM THE PROVISION ACCOUNT CREATED EARLIER. ACCORDINGLY THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE & BALANCE SHEET CONSISTS OF BAD DEBTS WRITTEN OFF ON DEBIT SIDE AND BAD DE BTS PROVISION WRITTEN BACK ON CREDIT SIDE. 27 . THE STARTING POINT OF THE COMPUTATION OF TOTAL INCOME IS THE NET PROFIT. NET PROFIT IS ASSESSED AFTER CONSIDERING 'BAD DEBTS WRITTEN OFF & BAD DEBTS PROVISION WRITTEN BACK' WHICH SHOWS THAT THE BAD DEBTS WRITT EN OFF HAS NOT BEEN CONSIDERED. ACCORDINGLY BAD DEBTS WRITTEN OFF HAVE BEEN SEPARATELY CLAIMED IN THE COMPUTATION OF TOTAL INCOME AS PER THE PROVISION OF SEC. 36(L)(VII) OF THE ACT. WE FURTHER OBSERVED THAT THERE HAVE BEEN BAD DEBTS WRITTEN OFF DURING THE YEAR. EVEN THE AO HAS NOT DENIED THIS FACT. THE ASSESSEE HAS ALSO SUBMITTED THE CERTIFICATE OF CA IN RESPECT OF BAD DEBTS WRITTEN OFF DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. SINCE BAD DEBTS HAVE BEEN WRITTEN OFF DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE IS ENTITLED TO THE DEDUCTION AS PER THE PROVISIONS OF THE SEC. 36(L)(VII) OF THE ACT. ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 20 2 8 . THE PROVISO TO SECTION 36(L)(VII) PROVIDES THAT IN CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES THE AMOUNT OF DEDUCTION RELATING TO THE BAD DEBTS UNDER SECTION 36(L)(VII) SHALL BE LIMITED TO THE AMOUNT BY WHICH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT UNDER THAT CLAUSE. IT IS SIGNIFICANT TO NOTICE THAT THE LANGUAGE USED IN PROVISO TO SECTIO N 36(L)(VII) IS THAT THE AMOUNT OF DEDUCTION RELATING TO ANY DEBT OR PART THEREOF UNDER SECTION 36(L)(VII) SHALL BE LIMITED TO THE AMOUNT BY WHICH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDE R THAT CLAUSE. WE FURTHER OBSERVE THAT THE SECTION 36(L)(VII) OF THE ACT REQUIRES THE ASSESSEE TO COMPLY WITH THE PROVISION UNDER SECTION 36(2) OF THE ACT. DEDUCTION UNDER SECTION 36(L)(VII) WILL BE ALLOWED ONLY WHEN SUCH DEBT OR PART THEREOF HAS BEEN TAKE N INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR. THE ASSESSEE HAS TAKEN BAD DEBTS WHICH WERE WRITTEN OFF INTO ACCOUNT AT THE TIME OF COMPUTATION OF INCOME. THEREFORE THE ASSESSEE IS ENTITLED TO THE DEDUCTION AS PER THE PROVISIONS OF THE SEC. 36(1) (VII) OF THE ACT. 2 9 . THE RELEVANT PARTS OF THE SECTIONS 36(L)(VII) AND 36(L)(VIIA) HAVE BEEN REPRODUCED. THE SAID SECTIONS PROVIDE AS UNDER: 'SECTION 36(L)(VII) : - SUBJECT TO THE PROVISIONS OF SUB - SECTION (2) THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR: ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 21 [PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES THE AMOUNT OF THE DEDUCTION RELATING TO ANY SUCH DEBT OR PA RT THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE]' 30 . SECTION 36(L)(VII) OF THE ACT ALLOWS DEDUCTION IN RESPECT OF ANY BAD D EBT OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE DURING THE PREVIOUS YEAR. THE DEDUCTION IS ONLY SUBJECT TO THE PROVISION OF SECTION 36(2). SECTION 36(L)(VIIA)(A) OF THE ACT ALLOWS DEDUCTION IN RESPECT OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS IN RELATION TO RURAL ADVANCES UP TO THE SPECIFIED LIMIT. FURTHER THE PROVISIONS OF SEC 36(L)(VII) AND SECTION 36(L)(VIIA) OF THE ACT HAVE BEEN CLARIFIED BY THE CBDT INSTRUCTIONS NO. 17 OF 2008 DATED 26.11.2008 WHICH IS AS UNDER: I. UNDER SECTION 36(L)(VII) OF THE ACT DEDUCTION ON ACCOUNT OF BAD DEBTS WHICH ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IS ADMISSIBLE. HOWEVER THIS SHOULD BE ALLOWED ONLY OF THE ASSESSEE HAD DEBITED THE AMOUNT OF SUCH DEB TS TO THE PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT UNDER SECTION 36(L)(VIIA) OF THE ACT AS REQUIRED BY SECTION 36(2) (V) OF THE ACT. II. WHILE CONSIDERING THE CLAIM FOR BAD DEBTS UNDER SECTION 36(L)(VII) THE ASSESSING OFFICER SHOULD ALLOW ONLY SUCH AMOUNT OF BAD DEBTS WRITTEN OFF AS EXCEEDS THE CREDIT BALANCE AVAILABLE IN THE PROVISION FOR BAD & DOUBTFUL DEBT ACCOUNT CREATED UNDER SECTION 36(2)(VIIA) OF THE ACT THE CREDIT BALANCE FOR THIS PURPOSE WILL BE THE OPENING CREDIT BALANCE I.E. THE BALANCE BROUGHT FORWARD AS ON 1ST APRIL OF THE RELEVANT ACCOUNTING YEAR. \ 3 1 . IN THE LIGHT OF ABOVE FACTUAL AND LEGAL POSITION THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE IN COMPUTATION OF TOTAL INCOME. PROVISO TO THE SECTION 36(L)(VII) ENSURES THAT DO UBLE DEDUCTION WILL NOT BE ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 22 ALLOWED. THE SAID PROVISO PROVIDES THAT IN CASE OF AN ASSESSEE TO WHICH THE CLAUSE (VIIA) APPLIES THE AMOUNT OF DEDUCTION RELATING TO THE BAD DEBTS UNDER SECTION 36(L)(VII) SHALL BE LIMITED TO THE AMOUNT BY WHICH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT UNDER THE CLAUSE. 32 . WE OBSERVE D FROM THE FINANCIAL ACCOUNTS FOR SUBSEQUENT YEARS THAT ON SIMILAR ACCOUNTING TREATMENT FOLLOWED BY THE ASSESSEE THE CIT(A) HAS GIVEN RELI EF TO THE ASSESSEE . THE CIT(A) HAS HELD THAT THE BAD DEBTS WRITTEN OFF U/S. 36(L)(VII) OF THE ACT HAVE TO BE ALLOWED ONLY TO THE EXTENT IT EXCEEDS THE PROVISION U/S. 36(L)(VIIA) OF THE ACT. DETAILS OF BDDR CREATED U/S. 36(L)(VIIA) & BAD DEBTS U/S. 36(L)(VI I) AS PER PROVISIONS OF THE IT ACT 1961 AY OP - BALANCE OF BDDR ADD. DURING THE YEAR (7.5% OF TI) TOTAL BDDR BALANCE AVAILABLE FOR UTILIZATION BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNT BAD DEBTS IN EXCESS OF BDDR ALLOWED U/S. 36(L)(VII) AND PROVI SO CLOSING BALANCE OF BDDR (A) (B) (C= A + B) (D) (E=D - C) (A+B - C) 2007 - 2008 - - - - - - 2008 - 2009 - - - - - - 2009 - 2010 - 11 65 236 11 65 236 - - 11 65 236 ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 23 2010 - 2011 11 65 236 14 93 051 26 58 287 2 10 50 040 1 83 91 753 - 2011 - 2012 - 10 68 644 10 68 644 1 45 76 192 1 35 07 548 - 3 3 . ON PERUSAL OF THE ABOVE TABLE& PROVISIONS OF SEC 36(1)(VII) & 36(L)(VIIA) OF THE ACT IT CAN BE APPRECIATED THAT DURING THE AY 2010 - 11 THE ASSESSEE HAS WRITTEN OFF THE BAD DEBT S OF RS. 2 10 50 039.50/ - UNDER SECTION 36(L)(VII) OF THE ACT. WHEREAS THE CREDIT BALANCE OF PROVISION FOR BAD & DOUBTFUL DEBTS CREATED U/ S. 36(1) (VIIA) WAS RS.26 58 287/ - (OPENING BALANCE OF RS.11 65 236 PLUS ADDITIONAL PROVISION U/S. 36(L)(VIIA) MADE DURING THE YEAR OF RS. 14 93 051. AS PER THE PROVISO TO SECTION 36(L)(VII) BAD DEBTS WRITTEN OFF IN EXCESS OF THE CREDIT BALANCE IN THE PROVISION MADE U/S. 36(L)(VIIA) AND ALLOWABLE U/S. 36(1) (VII) AMOUNTS TO RS.1 83 91 753/ - (BAD DEBTS WRITTEN OFF OF R S. 2 10 50 040 SUBTRACTED BY TOTAL BDDR BALANCE OF RS. 26 58 287. FROM THE RECORD WE ALSO FOUND THAT IN THE SUBSEQUENT YEAR I.E. A.Y. 2011 - 2012 CIT(A) HAS GIVEN RELIEF BY ALLOWING AMOUNT OF RS.10 68 644/ - AS PROVISIONS U/S. 36(L)(VIIA) OF THE ACT AND EXCESS OF CREDIT BALANCE IN THE PROVISIONS MADE U/S. 36(L)(VIIA) OF RS. 1 35 07 548/ - ALLOWED AS BAD DEBTS WRITTEN OFF U/S. 36(L)(VII). 3 4 . IN VIEW OF THE ABOVE FACTUAL POSITION AND APPLYING THE AN ALOGY FOR A.Y. 2011 - 12 THE BAD DEBTS WRITTEN OFF AND CLA IMED AS DEDUCTION ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 24 U/S. 36(L)(VII) IN THE COMPUTATION OF INCOME HAVE BEEN CORRECTLY CLAIMED BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 3 5 . IN SUPPORT OF THE ABOVE PROPOSITION RELIANCE CAN BE PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - I. CATHOLIC SY RIAN BANK LTD. V. CIT (343 ITR 270) II. HARYANA STATE INDUSTRIAL DEVELOPMENT CORPORATION V. CIT (344 ITR 460) III. DCIT V. UCO BANK & ORS. ((2016)46 CCH 313 KOLTRIB) IV. KANGRA CO - OPERATIVE BANK LTD. V. JCIT ((2015)45 CCH 119DELTRIB) 3 6 . IN CATHOLIC SYRIAN BANK LTD. V. CIT (343 ITR 270) THE APEX COURT HAS HELD THAT: - '41. TO CONCLUDE WE HOLD THAT THE PROVISIONS OF SECTIONS 36(L)(VII) AND 36(L)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT ITEMS OF DEDUCTION AND OPERATE IN THEIR RESPE CTIVE FIELDS. THE BAD DEBTS WRITTEN OFF IN DEBTS OTHER THAN THOSE FOR WHICH THE PROVISION IS MADE UNDER CLAUSE (VIIA) WILL BE COVERED UNDER THE MAIN PART OF SECTION 36(L)(VII) WHILE THE PROVISO WILL OPERATE IN CASES UNDER CLAUSE (VIIA) TO LIMIT DEDUCTIO N TO THE EXTENT OF DIFFERENCE BETWEEN THE DEBT OR PART THEREOF WRITTEN OFF IN THE PREVIOUS YEAR AND CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER CLAUSE (VIIA). THE PROVISO TO SECTION 36(L)(VII) WILL RELATE TO CASES COVERED UNDER SECTION 36(L)(VIIA) AND HAS TO BE READ WITH SECTION 36(2)(V) OF THE ACT. THUS THE PROVISO WOULD NOT PERMIT BENEFIT OF DOUBLE DEDUCTION OPERATING WITH REFERENCE TO RURAL LOANS WHILE UNDER SECTION 36(L)(VII) THE ASSESSEE WOULD BE ENTITLED TO GENERAL DEDUCTION UPON AN ACCOUNT HAVING BECOME BAD DEBT AND BEING WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR. THIS OBVIOUSLY WOULD BE SUBJECT TO SATISFACTION OF THE REQUIREMENTS CONTEMPLATED UNDER SECTION 36(2).' 3 7 . IN HARYANA STATE INDUSTRIAL DEVELOPMENT CORPORATION V. CIT (344 ITR 460) THE HARYANA HIGH COURT HAS HELD THAT; 'SECTION 36(L)(VII) PROVIDES FOR DEDUCTION IN THE COMPUTATION OF TAXABLE PROFITS OF ANY DEBT OR PART THEREOF WHICH IS PROVED TO HAVE BECOME A BAD DEBT IN THE PREVIOUS YEAR SUBJECT TO THE FULFILLMENT OF THE CONDITIONS SPECIFIED IN SUB - SECTION (2) OF SECTION 36. THE PROVISO TO SECTION 36(L)(VII) STIPULATES THAT THE AMOUNT OF DEDUCTION RELATING TO ANY DEBT OR PART THEREOF WHICH IS ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 25 CLAIMED TO HAVE BECO ME BAD DEBT SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. SECTION 36 (1) (VIIA) OF THE ACT WAS INTRODUCED WITH A VIEW TO PROVIDE FOR GRANT OF DEDUCTION IN RESPECT OF PROVISION FOR BAD DEBT MADE BY ALL THE BANKS AND FINANCIAL INSTITUTION. IN OTHER WORDS TO THE EXTENT TO WHICH THE PROVISION FOR BAD AND DOUBTFUL DEBTS HAS BEEN ALLOWED UNDER SECTION 36(L)(VIIA) THERE CAN BE NO DEDUCTION U NDER SECTION 36(L)(VII) IN VIEW OF PROVISIONS OF SECTION 36(2)(V) OF THE ACT' 3 8 . IN DCIT V. UCO BANK & ORS. ((2016)46 CCH 313 KOLTRIB) THE KOLKATA TRIBUNAL HAS HELD THAT; 'WE FIND THAT THE ASSESSEE HAD DULY WRITTEN OFF THE DEBTS IN ITS BOOKS OF ACCOUNT S AS MANDATED BY RBI REGULATIONS THROUGH REVERSAL FROM PROVISION ACCOUNT. THIS AMOUNTS TO ACTUAL WRITE OFF IN ITS BOOKS OF ACCOUNTS. WE FIND THAT THIS ISSUE IS ALREADY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE'S OWN CASE BY THE CO - ORDINATE BENCH DECISI ON OF THIS TRIBUNAL FOR THE ASST YEARS 1998 - 99 1999 - 2000 2001 - 02 & 2002 - 03 AND ALSO COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD VS C I T REPORTED IN 343 ITR 270 (SC). THE LEARNED DR FAIRLY CONCEDED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE APEX COURT BUT THE FIGURES STATED BY THE LEARNED AR REQUIRES VERIFICATION AND CONFIRMATION BY THE LEARNED AO. HENCE IN THESE FACTS AND CIRCUMSTANCES WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF JUSTICE AND /AIRPLAY TO SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO TO VERIFY THE FIGURES GIVEN BY THE ASSESSEE WITH REGARD TO THE CLAIM OF DEDUCTION U/S 36(L)(VII) OF THE ACT.' 3 9 . IN KANGRA CO - OPERATIVE BANK LTD. V. JCIT ((2015)45 CCH 119 DEL TRIB) T HE DELHI TRIBUNAL HAS HELD THAT; '6. THE INTERPRETATION OF ABOVE PROVISIONS HAD COME BEFORE THE HON'BLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. CI T (2012) 343 ITR 270 (SC) WHEREIN THE HON'BLE SUPREME COURT HELD THAT THE PROVISIONS OF SECTI ON 36(L)(VII) AND 36(L)(VIIA) ARE SEPARATE DISTINCT AND INDEPENDENT FROM EACH OTHER. AS A RESULT THE PROVISIONS OF SECTION 36(L)(VII) GOVERNING THE ALLOWANCE OF BAD DEBTS ARE NOT CONTROLLED OR LIMITED BY THE PROVISIONS OF SECTION 36(L)(VIIA) BUT ONCE THE BAD DEBT IS ACTUALLY WRITTEN OFF AS IRRECOVERABLE AND THE REQUIREMENTS OF THE PROVISIONS OF SECTION 36(2) OF THE ACT ARE SATISFIED THEN IT WILL NOT BE PERMISSIBLE TO DENY SUCH DEDUCTION ON THE APPREHENSION OF THE DOUBLE DEDUCTION UNDER THE PROVISIONS OF S ECTION 36(L)(VIIA) AND THE PROVISO TO SECTION 36(L)(VII) OF THE ACT. THE PROVISO TO SECTION 36(L)(VII) ONLY LIMITS ITS APPLICATION TO THE CASE OF BANK TO WHICH CLAUSE 36(L)(VIIA) APPLIES. THE PROVISO IS LIMITED IN ITS APPLICATION TO BAD DEBTS ARISING OUT O F THE RURAL ADVANCES OF BANKS. THE PROVISIONS OF SECTION ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 26 36(L)(VIIA) OF THE ACT IN NO WAY CONTROL THE APPLICATION OF THE PROVISIONS OF SECTION 36(L)(VII). THE BENEFIT OF DEDUCTION UNDER SECTION 36(L)(VII) SHOULD BE ALLOWED SUBJECT TO THE FULFILLMENT OF THE CONDITIONS LAID DOWN UNDER SECTION 36(2) OF THE ACT. THE PROVISIONS OF SECTIONS 36(L)(VII) AND 36(L)(VIIA) OF THE ACT ARE DISTINCT AND INDEPENDENT FROM EACH OTHER. HOWEVER BY VIRTUE OF THE PROVISO TO SECTION 36(L)(VII) OF THE ACT WHAT IS ALLOWED AS A PR OVISION FOR BAD AND DOUBTFUL DEBTS UNDER THE PROVISIONS OF SECTION 36(L)(VIIA). 40 . IN VIEW OF THE AFORESAID JUDICIAL PRONOUNCEMENTS AND FACTUAL POSITION OF THE CASE THE ASSESSEE BE ALLOWED THE AMOUNT OF 'BAD DEBTS WRITTEN OFF' U/S 36(L)(VII) OF THE ACT AS THE ENTIRE AMOUNT HAS BEEN ACTUALLY WRITTEN OFF FROM THE INDIVIDUAL LEDGERS OF THE BORROWERS/DEFAULTERS AND THE SAME IS ALSO REFLECTED IN THE CORRESPONDING 'LOANS AND ADVANCES (NPA) ACCOUNT AND 'INTEREST RECEIVABLE' ACCOUNTS IN THE BALANCE SHEET OF THE APPELLANT BANK. WE DIRECT ACCORDINGLY. 41 . IN THE RESULT BOTH THE APPEALS FILED BY ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIB UNAL RULES 1963. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 / 02 /201 9 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 21 / 02 /201 9 KARUNA SR. PS COP Y OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) MUMBAI. 4. CIT ITA NOS.2579/MUM/2013 & 2469/MUM/2014 THE MALAD SAHAKARI BANK LTD. 27 BY ORDER ( ASSTT. REGISTRAR) ITAT MUMBAI 5. DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY//