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IN THE HIGH COURT or KARNATAKA AT nAN1§ALoRm
DATED nus THE 19'"! mm or MAR.cH ' "
PRESENT " g L'
THE Hon'nLm MR. Jua'rii:l:'nn:&.PA:§,fv1a::m}n L"
'FEE HG;'€'BLE M" JUEFECE '_E?s'x'R,:'|:'1's.'IT':""'x'
c v.-. r.*1*.%A, m_,4a-k% cm 2003
rir1_;:I_Lr:9._4;o_j<Lr_go;s{:%{%
nm,'n|rnur.I\1,.:
1.
V mnaa._J1-- 4o3"'oo1.
The 5Depiitjf' V
Inconag "Fa.=z_.(Asst)=,V * 3
*;"_'«'-pi::.'*.i.s=.Vl'ii»!t!.I.=..r.=."g-.*:3', '
M;4pga_:«_;,_:;agh§m %
The Comn1isaaicJ1ér.___c5f
Inc;-me Tau",
- --.Aayaka1é Bhavafa, fiiot No.5,
EDC Complcx, Patti Plaza,
Kumar, Adv.)
The Bank Ltd.,
H. 0. ..Ko<_lia1baJ'1,.
,1_gI4LnGALoRm.
(By Sri. Sarangan, Senior Counsel, with
Smt.I-l.Va;ni, for
Sri. B.L.Ac11ar_va, Adv.)
....--------J_
*_*_*_*_*_''l'_*
.. APPELLANT8.
.. RESPONDENT.
This I.T.A. filed under Section 260-A of the Income Tax Act,
1,61 arising out of order dated 29.07.2003 passed. in ETA
No.50/BANG/1997 for the assessment year 199.394′ praying to
‘””W the appeal and set aside the order of; the! Tax
Appellate Tribunal, Bangalore, in ITA No.50’/’ BANE}./01997.] dated
99.07.2003 and confirm the order passed the fieputy
Commissioner of Income Tax (A:3’st),”‘ ‘Special Range,”-vMa11ga1;oIe”4.
dated 29.02.1996 and etc.
IN ITA N0.4-81 OF 3003:
BETWEEN:
1. The Deputy Commissioner of’
Income Tax (Asst}..,_ V ‘
Special Range, _ ‘
E- ‘-
2. The Commissioner of –.
Inconiei’-Ta:i;,0’__–_’_ ~ ~ _ V
Aazv-%*kaI«’Bhévan, ‘P1ct”No–5.
EDC Complex, P_atti’P’!aza ‘
3
:r’A.’.1ra.-“.m…Ii.r: » 4&3 oer .. .A_PP|.L!!.-..-.-‘l…’!’e.
Vi:-13y’ Adv.)
AND: ‘
The_Ka1*nata’rza Bank Ltd.,
I{cidia1’oa;ii”,,
“”” ..REE|PONDEN’1’.
‘ = _ Casarangan, Senior Counsel, with
, .Smt.’..z’.-i’.’v’a11i, for
‘ B. L.Acha1’ya, Adv.)
t it 1Ir_1lr_-3r_-k_’J:_’:k’_’Jr
~. This I.’1′.A. filed under Section 260-15; of the Income Tax Act,
.1961 “arising out of order dated 29.07.2003 passed in {TA
I\ir\”‘-1r)’7’I-lflfllfll 1(_](_)’7 “|I\1’ I-Inch nmnnnmvvun-n+ 1:-an-u-nu ‘I()(}/I ;f}’-1: -rvl-Ir’|Irv:v1.Iv +1-u.
.’ §1\Jl .l’£4l I lJll1I\.lI LJJI .I.\).l- l..l.I.lu G.DBluD€3-In].-l.\4l..I.L _ykaG..I. J..I77″l’ .79..) LJLCIJILL5 loll
{ail-cw the appeal and set aside the order of the Income Tax
glppeiiate Tribunal, Bangalore, in ITA No.127iBi\NG/’1997 dated
V. ,.-‘29.07.2003 and confirm the order passed by the Deputy
Commissioner of Income Tax (Asst), Special Range, Mangaloxe
dated 28.02.1997 and etc. # ,
‘”10
‘hese l.’l’.As.. coming on for Final Hearing this day. Deepak
1
Vegan -L, ..i-ered the foflowmg: .
-L1LD_QJ!l_EJL'[
Heard Sri.Aravind Kumar. learned
and Sri.G.Saranga11, learned senior ‘A
This order shall also govern disposal of ETA. /”2003, which is
between the same parties. The__faCt_aa1_Vaspect .andVAVlf5ega1 scenario in
:3’
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.l’.’__, .1-.. _…_ _ _, ..1….___….e.,__..”.~.,…1V..~.. ._ ..v _ .1 .:|’……_…. -1-1….
IUI LLIC Pal IJC ILL I…I.1l3HC’i11)’}’1VCE€I.l3,.’E!TlIa.[ L1 1 HJLLL UIEPUHC U]. UUL11
the appealsjhy oo1n’:mon_: V t’ 2
2. Revenne is us b_i_f”‘i’1;’*1n””g these appeals under Section
HRH Q 1:]!-:1 f11nI’-In-:11n’r1’nr
uv ,’1.- 1 \.z\.)aelV..l.\’.’-. Jun .rl\..«I.,_ .l..J\J.I. |.J.I.\a1LoJ.l.£Cl.l.|.l.~&
1113″ En 11.:–fiat-I-u=u-‘I 1-
u\.- u.
.I.J.I3.uIJ.
GB
in short as”51″.he Aci_”)A’ag’ain’st the order ctated 29.07.2603 passed by
” V. fl1_e3«:.Incon1_e A Appellate Tribunal, Bangalore “A” Bench, in
‘ assessee”~s appeals ITA No.50] BANG] 1997 and ITA
H @1997 for the assessment years 1993-94 and 1994-
9544″1*esjV2ectitre1y. Appeals were also admitted on the substantial
.. “q_ue._st1’ons of law which have been formulated by the Revenue in its
and after perusal of the records, we are of the opinior1’etl1at only
following substantial questions of law would a1ise”iI1<t1le.S:ie appeals:
1. Whether the Appellate T1ib4un£:l.ViIbf’as’.’;vco.iIee1; V
in holcling that dediaiction. A. :’V’ f
oat-nr….\ .–…..-. .-.’!1…….-..-.1.-.1..’, :.;;.:-__…i;,..£:… I …;…1’~.
out [V _; cur: é:Lupw uzc; .. uxucpcixupzttiy u.lJ,u ..
i_rresp..o1_:1ve of i_i-_e i’-provision ‘ for, b;
doubtful debts created, Vbyassessee: relation
to the advanced ‘brancliesiisubject
to the imitation ma should not
be 4_c:1V’t3:iuct¢.=;’¢V:lV’Vt\vic:e_:’ uLj;m;_1ea?- aéeaon 36(1)(vii)
an
;936{_l]ivii-a}. sin1_tIJ.t.af1ieoi1S”iy?
.- ” an
_ «aivaseeonect in applying the
M nz9;*:;-sat dated 14.06.1979 to the
« assessnjient.. 1993-94 though Section
_ For “sake of convenience, facts appearing in ITA
4. “F”TUi.S 8111011″: 01 u1u1t:ut::isa.1’_y ufituilfi 311′”:
“.f3?a1’e being taken into consideration.
V’ ‘ -V herejnbelow:
Respondent – assessee being a
scheduled bank filed return of income for the
€I.DDlri’.3U4IuI..I.\a.l…I.|. _y|.aCLl€) L779 I?”‘l’ \J.l..l S-)\JI¢’I..£vu-l.?3\.J
,.–..l
” 53)
»A’-if” I.1.1.’.’i’:.w’;1.;aoe”~.’I”‘=.=.;-.: (Apnea?
claiming a net loss of Rs.2.’27.’23,510/-.j”En
the return of income filed by the asse.eeee”p:’i,f%.
has ciaixned a sum of Rs.38,23,83€_’r;’._– aa-Ba?’ ‘ V.
for deduction ofiidebts to
R338,’ 8,836]-, acmajiy “w.1fitten’ on was not
by the said
_ _–pasae_;1 ifiiessessing Officer,
V .Vp1-‘ri;_fe1Teéi ‘Before tne Commissioner
s:\ T
‘h Ann|=11.c|fl=-
r………..,. ……. .. .rr…………..
‘ ‘ the appeal by upholding
ii the e1i1’efo_f ifksaeosing Ofiicer.
A…………….. r…..a.1…… 4’…..1:……. ………….:…….I 1….
~..’na:sc:sacc u.uu1t:J. iccnug uggiicvcu uy
The said cmier passed by the Commissioner of
Tax (Appeals), preferred to file appeal
A ghefolwe the Income Tax Appellate Tribunal.
C£1’1~r\i’Ia1-0117 ‘Frat-
kJ ‘J 1
‘H’: can
nu l..l..I-Iv
l2I¢§t!fiC!fl§1″I”Ifi’f’|1′ Ifflflli”
CIL’II3I.tL’.I§-IuIuI.\.v.I..I. I; J LICI-I
1994-95, it filed another appeal against that
part of the order of the Commissioner of
Income Tax (Appeals) which was against it.
That is how both the appeals came up for
._’_®
36(1)(v1’i-a) T on T a ~
Rs.1,1o,94,36o/~; “The cam or oeigeaasegsec i
It *.-.*o1…,-.’3. be ml.-.-:s.r…nt to -..§2mdur:c S:-.ct_.1Z.-on .’i«’6(r}.(;;,
“d p'”‘o” ” tlr arne”dm(‘_:i1’s ‘o’7’t’fi’ ..F_”ra
consideration before the Tribunal, whereby
the impugned order came to be passed. ~_’ -. ‘
1985, which read as follows: _
_,_ d_ed_§;eti’_;;s provideddor
~se(i).*r
the folloW’m.’g:’– clauses.’ a’sLa33«.ppe allowed in
respect of the -lniatpters dealtfevith therein, in
computingjthe to in section
:”1*1{yii) –».js1ibject-.tov;Vthe provisions of sub-
_ . sectiori”‘{2)’,’p’am}ount of any debt, or part
* thereof,:_:’wl1icali”established to have become
7a bad debtfne previous year;
H ‘(iii’ia)V in respect of any provision for bad
doubtful debts made by a scheduled
or a non-scheduled bank in relation to
~ _ jladvances made by its ‘orariehes,
at
I
.e”..=.ount not exceeding one and 9. half per -::..n.
of the aggregate average advances made by
such branches, computed in the prescribed
manner.”
Section 36(1)(vii) and (viia) as it
after the amendment made by the
.. ,.11,…. .
3 fun WS.
“36(1).
for in the following c1a1;ses;Ae,h?all’ebe-gillowetlit
respect of the matters «(leek V
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(vii) et1bj’eot.,to::’ u1eetlIdtpr¢vi.sions of sub-
section debt, or part
11 o
theieef; ‘g-z;_,ic§*1″is e$t,_.1.*.-‘l’i.;.1-‘–:.c«_. .o have become
year:
” ‘VProv’ide’d that in the case of bank to
Whic§i”e«cié1*1se.,,{viia) applies, the amount of the
“de-;!.i1ct’.’:-n’ to any such debt or part
lthereof be limited to the amount by
whlclfétfiich debt or part thereof exceeds the
Tcmdit balance in the provision for bad and
‘~t”1oi.1bt;fu1 debts account made under that
clause;
[viia) in respect of any provision for
bad and doubtful debts made by a scheduled
bank (not being a bank approved by the
purposes of
uentr uuve 11 em for the
“”1—A-L
lg)
The dedéuctiohlel ” ‘id
V V 1:’:_:I0_u, 1:-Lu:
clause (viiia) or a bank incorporated b.y'”~.or
under the laws of a country outside ._
.-.11..-‘I 1!-ta-I1-|’.r
U
E 11 cum, __ V ‘
e__ceed1__g tn- per cent of the
(computed before
under this clause 7-It
amount not exceeding V”tu_7o per
aggregate averagier’a»iadvances._ made the
rural branches o:f”auchi”‘r)ank, é””fJ’i.’1t o 1
the p1escribed.rnanne- ‘wh1Z_;12e.reris higher,”
undergone a
the’ Inccrue?:a:t”‘(;Amendment) Act,
‘ respect of any provision for
.t bad andidoobtful debts made by –
is’; ‘a scheduled bank [not being a bank
“«.nVA”approved by the Central Government for the
of clause (viia) or a bank
under the
1
bank, an amount not exceeding five per cent
of the total income (computed before making
any deduction under this clause and Chapter
VI-A) and an amount not exceeding two per
—–….1
‘[9
“. V’ ._ .1;
an au.*”s.o'”it=. no-.–.-__
nlaking. A_ any, « action
cent of the aggregate average advances
by the rural branches of such.__ 4′ ”
computed in the prescribed man11e:.t;:””
There is a rurmef’ tgirr.f:11c1meiii§” to me
main part of clause
with effect from<Ap_1ji1 1,2'-19289, o.(;i'.1.a§.i1seVVV(V?ii) i
main part reads aS"'fci"1ows:
"Subject _ to "~~.prov~isjions of sub-
section (2), t11eV_a.'if1'o11nt_–«of' vé!;cy'_'.~bad debt or
p8_II'i'.: vthergzéof '_1ggwi1ich.(,i' '_-.._i$' 'wiitten off as
…ifreco_§eirabIe _in._V.t11e4–a§¢co'unfé of the assessee
V _i'or:__tE1e pievidiis year."
._ " 36(2) specifies certain
u " oondificins Vf9a_:\be""fulfi11ed for eligibility to the
V '""' 6(2) in making any deduction for a
119:1 rink n1'- 1'\t_)1"I' 'H1 n-nan 'Hun fnflrnrr-i (I
provisions shall apply-…
clause (v_.ii ..
I — –p– i– ova—— –
,1′!
such deduction shall be allowed unlessiflqe
bank has debited the amount of such A’
“art of debt in that pmvious t’oVfjjth_e ‘
provision for bad and doubtful _deb_”ta. aocouriti
made under that clausse?’
‘ » ‘ . ‘ rx :3
6- L’:”L9a.1”.’n1Cd 3311101″ C{}’cl.:’1u’:’C1 llespsl.-l.w!_.\/J$L s.n..1..-ul-ua.I.cI.u cI.u cu.
the outset sun ‘ tedvtntat of’ projected i11 both
the appeals stand vjndgnnents of Kerala and
Madras High rm 579 (Kerala) (South
Indian Bank j’L_tdii:.:fltI;5 votihicome Tax and (2007) 2291
rm Eof Income-Tax Vs. City Union
Bank:7._Ltd.’ “of Madras High Court the earlier
judgment’ of Keralai has been elaborately conai
Thvie iv.’-.2 ‘.vcu1d.._ccneider me ratio decidendi of the cae of Kerala
‘””*” 1- considering “‘e provisions of Section 36i1i{vii)
following finding has been Ieconded:
_.d out,
“In ot1__1e_r words, as already point
a scheduled bank may be having both urban
and rural branches and advances are given
from both branches. Having regard to the
hazards involved in realising the advances
11
made by rural branches particularlyfto
agriculturists, certainly the assesseerébaiiki
1’11 ”
‘HQ {-9
:5
respect of advances made
branches. If an asses;’.’see”makes a. giicvision
under clause (viia) in;”:.resjoee’t of~.b:.=.d deb_’n;s.V.i
relating to rural adsI§ancesA.on1y, it
an assessee the befiefii»pmvided iundergclause
t-..’.’\ …..1…’..,1.. :.
{ 11 W111 111:;
will result ii1V_disc1″in1ination’~:witi1out reason.
The ‘ «Legislature .:canniot_j_bev ‘presumed to have
i, result. in the case of
intention of the
it L4-figisiaiiinteéiiitienactinig the proviso to clause
‘ (€11:-H }’..’l””c\.nrifl~1’n9rs Q’F\f1\ Of)!’ n1a1’|cu:b luv’ ‘tn csnnfinh
siinultsjneously is only to see that a
t1ouatVjie’i benefit in respect of the same bad
zc1ebtiiiis”r1*ot being given to a scheduled bank.
only for the said purpose, the proviso
,, ., clause (v)
ix.-.2-….u14 nnnn .1.-. .2 1\.m.3.-..-l.-.-..=.-.4- Anc-
‘ _ ‘_l31..I..|..lL«I.II.1.’»’I.I..I.CL’|.:I3ly LID’ L.I..I.L- l’I.IJ.lLr.I..lLI.I.I.I.C.l.I.I. TIM-L, 1.
were introduced
1 OF:
1.. 1-“: -I-‘I.-.
on),
with effect front April 1, 1985. According to
us, the scope of the proviso to clause (vii) of
section 36(1) of the Act is only to deny the
deduction to the extent of bad debt written off
in the books with respect to which provision
.,—–.__ I
111. yxt,-.1.» LU Lhlfllkb _y1uv1D1u1.1 11:1 ua=._ |.«l.l.-I.a?.!.V .B.l«l ‘
-_*1’efen*ed to in the proviso relate to the dents
in -re peet of the rural branches and net .0
was made under clause (viia) of the Act. ”
make it clear, if the bad debt writtefi»
1.CJE’lL5S JT 1 T73 T. uI’:’uT.S OUJ
wh;..h. t.-e In 1- 1 11 ~ m_r_Ie 1_111r1e1:e3-_11_t_e
(viia), such debts will ran” squarely heme:
main part of clause (viii) ia~.e’nt;i:t1ed7t.A
deduction and reepect Aofxtthat the V
debt with Ieferenceto» which .a”p:4ovinSjon is
_ ,_ 511
made under. Cm11S’C”!:\JI_’i;i:a::I’V,”.,_th.C moviso Wm
operate to r.i.eduetiea”to the e..t.,r-.- of
me _c1iffeze1’1c:ev:”bet1′:§et::n of debt
w;4*itte_1ft:’ ea the…previei;_ta and the credit
_-jlrovisiéta for bad and doubtful
d:ebta;_accoi31’n.t clause (viia).
V appellate authority in the case
” »._ of me Bank Ltd. for the
“‘aa_aeas.fi1efit’3}ears 1985-86, 1986-87 and
198’?-88_….«had held that any such debt
E3.
debts,” and that since the bad debts written
“V ‘off in these two assessment years relate only
to urban branches, there is no case to make
any disallowance under the proviso to section
36[1)(vii) of the Act.
However, the ‘T’ribuna1
.-1.’.-‘I an:-A. l\ ‘
u u. ut u u we 1.2.-.1.I..;|. cu. aapecta of any of
these cases. According to the Tribunal, file
assessee-bank is entitled to the ciedt_icti_o–n’
11nr1n1′- n1c|11n¢:n {uh}
L’.I.’\.rI.\a’.l \./olCl’.rI.\’J’d’ K V”,
between the provision made it
‘ (viia) and the bad debts”w1itten_.oii’-~inVt11e
accounts, without if
respect of debts relating advances
rural advances. i””e«r.TAcco1dii1gi_ 113, “the
m..:1….-.n 1……’ …,.4 M… .§._’L,…: +1…§.’;..,…….g:.. +1….
1 1 uueu 111-,1; nut. ex1J?.1tJI«’:’1\,1.uv.;u Lut: Lbauc JJJ u.1
proper peisgiective :j_wifi:.V’~rei’er_nce ,o th-
provisions of (viia) and
316$’-‘!«).(v_). ofl§_ the that we have
scope the provisions of the
-pliéviso to c1anseV:[vii) section 36(1) of the
…a. .I.’l…..
.. gr .a.’V.””‘ ;-_°…-.. n. _..
U1 VIEW LIICII. LIJ. H1
Accordingly, we are of
tlieppvieiv that the matter must go back to the
Assessing” Officer for consideration with
‘reference to the interpretation placed by us in
this”‘judgment in the first instan’ ce. For the
‘ ‘- ~’ o n c 4
“..1«n1:1 111′-n11-nu-1 1-rn1~nna::: at-rp nhf I31!’
‘;auJ.u. u. 1.! nu yuan, w I.» an L ucuu.
1-‘I’-nu: n1-V491»-cs
uni.» ueuvaa
.l-IJJ-4|-I. I-La
Vof the Tribunal and the first appellate
authority on this point and direct the
Assessing Officer to recotnpute the deduction
available under clause (vii) of section 36(1) of
the Act in the fight of the interpretation
…_..v’
E51?
(\1″I1tT nr {ha i’fi’-iii-:VIr~enai I .
14
placed by us on the proviso to the said clauhsep
under the section.
These appeals are disposed: as ‘
above.” ».
‘7. In the aforesaid View of the matter. W6′”il£i1’.ewl1Oéi0l.liJtiV’i]Ilat
questions projected are to be ansvvered -favour of the assessee
and against the Revenue}
8. However, on vpaccouniotf we are not able to
grant full of Rs.38,’.28,836/ ~
does not this amount was pertaining
to rural even though before the Tribunal, it
was contended counsel for the assessee that the
aforesaid. aniount’ pertained to other than rural debts, but the
net substantiated by any other evidence in this regard.
+115 tn-“‘|”&;5£i’IV”l §=_nf~’.:a1rir’1n1-Inc: if runrflri nnf Inn 11:-nn A-r1 Irnr 1’1-an ‘T’1-I 111-nil
or other authorities below whether the amount of
Rs.38;2£§;836/ — reflected as other than the rural debts.
Confronted this situation, learned counsel for the assessee
it ” “‘*oontended that let the matter be remanded to the Tribunal to
“T175
l\/
examine this aspect of the matter, where the assesseetvould also
be able to substantiate Whether the aforesaid to
other than rural debts.
10. In this View of the matter, as n1enjtioned_’ hereinabove, the ]
questions of law referred to Vabove are iifaxijoui ofgt11e
assessee and against the Revenue,’ but the aforesaid
fact, we remand the matter for afresh. after
giving opportunity to their points
by producing evidence in ‘Needless to say the aforesaid
two _;udgm..nts of Kuala Madras High Courts wo1…d. be -.ept 1.-
mud ‘D’; the While ue-e’d1n” the matter.
1 1. Even” *he’ar.’Lng the learned counsel for the
parties. we of’ considered opinion that only the aforesaid
–. two-osuloatalitial duestions of law would arise for consideration by
learned counsel for the appellant — Revenue
i11sisted_that the following substantial questions of law would also
arise tor ‘eonsideration:
H 1. Whether Tribunal was right in allowing loss
12. However we notice from the it J
that these two questions hairevibeen Tribunal in
Podar Cement [80]] and in the
case of M/__s..V Cir (339 113 775 (sen. In
this two questions of law which
accoroiing to we-111d also arise, infaet do not arise for
our consideration have already been answered by the
afor-:j’:saic1 hiudgments of the Supreme Court.
‘ _ the first two substantial questions of law stand
ai1swe1’ed’fij,_’ us in favour of the assessee and against the Revenue
and stands remanded to the Tribunal as mentioned
it hereinabove. The latter two (3 1es_i_n._ of Lw _l_ _.a_d_y ._t-_r1r_1
‘ F 1-11 C.’ I” 14- ‘I-.’ ‘I1
answered by the judgments or we uupreme oou. 1., which % no
14. Appeals thus stand disposed of. Copy ” be
retained in the connected appeal.
AGV.