When Banks claim deduction of bad debt written off in previous year by virtue of proviso to section 36(1)(vii), they are entitled to claim deduction of such bad debt only to extent it exceeds provision created and allowed as deduction under clause (viia)

DECIDED BY: HIGH COURT OF KERALA (FB), IN THE CASE OF: CIT Vs. South Indian Bank Ltd., APPEAL NO: ITA No. 299 of 2009, DECIDED ON December 16, 2009

JUDGMENT

Ramachandran Nair, J.

Though the issue raised in these connected appeals filed by the Revenue stands decided in favour of the assessees by Division Bench judgment of this court in SOUTH INDIAN BANK LTD. V. COMMISSIONER OF INCOME-TAX reported in 262 ITR 579, the department while arguing these appeals before a Division Bench of this court canvassed against the correctness of the said judgment and the Division Bench on being prima facie satisfied, referred the matter for decision by Full Bench and hence the matter is before us.

2. When the appeals were taken up, Senior counsel Sri.Sarangan appearing for the assessees submitted that appeal filed by the department against the above judgment of this court is pending before the Supreme Court and, therefore, hearing should be deferred until Supreme Court decides the matter. He has also relied on two decisions of the Supreme Court in CENTRAL COALFIELDS & OTHERS V. H.M.P. & OTHERS reported in 1994 Supp.(1) SCC 323 and in D.K.TRIVEDI & SONS V. STATE OF GUJARAT reported in AIR 1986 SC 1323 for the proposition that in matters like this, the recourse open to the High Court is to keep the matter pending until decision of the Supreme Court in the pending SLP/Appeals on same issue. However, we find that more than 40 cases are listed before us for hearing, that too, on reference made by another Division Bench doubting the correctness of the judgment which is under appeal before the Supreme Court. The issue is very important and it arises on an year to year basis in the assessment of every Bank in Kerala. Since the department has not accepted the above Division Bench judgment which is pending in appeal in the Supreme Court, Assessing Officers are not following the said judgment, but are making assessments disallowing the claim which is consistent with their stand. This leads to repetitive appeals for every year in the case of each Bank. The reason why Supreme Court expects the High Court to keep matters pending in the High Court on issues pending in SLP in the Supreme Court, is to avoid unnecessary filing of appeals to the Supreme Court. In these cases since the Division Bench of this court doubted the correctness of the earlier decision of this court which is pending in Supreme Court, it is a matter for us to consider whether the said Division Bench decision is correct or not. If we decide the issue either way and if the parties accept the same, then the same will put an end to all litigations in this court and down below before the appellate authorities including the Tribunal. Therefore, we feel the above decisions of the Supreme Court cited by the Senior counsel appearing for the assessees do not stand in the way of our proceeding to decide the questions referred to us by the Division Bench. Accordingly we have heard Sri.P.K.R.Menon, Senior Standing Counsel appearing for the appellants and Senior counsel Sri.Sarangan and other counsel appearing for the respondent-Banks.

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