CATHOLIC SYRIAN BANK LTD. versus COMMISSIONER OF INCOME TAX, THRISSUR

Citation: [2012] 4 S.C.R. 739 · Decided: 17-02-2012 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Disposed off

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Judgment (excerpt)

[2012] 4 S.C.R. 739 
CATHOLIC SYRIAN BANK LTD. 
V. 
COMMISSIONER OF INCOME TAX, THRISSUR 
(Civil Appeal No. 1143 of 2011) 
FEBRUARY 17, 2012 
[S.H. KAPADIA, CJI, A.K. PATNAIK AND SWATANTER 
KUMAR, JJ.] 
Income Tax Act, 1961: 
ss. 36(1 )(vii) and 36(1 )(viia) read with s. 36(2) -
A 
B 
c 
Interpretation of - Scope and ambit of the proviso to clause 
(vii) of sub-section (1) of s.36 - Discussed - Held: The 
provisions of s.36(1)(vii) and s.36(1)(viia) are distinct and 
independent items of deduction and operate in their 
respective fields - Scheduled commercial banks would get the 
D 
full benefit of the write off of the irrecoverable debt(s) under 
s.36{1)(vii) in addition to the benefit of deduction for the 
provision made for bad and doubtful debt(s) under 
s.36(1)(viia). 
s. 119 - Circulars issued by Central Board of Direct Taxes 
(CBDT) - Effect of - Discussed. 
E 
Questions of law relating to interpretation of Sections 
36(1)(vii) and 36(1)(viia) read with Section 36(2) of the 
F 
Income Tax Act, 1961 and the scope and ambit of the 
proviso to clause (vii) of sub-section (1) of Section 36 of 
the Act arose for consideration in the present appeal. 
The assessee-bank (appellant) contended that the 
deduction allowable under Section 36(1 )(vii) of the Act is G 
independent of deduction under Section 36(1)(viia) of the 
Act; that distinct and different items of account are 
maintained by the bank in the normal course of its 
business and it is not permissible to interchange these 
739 
H 
740 
SUPREME COURT REPORTS 
[2012] 4 S.C.R. 
A items in accordance with the settled standards of 
accountancy or even in law; and further that as similar 
claims had been decided in favour of the banks for earlier 
assessment years, by Special Bench of the ITAT, which 
had not been challenged by the Department, as such, the 
8 issue had attained finality and could not be disturbed in 
the subsequent years. 
The Revenue on the other hand contended that it 
would amount to allowing a double deduction if the 
provisions of Sections 36(1 )(vii) and 36(1 )(viia) are 
C permitted to operate independently and that the proviso 
to Section 36(1 )(vii) was introduced with the intention to 
prevent this mischief. 
Allowing the appeals filed by the assessees and 
D dismissing the appeals filed by the Revenue, the Court 
Per Swatanter Kumar, J. [for himself and Patnaik, J.] 
HELD: 1. Merely because the orders of the Special 
Bench of the ITAT were not assailed in appeal by the 
E Department itself, this would not take away the right of 
the Revenue to question the correctness of the orders of 
assessment, particularly when a question of law is 
involved. [Para 13] [759-E] 
F 
2.1. It is a settled canon of interpretation of fiscal 
statutes that they need to be construed strictly and on 
their plain reading. Sections 36(1 )(vii) and 36(1 )(viia) 
provide for such deductions, which are to be permitted, 
in accordance with the language of these provisions. A 
bare reading of these provisions show that Sections 
G 36(1 )(vii) and 36(1 )(viia) are separate items of deduction. 
These are independent provisions and, therefore, cannot 
be intermingled or read into each other. [Para 16] [763-D, 
E] 
H 
2.2. The provisions of Section 36(1)(vii) would come 
CATHOLIC SYRIAN BANK LTD. v. COMMISSIONER OF 741 
INCOME TAX, THRISSUR 
into play in the grant of deductions, subject to the 
A 
limitation contained in Section 36(2) of the Act. Any bad 
debt or part thereof, which is written off as irrecoverable 
in the accounts of the assessee for the previous year is 
the deduction which the assessee would be entitled to 
get, provided he satisfies the requirements of Section 
B 
36(2) of the Act. Allowing of deduction of bad debts is 
controlled by the provisions of Section 36(2). As regards 
the argument advanced on behalf of the Revenue that it 
would amount to allowing a double deduction if the 
provisions of Sections 36(1 )(vii) and 36(1 )(viia) are c 
permitted to operate independently, there is no doubt that 
a statute is normally not construed to provide for a 
double benefit unless it is specifically so stipulated or is 
clear from the scheme of the Act. As far as the question 
of double benefit is concerned, the Legislature in its 
0 
wisdom introduced Section 36(2)(v) by the Finance Act, 
1985 with effect from 01.04.1985. Section 36(2)(v) 
concerns itself as a check for claim of any double 
deduction and has to be read in conjunction with Section 
36(1 )(

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