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| The Tax Publishers2019 TaxPub(DT) 8441 (Del-Trib) INCOME TAX ACT, 1961
Section 36(1)(viia)
Where assessee had created provisions for NPA and claimed deduction under section 36(1)(viia) then AO was not justified in denying the deduction on the ground that no provision was made under the head 'provision for bad and doubtful debts for the year under consideration.
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Business deduction under section 36(1)(viia) - Bad debts - Provision made under the taxonomy of provision for non-performing assets -
Assessee rural bank claimed deduction under section 36(1)(viia) AO disallowed this on the ground that no provision was made under the head 'provision for bad and doubtful debts for the year under consideration.Held: Assessee had admittedly made provision for non performing assets (NPA) in respect of its urban branches. It had debited Rs. 2.52 crores (approximately) (i.e., 7.5% of gross total income) in P&L A/c creating provision for non-performing assets in accordance with section 36(l)(viia). AO disputed deduction claimed for the reason, that assessee had not created provision for bad and doubtful debts. In case of Banking Companies, accounts are made in accordance with RBI guidelines and Banking Regulation Act, 1949. Although, assessee had named the provision as 'Provision for NPA', but in pith and substance the provision had been created for 'Bad and Doubtful Debts'. The taxonomy of provision had been done by the assessee to keep it in line with the RBI and Nabard guidelines. Thus, assessee having made provision in accordance with section 36(1)(viia) was entitled to the benefit of same.
Relied:Vellore Distt. Central Co-operative Bank Ltd. v. CIT (2013) 145 IDT 129 (Chen-Trib) : 2013 TaxPub(DT) 2724 (Chen-Trib), Dy. CIT v. Catholic Syrian Bank (2004) 88 ITD 185 (Coch-Trib) : 2004 TaxPub(DT) 216 (Coch-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
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