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| The Tax Publishers2020 TaxPub(DT) 2129 (Pune-Trib) INCOME TAX ACT, 1961
Section 36(1)(viia)
Revenue was not justified in disallowing provision created for bad and doubtful debts under section 36(1)(viia) by assessee-bank on standard assets because assessee was bound by the guidelines issued by the Reserve Bank of India to make such provision.
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Business deduction under section 36(1)(viia) - Provision for bad debts - Provision created by assessee-bank in terms of RBI guidelines -
In case of assessee-bank provision created for bad and doubtful debts under section 36(1)(viia), which included a provision in respect of standard assets was disallowed by AO. It was alleged by AO that under section 36(1)(viia), deduction was not allowable on standard assets as the same was good and recoverable and provision made on such assets cannot be considered to be a provision for bad and doubtful debts. Held: RBI guidelines prescribes the provision on standard assets from the year ended March 31, 2000 directing banks to make a general provision of a minimum of 0.25% on standard assets. Decision of revenue was unjustifiable for reason that assessee was bound by the guidelines issued by the Reserve Bank of India. Any contrary view taken by the Income Tax Authorities would disentitle the assessee from claiming deduction under section 36(1)(viia). Assessee was eligible for deduction.
Followed:Bellad Bagewadi Urban Souhard Sahakari Bank Niyamit v. CIT [I.T.A. No. 100168/2015, dated 29-1-2018]
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2013-14
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