NBFC bad debt provision deduction barred where Income-tax Act expressly excludes it despite RBI guidelines.

An NBFC cannot claim deduction for provision for bad and doubtful debts by relying on RBI guidelines or section 45Q of the RBI Act where the Income-tax Act expressly bars such deduction. Section 45Q overrides other laws only to the extent of inconsistency, but the Income-tax Act is a self-contained code for computing taxable income and the Explanation to section 36(1)(vii) specifically excludes such provisions. The separate allowance in section 36(1)(viia) for specified banks shows that Parliament intended the deduction only for identified classes of assessees. As NBFCs are outside that exception, the disallowance remains valid.

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Issues: Whether an NBFC could claim deduction for provision for bad and doubtful debts on the basis of RBI guidelines and section 45Q of the Reserve Bank of India Act, despite the Explanation to section 36(1)(vii) of the Income-tax Act, 1961.

Analysis: Section 45Q gives overriding effect to Chapter III-B of the Reserve Bank of India Act only to the extent of inconsistency with other laws. The Income-tax Act operates as a complete code for computation of taxable income, and the Explanation to section 36(1)(vii) expressly excludes any provision for bad and doubtful debts from deduction. The special allowance in section 36(1)(viia) for specified banks shows that Parliament consciously permitted such deductions only in defined cases. As NBFCs are not covered by that exception, RBI guidelines cannot override the express prohibition in the Income-tax Act.

Conclusion: The claim for deduction was not allowable, and the disallowance was rightly sustained.

Ratio Decidendi: An administrative or regulatory guideline cannot override an express tax disallowance where the statute itself provides a specific exception only for identified classes of assessees.

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