Appeal dismissed, CIT(A) order upheld, assessee entitled to deduction under Income Tax Act

The appeal by the revenue was dismissed, and the order of the CIT(A) was upheld, allowing the deduction claimed by the assessee under section 36(1)(viia) of the Income Tax Act. The Tribunal emphasized the principle of consistency and affirmed that the assessee was entitled to the claimed deductions under section 36(1)(viia).

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Issues Involved:
1. Deletion of disallowance of Rs. 1,95,00,000/- claimed by the assessee under section 36(1)(viia) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance under Section 36(1)(viia):
The primary issue in this appeal is the deletion of the disallowance of Rs. 1,95,00,000/- claimed by the assessee under section 36(1)(viia) of the Income Tax Act. The Tribunal noted that the facts for the assessment year 2017-18 were identical to those of the assessment year 2010-11, where a similar issue was adjudicated.

The Tribunal reviewed the relevant provisions of section 36(1)(viia), which allows deductions for provisions for bad and doubtful debts made by banks. The section specifies that a scheduled bank, a non-scheduled bank, or a co-operative bank can claim deductions not exceeding seven and one-half percent of the total income and ten percent of the aggregate average advances made by rural branches.

The assessee had made a provision of Rs. 7.16 Crore under section 36(1)(viia), but the Assessing Officer disallowed Rs. 3.66 Crore, arguing that certain provisions did not qualify as bad and doubtful debts. The CIT(A) allowed the claim, stating that the assessee met the conditions for deductions under section 36(1)(viia), as the rural advances were Rs. 159 Crore, and the claim was within the permissible limit.

The Tribunal also considered the principle of consistency, noting that similar deductions were allowed in previous assessment years (2008-09, 2009-10, 2015-16, and 2016-17). The Tribunal cited the Hon'ble Supreme Court's decision in Catholic Syrian Bank Vs CIT, which clarified that deductions under section 36(1)(vii) and section 36(1)(viia) are distinct and independent.

The Tribunal referred to various precedents, including decisions from the ITAT Amritsar Bench and the ITAT Chennai Tribunal, which supported the allowance of provisions for bad and doubtful debts under section 36(1)(viia) without differentiating between provisions on bad assets and standard assets.

In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal. The Tribunal emphasized the principle of consistency and the assessee's compliance with statutory provisions, affirming that the assessee was entitled to the claimed deductions under section 36(1)(viia).

Judgment:
The appeal by the revenue was dismissed, and the order of the CIT(A) was upheld, allowing the deduction claimed by the assessee under section 36(1)(viia) of the Income Tax Act. The Tribunal pronounced the order on 04/07/2022, reiterating the importance of consistency and adherence to statutory provisions.

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