2017 (2) TMI 1010 - AT - Income Tax

Appellate tribunal affirms cooperative bank's bad debts deduction under Income Tax Act

Dy. Commissioner of Income Tax Versus M/s. Punjab & Maharashtra Co-operative Bank Ltd.

The appellate tribunal upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] in favor of the assessee, a cooperative bank, allowing the ... Deduction for bad debts u/s.36(1)(vii) - deduction was never claimed nor allowed in earlier year - CIT-A allowed claim - Held that:- According to the entries, the assessee was found eligible for deduction of bad debts invoking of provision u/s.36(1)(vii) of the Act. According to the provision of 36(1)(vii) of the Act the P&L A/c. has been debited and the debtors account credit that amount of bad debts written off. The CIT(A) also find support of law support by the Hon’ble Delhi Tribunal in the case of Jain Co-op. Bank Ltd. in which it is specifically held that the provision created prior to A.Y.2007-08, not claimed as a deduction, could not be taxed when written back. Therefore, the assessee has rightly reduced the said amount in its computation of income. The CIT(A) has passed the order in view of the above mentioned case. No contrary law of any kind was produced before us to distinguish the facts of the case on record. In view of the said circumstances, we are of the view that the CIT(A) has passed the order judiciously and correctly which is not require to be interfere with at this appellate stage. - Decided against revenue Issues:1. Justification for granting deduction for bad debts u/s.36(1)(vii) of the Act.Issue No. 1 - Deduction for Bad Debts u/s.36(1)(vii) of the Act:The primary contention in this issue revolves around the justification for allowing a deduction for bad debts under section 36(1)(vii) of the Income Tax Act. The case involved the assessee, a cooperative bank, which had claimed a sum of Rs. 17,41,56,007 as bad debts written off for the assessment year 2011-12. The Assessing Officer initially disallowed this claim, arguing that the bad debts were not debited in the Profit and Loss Account (P&L A/c.), making the claim ineligible. However, the Commissioner of Income Tax (Appeals) [CIT(A)] ruled in favor of the assessee, allowing the deduction. The CIT(A) highlighted that the assessee, as per RBI guidelines, had been creating provisions for bad debts by debiting the P&L A/c., even though it was not eligible for deduction under section 36(1)(viia) until A.Y. 2007-08. The CIT(A) noted that the assessee had correctly reduced the amount in its computation of income, in line with the provisions of section 36(1)(vii) of the Act. Additionally, the CIT(A) referenced a precedent set by the Hon'ble Delhi Tribunal, emphasizing that provisions created before A.Y. 2007-08 and not claimed as deductions could not be taxed when written back. The appellate tribunal concurred with the CIT(A)'s decision, stating that no contradictory legal precedent was presented to warrant interference at the appellate stage, ultimately dismissing the revenue's appeal.This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the reasoning behind the decision, preserving the legal terminology and significant details from the original text.