ITAT Mumbai: Excess provision of BDDR not taxable to prevent double taxation

The ITAT Mumbai held that the excess provision of Bad and Doubtful Debts Recoverable (BDDR), derived from income already taxed in earlier years, should not be taxed again in the current year to prevent double taxation. The ITAT found the Commissioner of Income Tax (Appeals) unjustified in confirming the addition and allowed the appeal of the assessee, setting aside the Commissioner's order.

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Issues:
Whether the Commissioner of Income Tax (Appeals) was justified in confirming the addition made being excess of Bad and Doubtful Debts Recoverable (BDDR) in the case.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15, specifically challenging the addition made due to excess provision of Bad and Doubtful Debts Recoverable (BDDR). The assessee, a Co-operative Society engaged in banking, had declared a total income in its return. During scrutiny assessment, the Assessing Officer added an amount as excess provision of BDDR to the income of the assessee, which was credited before 31.03.2007. The Assessing Officer considered this excess BDDR as taxable income. Before the Commissioner of Income Tax (Appeals), the assessee contended that the provision was made in accordance with RBI guidelines and had no effect on taxable income for the current year. The Commissioner of Income Tax (Appeals) found the submissions of the assessee unacceptable and confirmed the addition made on account of excess BDDR provision.

The assessee argued that the excess provision was made out of earlier years' income that was already taxed, thus subjecting it to taxation again would result in double taxation. The ITAT Mumbai, comprising Shri Inturi Rama Rao, AM, and Shri S. S. Viswanethra Ravi, JM, noted that the provision under BDDR was from income taxed in earlier years and should not be taxed again in the current year. Therefore, they found the addition made by the Assessing Officer, as confirmed by the Commissioner of Income Tax (Appeals), unjustified. Consequently, the ITAT allowed the sole ground raised by the assessee and set aside the order of the Commissioner of Income Tax (Appeals), ultimately allowing the appeal of the assessee.

In conclusion, the ITAT Mumbai held that the excess provision of BDDR, which was made from income already taxed in earlier years, should not be subject to taxation again in the current year to avoid double taxation. The ITAT found the Commissioner of Income Tax (Appeals) unjustified in confirming the addition and allowed the appeal of the assessee.

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