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Section 36(1)(viia) allows deduction only for a provision for bad and doubtful debts actually made in the bank's books and within the statutory ceiling linked to total income and average rural advances. For the years in question, the provision need not follow any separate Income-tax Act method of quantification, and RBI prudential norms govern provisioning, including a general provision on standard assets because they still carry credit risk. The earlier proviso relating to doubtful or loss assets was confined to specified earlier assessment years and did not exclude standard assets here. The Special Bench answered the reference for the assessee and held that provision on standard assets made in accordance with RBI norms qualified for deduction, subject to the books and ceiling requirements.
Section 36(1)(viia) allows deduction only for a provision for bad and doubtful debts actually made in the bank's books and within the statutory ceiling linked to total income and average rural advances. For the years in question, the provision need not follow any separate Income-tax Act method of quantification, and RBI prudential norms govern provisioning, including a general provision on standard assets because they still carry credit risk. The earlier proviso relating to doubtful or loss assets was confined to specified earlier assessment years and did not exclude standard assets here. The Special Bench answered the reference for the assessee and held that provision on standard assets made in accordance with RBI norms qualified for deduction, subject to the books and ceiling requirements.
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