TaxTMI 
TaxTMI 
2013 (1) TMI 209
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....he Income Tax Act, 1961 (hereinafter to be referred to as the 'Act') by way of bad debt in following manner:- CRB Advance write off Rs. 6,47,57,546 CRB Shares write off Rs. 1,66,87,200 Write off of OD to Vishwanath Rs. 37,658 Loan write off Rs. 5,21,79,532 Rs. 13,36,61,936 4. The assessee had also simultaneously claimed deduction under section 36(1)(vii)(a) of the Act for provision for bad and doubtful debts of Rs. 1,36,09,550/-. 5. The Assessing Officer questioned the claim of deduction under section 36(1)(vii) and called upon the assessee to justify the same. In response to such objection of the Assessing Officer, the assessee contended that in the computation, entire NPA provision has been added back and only the bad debts actually written off have been claimed as a deduction. The assessee pointed out that the deduction of Rs. 1.36 crores (rounded off) formed part of the NPA provision of Rs. 8.39 crores (rounded off). 6. The Assessing Officer, however, did not accept the stand of the assessee observing that from the details furnished in respect of Bad Debt Reserve Account, it emerges that the account had an opening balance of Rs. 75.....
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....f the total income for provision for bad and doubtful debts made by the bank. Such claim has been made and rightly allowed by the Assessing Officer. He, therefore, was of the opinion that since the deduction is available to the bank under section 36(1)(vii), the proviso to section 36(1)(vii) will be applicable and the deduction under section 36(1)(vii) would be limited to the amount by which the said debt or part thereof exceeds the credit balance in the provision for bad and doubtful debt account. In short, he was of the opinion that the claim of deduction towards bad debt under section 36(1)(vii) against the written off debt at Rs. 14.12 crores should be restricted by 1.36 crores (separately claimed and allowed under section 36(1)(viia) of the Act) and the net amount of Rs. 12.75 crores (written off) would be allowable deduction of the assessee under section 36(1)(vii) of the Act. 9. Such order of the Appellate Commissioner was challenged by the assessee before the Income Tax Appellate Tribunal ('the Tribunal', for short). Against such judgment of the Commissioner, revenue as well as the assessee preferred separate appeals. The Tribunal by the impugned judgment dated 7th Novem....
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....or the actual bad debt for which provisions have been made by bank under section 36(1)(vii) of the Act. The counsel submitted that the issue is clarified by the CBDT in its circular dated 26-11-2008 wherein clause (ii) of Para 2 puts the entire issue beyond any pale of controversy. 13. Having thus heard learned counsel for the parties and having perused the record, we may notice the statutory provisions involved. Relevant portion of section 36 reads as under:- 36. Other deductions.- (1) The deduction provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 - (vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year :] [Provided that in the case of [an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:] [Explanation.- For ....
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.... before the 1st day of April, 2005;] (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply - (v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause. 14. From the above statutory provisions, it can be seen that in addition to the deduction available to an assessee under section 36(1)(vii) for bad debts, in case of special class of banks mentioned in clause (viia), deductions subject to fulfilment of certain conditions is available in respect of any provision for bad and doubtful debts. One of the restrictions is of limiting such deduction to a maximum of a specified percentage of total income of the assessee computed before making any deduction under this clause and not exceeding prescribed percentage of aggregate average advance made by the rural branches of such bank. From the decision of the Apex Court in the case of Catholic Syrian Bank Ltd. (supra), it can....
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....under different sections are being allowed by the Assessing Officers without proper verification, leading to substantial loss of revenue. It is, therefore, necessary that assessments in the cases of banks are completed with due care and after proper verification. In particular, deductions under the provisions referred to below should be allowed only after a thorough examination of the claim on facts and on law as per the provisions of the I.T. Act, 1961. (i) Under section 36(1)(vii) of the Act, deduction on account of bad debts which are written off as irrecoverable in the accounts of the assessee is admissible. However, this should be allowed only if the assessee had debited the amount of such debs to the provision for bad and doubtful debt account under section 36(1)(viia) of the Act, as required by section 36(2)(v) of the Act. (ii) While considering the claim for bad debts u/s 36(1)(vii), the assessing officer should allow only such amount of bad debts written off as exceeds the credit balance available in the provision for bad & doubtful debt account created u/s 36(1)(viia) of the Act. The credit balance for this purpose will be the opening credit balanc....