TaxTMI 
TaxTMI 
2013 (12) TMI 413
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....tivities. It filed its return of income for assessment year 2007-08 on 29/10/2007 admitting loss of Rs. 2,89,13,520. The scrutiny assessment was completed on 29/12/2009 determining the loss at Rs. 2,27,46,890/-. 3. The CIT, by virtue of powers vested in him u/s 263 of the IT Act, 1961, the assessment records of the assessee bank were called for and examined. On examination of the record, it was considered that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue for the following reasons: A) The assessee was allowed provision created on doubtful debts amounting to Rs. 41.41 lakhs though the same is not allowable. B) An amount of Rs. 18.43 lakhs being provision for bad and d....
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....ce regarding the provision for bad and doubtful debts of Rs. 18,43,318/-, the AR of the assessee submitted that since the amount had been credited and recognized as income, an equal amount has been reversed by making a provision under bad and doubtful reserve and this has not made any impact on the profit & loss account but only reflected in the profit & loss account for the purpose of accounting. 8. After considering the submissions of the assessee, the CIT observed that the assessee a cooperative bank as per proviso (a) to provisions of section 36(1)(viia), falls under 'other than' a primary agricultural credit society of a primary cooperative agricultural and rural development bank. Hence, the provisions claimed u/s 36(1)(viia) towards ....
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....on 43D does not applicable to the cooperative bank." 10. After considering the submissions of the assessee, the CIT observed that cooperative banks are allowed to make provision 36(1)(vii)(a), w.e.f. 2007 only, therefore, the assessee does not come under the purview of section 36(1)(vii)(a), and hence the provision for bad debt is not allowable deduction or the assessment year. In view of this, the claim of the assessee for deduction u/s 36(1)(viia) is not allowable. The CIT, therefore, directed the Assessing Officer to enhance the order u/s 143(3) passed on 29/12/2009 by an amount of Rs. 2,40,61,848/- and an amount of Rs. 18,43,318/- both being provisions created. 11. Aggrieved the Assessee is on appeal before us and has raised the follo....
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....ful debts to P&L and crediting it to the Reserve for Overdue interest. We agree with the contention of the Assessee that the conclusion of the CIT(A) that the Assessee's claim for deduction u/s 36(1)(viia) is not allowable as provisions of sec Sec 36(1)(viia) was made applicable to Coop Banks only from 1.4.2007, is erroneous. The Assessee did not claim the deduction u/s 36(1)(viia). They did not recognise the interest attributable to the Bad and doubtful debts by debiting P&L and crediting the reserve for overdue interest. According to the Assessee interest income on bad and doubtful debts does not accrue at all. Hence the same was excluded from the P&L by transferring it to reserve for overdue interest. 13. The Madras high Court in the ca....