TaxTMI 
TaxTMI 
2014 (12) TMI 507
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....s. 8,07,000/-. Such provisions have been made on anticipation basis and the liability / loss being not actually arisen during the year under consideration. Provisions for doubtful debt, penal interest and sundry debtors were required to be disallowed because under the IT Act, the provision made in account for an accrued or known liability is an admissible deduction and no other provisions qualify for deduction. Since in this case, no such liability has accrued, therefore, the claim of assessee was disallowed and all amounts were added to the income of the assessee. All the three additions were challenged before the ld. CIT(A). However, as far as admissibility of provision for doubtful debts and sundry debtors are concerned, the assessee has furnished working of the amount of provisions admissible u/s.36(1)(viia) of the IT Act, which is reproduced at page 2 of the appellate order and the ld. CIT(A) allowed part deduction to the assessee as per the above provisions and rest of the additions were confirmed. 2.1. In respect of provision for penal interest of Rs. 1.94 crore, the assessee submitted copy of guidelines issued by RBI in respect of accounting of accrued interest on NPA, whi....
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....accrued to was considered only when it was realized. On the other hand, the ld. DR relied upon the orders of the authorities below and submitted that when for 2-3 quarters, no interest was received, it was considered as provision for penal interest. The same accrued in favour of the assessee which should have been shown for taxation purposes. The ld. DR relied upon the decision of Madras High Court in the case of T.N. Power Finance and Infrastructure Development Corporation Ltd. vs. JCIT, 280 ITR 491 in which it was held - "Held, that merely because the Reserve Bank of India had directed the assessee to provide for non-performing assets, that direction could not override the mandatory provisions of the Incometax Act contained in section 36(1 (viia) which stipulate a deduction not exceeding 5 per cent, of the total income only in respect of the provision for bad and doubtful debts which are predominately revenue in nature or trade related and not for provision for nonperforming assets which are of predominately capital nature. The assessee was not entitled to deduction, in view of the Explanation to section 36(1)(vii) which says that the provision for bad and doubtful debts made in....
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....d. vs. JCIT, 320 ITR 577 held (Head Notes) - "Provision for non-performing assets and debited to profit and loss account - Made under Reserve Bank Prudential Norms - Can be treated as income - Expense not deductible under section 36(1)(vii) or (viia) - Reserve Bank disclosure norms have nothing to do with computation of taxable income under Income-tax Act." It was further held that what is not deductible under specific provision is not deductible as general business expenditure. The assessee is a co-operative bank. Therefore, provisions of section 36(1)(viia) may apply in favour of the assessee to some extent for making provision for bad and doubtful debts. Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd. vs. CIT, 343 ITR 270 held that "scheduled commercial banks would continue to get the full benefit of write off of irrecoverable debts u/s. 36(1)(vii) in addition to the benefit of deduction for the provision made for bad and doubtful debts u/s. 36(1)(viia)". The Hon'ble Supreme Court followed the same decision in the case of DCIT vs. Karnataka Banks Ltd., 349 ITR 705. The ld. CIT(A) specifically found in the case of the assessee that penal interest has not been wri....
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....laimed deduction of provision for penal interest. RBI guidelines, thus, issued were not in consonance with the provisions of the IT Act, therefore, cannot be applied in favour of the assessee for allowing deduction in favour of the assessee. We, therefore, do not find any justification to interfere with the order of the ld. CIT(A). We confirm the addition and dismiss the appeal of the assessee." 6. The assessee in miscellaneous application has stated that the Tribunal has not considered the guidelines of RBI binding on the bank and that the decision in the case of Southern Technology Ltd. (supra) is not applicable to the case and that the circular is binding. It is, therefore, stated that the mistake apparent on record may be rectified and order may be amended. 7. At the time of hearing of miscellaneous application, none appeared on behalf of the assessee. The assessee's counsel Shri S.K. Lulla, C.A. forwarded a letter stating that the M.A. may be decided on merits in the light of the following decision : (i). CT vs. Industrial Finance Corporation of India Ltd., 248 CTR 69 (ii). ACIT vs. Osmanabad Janta Sah. Bank Ltd., 152 TTJ (UO) 01. (iii). CIT vs. Punjab State Cooperative B....