2014 (1) TMI 1737

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....viding credit facilities to its customers. The assessee filed its return of income for the AY.2009-10 on 30-09-2009 declaring its income as Rs. 31,08,26,750/-. The case of the assessee was selected for scrutiny and notice u/s. 143(2) of the Income Tax Act, 1961 (herein after referred to as 'the Act') was issued to the assessee. In its books of account, the assessee had made 'Provision for Non- Performing Assets' in accordance with section 36(1)(viia). The Assessing Officer dis-allowed the same on the ground that the assessee has not made any Provision for Bad and Doubtful Debts and thus, is not entitled to the provision made u/s.36(1)(viia) of the Act, as claimed. Aggrieved against the assessment order dated 23-12-2011, the....

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....he appeal of the assessee. The ld.DR contended that the assessee has created provision in general. Specific non-performing accounts have not been identified by the assessee. To support his contentions, the ld.DR relied on the order of the co-ordinate bench of the Tribunal in the case of Kottakkal Co-operative Urban Bank Ltd. v. ITO [2013] 142 ITD 123 (Cochin). 5. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below as well as the order referred to by the ld.DR. It is a well settled law that unless provision is created for bad and doubtful debts, by banking companies or co-operative banks, benefit of section 36(1)(viia) cannot be claimed. The provisions of section 3....

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....nk incorporated as per the Indian Laws or the co-operative bank shall be allowed deduction in respect of any provision for bad and doubtful debts made by it of an amount: I. Not exceeding 7.5% of the total income before computing any deduction under chapter-VIA; and II. Not exceeding 10% of the aggregate average advances made by the rural banks of such bank computed in the prescribed manner." 6. In the present case, the assessee has admittedly made provision for non-performing assets (NPA) in respect of its urban branches. The assessee has debited Rs. 2.52 Crores (approximately) (i.e., 7.5% of the gross total income) in P&L A/c creating provision for non-performing assets in accordance with the provisions of section 36(1)(viia) of the ....