2011 (8) TMI 1259

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....st the facts of the case. 2. On the facts and circumstances of the case, the CIT(A)-XXV, new Delhi has erred in upholding the assessment order u/s 143(3) dated 31.12.2009 for the year 2007-08 passed by the ACIT, Circle 30(1), New Delhi in disallowance of deduction of ₹ 77,73,715/- on account of reversal of NPA provisions credited to the Profit & Loss Account." 2. The only issue for consideration in assessee's appeal relates to confirming the addition of ₹ 77,73,715/- on account of reversal of NPA provisions credited to P&L A/c. The facts of the case stated in brief that the assessee derives income from banking. During the course of assessment proceedings, the Assessing Officer found that the assessee had reversed NPA....

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....y previous year the said allowance for deduction gets reduced due to excess provision made by the assessee, the excess provision gets taxes in the year of recovery. In the case of the assessee, if deduction u/s 80P would not have been available, the assessee would have claimed deduction u/s 36(1)(viia) of the Act. Further, the assessee has claimed the deduction u/s 80P of the Act and hence the amount was not offered for tax in the earlier years. Accordingly, the income was not getting taxes twice. The Assessing Officer, therefore, added the amount of ₹ 77,73,715/-. 3. On appeal, it was submitted that assessee was creating provisions of NPA over the years and the same was added in the computation of income, but the assessee had ultima....

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....rties. The ld.AR of the assessee submitted that up to assessment year 2006-07, the assessee being a cooperative bank was eligible for deduction u/s 80P(2) of the Act. The assessee had been creating NPAs as per guidelines of the RBI. Since provisions for NPA was not eligible for deduction, the assessee while computing total income of earlier years had added the amount of NPA in the income and had claimed deduction in respect of entire income u/s 80P of the Act. From these facts, it is clear that the assessee had not claimed deduction on account of provisions in earlier years. Therefore, reversal of the NPA by crediting the amount out of NPA provisions would not constitute income liable to be taxed. In view of above facts, in our considered o....

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....d claimed deduction u/s 80P of the Act in earlier years by virtue of which the same income has not been taxed. As a pre income which has not been taxed in earlier years cannot be allowed to reduce the taxable income of the future years. The Assessing Officer, therefore, disallowed the claim for bad debts. 6. Before the CIT (Appeals), it was submitted that assessee had not claimed provisions of bad debt as the entire income of the assessee was exempt u/s 80P of the Act. It was also submitted that although the amount of bad debt has not been debited to P & L Account, the same had been claimed as deduction under section 36(1)(vii) of the Act, and the same was allowable as per the existing provisions of bad debt. It was also submitted that amo....