TaxTMI 
TaxTMI 
2017 (8) TMI 1073
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....acts in deleting the addition of bad debts claim of Rs. 11,72,22,554/made by the Assessing Officer ? [B] Whether the Appellate Tribunal was right in law and on facts in deleting the disallowance of excess provision written back of Rs. 10,00,00,000/?" 2. The first question pertains to the assessee's claim of bad debts of Rs. 11.72 crores (rounded off). The respondent assessee is a cooperative bank. For the assessment year 2008-09, the assessee had filed the return of income. The assessee had claimed bad debt of Rs. 15.35 crores (rounded off) which comprised of bad debt of Rs. 11.72 crores (rounded off) shown in the statement of income and Rs. 3.62 crores (rounded off) outside such statement. The assessee requested the Assessing Offi....
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.... case of T. R. F. Ltd. v. Commissioner of IncomeTax reported in [2010] 323 ITR 397 (SC), bad debt can be allowed only if the same is written off in the books of account of the assessee. In the present case, the assessee had not written off the bad debts in the books of accounts. A mere mention in the audit report would satisfy such requirement. He accordingly disallowed the claim of bad debt. 5. The assessee approached the Commissioner of Income Tax (Appeals) who while confirming the order of the Assessing Officer, raised an additional ground for rejecting the claim. In his opinion, proviso to section 36(1)(vii) of the the Income Tax Act, 1961 ('the Act' for short) would not allow bad debts if it does not exceed the credit balance ....
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....ier years to the debit of profit and loss account but added back as provision is not tax deductible. As regards the learned CIT(A)'s reference to proviso to section 36(1)(vii), which, in turns, refers to section 36(1)(viia), to provisions made under section 36(1)(viia) which admittedly is not the case here. In view of these discussions, as also bearing in mind entirety of the case, the grievance of the assessee must be upheld. Accordingly, disallowance of deduction for bad debts, amounting to Rs. 11,72,22,554/, is deleted." 7. Having heard learned counsel for the parties and having perused the documents on record, it emerges that the assessee had actually written off the debt by squaring up the accounts of the debtors and crediting th....
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.... 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.] Under this proviso, the claim of bad or doubtful debt would 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 in clause (viia) in case of an assessee to which such clause applies. The fact that clause (viia) applies t....
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....f the assessee. Assessee carried the matter in appeal. Commissioner of Income Tax (Appeals) confirmed the view of the Assessing Officer invoking the provision of section 41(1) of the Act. The assessee's defense that the assessee had not claimed interest expenses in the earlier years and therefore, reversal of the unclaimed expenses cannot be taxable, was rejected on the ground that during earlier period, the assessee's income from the banking business was exempt under section 80P of the Act and therefore, it was irrelevant whether the assessee had claimed such interest in the past or not. 10. The assessee carried the issue before the Tribunal. Tribunal reversed the view of the Revenue authorities making following observations: "9....