TaxTMI 
TaxTMI 
2022 (12) TMI 1544
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....nd the observations made therein would also apply to assessment year 2013-14. Assessment year 2012-13: 2. The assessee has taken the following grounds of appeal: "1. The Ld. CIT(A) has erred in law and on facts and circumstances of the case in deleting the additions made on account of Interest Accrued on NPA of Rs. 2,70,87,263/-. 2. The Ld. CIT(A) has erred in law and on facts and circumstances of the case in deleting the disallowance made of deduction u/s. 36(l)(viia) of the I.T. Act of Rs. 22,98,782/-." Assessment Year 2013-14: 3. The assessee has taken the following grounds of appeal: "1. The Ld. CIT(A) has erred in law and on facts and circumstances of the case in deleting the disallowance made of deduction u/s. 36(l)(viia....
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....cision of ITAT Ahmedabad in the case of Karnavati Cooperative Bank 17 Taxmann 239, which decision has also been followed by the ITAT Rajkot in subsequent decisions. 6. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) deleting the additions on account of accrued interest on NPAs. In our considered view, the issue under consideration has been decided in favour of the assessee by various Courts, including the Apex Court of India and the Gujarat High Court, which have held that even if the assessee is following mercantile system of accounting, interest accrued on NPAs are only taxable on receipt basis. In the case of Jamnagar District Co-Operative Bank Ltd.[2018] 94 taxmann.com 300 (SC), Supreme Cour....
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.... Urban Co-op Bank Ltd.[2014] 42 taxmann.com 392 (Pune - Trib.), the assessee-co-operative bank had accrued interest on NPA account of Rs. 1,32,49,730 out of which assessee had actually received Rs. 1,30,58,733 and same had been offered to tax. The assessee did not offer tax on balance interest. The addition was made on ground that assessee was following mercantile system of accounting and, hence, whole amount of accrued interest had to be brought to tax. In fact, assessee had been consistently following cash method of accounting recognizing income in respect of asset qualified as bad and doubtful debt (NPA) as per RBI guideline in view of provision of sections 145 and 43D.The ITAT held, following the case of Asstt. CIT v. Osmanabad Janta Sa....
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....ad claimed deduction of 22,98, 782/- under section 36(1)(viia) of the Act in respect of provision for bad and doubtful debts. In the assessment proceedings, the AO disallowed the claim of deduction of the assessee on the ground that section 36(1)(viia) of the Act applies only in cases where assessee has given rural advances. The AO held that deduction under section 36(1)(viia) of the Act is allowable only for rural advances and the aforesaid section provides a two-fold deduction: a) 7.5% of total income before making any deduction under section and Chapter- VIA and b) 10% of the average aggregate of rural advance Therefore, the AO held that the Legislature in order to encourage banks to set up branches in rural areas, is allowi....
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....he Hon'ble Supreme Court has held that once an assessee has claimed a deduction of provision of bad debts under clause (viia) then by virtue of provision of clause (viia) the assessee could claim deduction of bad debts return off only to the extent of excess of right off over the amount standing to the credit in the account created under clause (viia) of section 36. From the above judgment of the Hon'ble Supreme Court the AO has inferred that deduction u/s.36(1 )(viia) is specifically for banks having rural branches and has concluded that the deduction u/s.36(1 )(viia) is not allowable to the bank which does not have rural branches. Such inference in my considered opinion is erroneous interpretation of the judgment and it is c....
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.... Trib.), it was held that deduction under section 36(1)(viia) cannot be restricted to extent of provision for bad and doubtful debts relating to rural advances only. In the case of Chaitanya Godavari Grameena Bank[2018] 93 taxmann.com 400 (Visakhapatnam - Trib.), in order to allow assessee's claim under section 36(1)(viia), what is to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created, irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for doubtful debts so created, assessee is entitled for deduction subject to upper limit of deduction laid down in said section. In the case of Kodungallur Town Co-op Bank Ltd.[2016....