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2018 (8) TMI 1062 - AT - Income TaxDeduction u/s 36(1)(viia) or u/s 36(1)(viii) - creation of special reserve fund - cooperative society doing the business of banking in the district of Mandsaur - AO observed that the assessee is not entitled to a deduction u/s 36(1)(viii) since the bank has not given the long term finance for development of agriculture. Held that:- Provision of section 36(1)(viia) relates to provision for bad and doubtful debts which, certain category of assessee’s have been referred in the section are allowed to claim the expenditure as in the nature of business as they engaged in to, regular bad debts occur. Specific reserve is not an expenditure but it is an apportionment of the income and statue in order to promote long term finance in various sectors for the benefit of general public of the country gives the benefit of deduction to claim 20% of the available profits to be accumulated under the head special reserve and the claimant is duty bound to use such specific reserves only for the aforesaid purpose for which it has been made and in case of any default the same needs to be brought to tax. From above discussions we are of the view that both the section 36(1)(viia) and 36(1)(viii) of the Act deals with two distinct items namely an expenditure in the name of provision for bad and doubtful debts u/s 36(1)(viia) of the Act and in the nature of income u/s 36(1)(viii) of the Act which is set apart for a specific purpose. In our view both the items expressed in these two sections i.e. 36(1)(viia) and 36(1)(viii) of the Act are different and cannot be equated to each other. The assessee after becaming aware of the fact that it is not eligible for such deduction u/s 36(1)(viii) of the Act, it changed its stand and now is pleading that the set off may be given u/s 36(1)(viia) of the Act relating to provision for bad and doubtful debts giving the reason that it still has unutilized limit of ₹ 9.2 crores. We fail to understand how an item of income can be equated to an item of expenditure. In the instant case the assessee has tried to equate the apportionment of profit against an expenditure for provision for bad and doubtful debts which in our view is not possible. - Decided against the assessee.
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