TMI Blog2005 (3) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The assessee (respondent herein) is a scheduled Bank as defined under section 36(viia) Explanation (ii) of the Income-tax Act. The assessee has several rural branches as defined in Explanation (ia) ibid. 3. For the assessment year 1994-95, the question arose before Assessing Officer as to whether assessee is entitled to claim benefit of section 36(1)vii) and (viia ) and if so, to what extent or how much ? In fact, so far applicability and/or entitlement of benefit and consequent deduction under aforementioned two sections are concerned, the same was not in dispute. In other words, it was not disputed that assessee is entitled to claim deduction under these two sections. The real question that fell for consideration was its manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 36(vii) or (viia ) ibid being erroneous and prejudicial to the interest of Revenue. In this view of the matter, the CIT by order dated 31-3-1999 set aside the order of Assessing Officer to this extent. It is this order of CIT, which was challenged by the assessee in appeal to Tribunal (ITAT). By impugned order, the Tribunal allowed the appeal and set aside the order of CIT. As a consequence, the order of Assessing Officer granting benefit of deduction claimed by the assessee amounting to ₹ 4,56,31,774 was restored. It is against this order of Tribunal; the Commissioner of Income- tax (Revenue) has come up in appeal. 6. Heard Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but for which figures are available much after the end of the year. 9. In our considered opinion, the issue of this nature such as the one involved has got to be decided on the basis of recognized principle of accountancy coupled with the requirement of sections which govern the issue. Indeed, it involves the manner and methodology of accountancy in claiming deduction. In cases of like nature, their Lordships of Supreme Court have always taken the help of methods adopted/prescribed/ recognized by the Indian Institute of Chartered Accountants as in the opinion of their Lordships, they are the best guide. In one of the case in CCE v. Dai Ichi Karkaria Ltd. [1999] 7 SCC 448, their Lordships while supporting their conclusion while examini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision for bad and doubtful debts account has an opening balance of ₹ 1 lakh on April 1, 2002. XY Ltd. wants to write off ₹ 14 lakhs during 2002-03 on account of bad debts. Compute the amount of deduction under section 36(1)(vii)/(viia ). What are the formalities the taxpayer is required to complete ? The amount of bad debt, i.e., ₹ 14 lakhs should be debited to Provision for bad and doubtful debt account as follows:- Provision for bad and doubtful debt account By P L a/c. [being deduction under section 36 The following conclusions, one can draw- 1. The amount of deduction under section 36 is as follows- a. provision for bad and doubtful debts under section 36(1)( viia) : ₹ 8 lakhs (being 5% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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