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2013 (11) TMI 1696 - AT - Income TaxEligibility for deduction u/s.36(1)(viia) to Co-operative bank - Provision for ‘Reserve for NPA' used according to the RBI directions - "Provision for loss on investment" an allowable deduction - HELD THAT:- the provision for NPA is not equal to provision for bad and doubtful debts. The provision for bad and doubtful debts means the debt is either become bad or its recovery is doubtful, whereas, Classification of NPA as per RBI guidelines means that recovery of principle and interest could not be made in the particular period from the party and that does not mean as per the accounting standard issued by the ICAI, it became either bad or recovery is doubtful. Thus, not eligible for deduction since the above provisions are not in accordance with Sec.36(1)(viia) The terminology ‘Reserve for NPA’ has been used by the assessee in accordance with the RBI directions. As is evident from the assessment order, the assessee has indeed created ‘Reserve for NPA’. For claiming benefit under the provisions of Section 36(1)(viia)(a) the conditions to be satisfied is: that provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Co-operative Banks do not strictly follow the provisions of Banking Regulation Act for the purpose of maintaining their Books of Accounts. Therefore, creation of provisions for bad and doubtful debts may be under different nomenclature. This will not disentitle the assessee for claiming deduction under the provisions of Section 36(1)(viia(a). The purpose for creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts. The decision in the case of CIT vs. Bank of Baroda, 262 ITR 334 (Bombay) [2003 (3) TMI 80 - BOMBAY HIGH COURT]. Therefore, the claim of ₹ 19,57,916/- becomes allowable. We order to allow the same. In the result, the appeal of the assessee bank is allowed.
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