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2015 (4) TMI 1203 - HC - Income TaxAllowable deduction on provision for NPA(Non Performing Assets) - whether claim of the assessee did not qualify under Explanation below section 36(1)(vii) to the effect that a provision will not amount to writing off? - Held that:- As decided in Southern Technologies Ltd. Vs. Joint Commissioner of Income-Tax [2010 (1) TMI 5 - SUPREME COURT OF INDIA] Section 36(1) (viia) provides for a deduction not only in respect of "written off" bad debt but in case of banks it extends the allowance also to any Provision for bad and doubtful debts made by banks which incentive is not given to NBFCs - even in the case of banks the Provision for NPA has to be added back and only after such add back that deduction under Section 36(1) (viia) can be claimed by the banks - that neither Section 36(1)(viia) nor Section 43D violates Article 14. We further hold that the test of "intelligible differentia" stands complied with and hence we reject the challenge - Provision for possible loss are only notional for purposes of disclosure, hence, they cannot be made an excuse for claiming deduction under the IT Act, hence, "add back". The point which we would like to make is whether such losses are contingent or actual cannot be decided only on the basis of presentation. Such presentation will not bind the authority under the Income-tax Act. Ultimately, the nature of transaction has to be examined. In each case, the authority has to examine the nature of expense/loss. Such examination and finding thereon will not depend upon presentation of expense/loss in the financial statements of the NBFC in terms of the 1998 Directions. Therefore, in our view, the RBI Directions 1998 and the Income-tax Act operate in different fields. - Decided in favour of the revenue
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