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2013 (9) TMI 642 - AT - Income TaxClim of doubtful debts - NBFC - as per the mandatory requirements of directions of RBI, the assessee had made a provision for doubtful debts at a specified percentage based on the classification of assets viz. sub standard, doubtful and loss assets. The AO disallowed the assessee’s claim treating the same as contingent liability. - Held that:- this issue is covered against the assessee by the decision of Hon’ble Supreme Court in the case of Southern Technology Ltd. [2010 (1) TMI 5 - SUPREME COURT OF INDIA], wherein it was held that Provision for non-performing assets in terms of the Directions of the Reserve Bank of India does not constitute “expense” on the basis of which deduction can be claimed by the non-banking financial companies u/s 36(1)(vii) of the Act. - Decided against the assessee. Accrual of Interest on sticky loans and advances - CIT deleted addition - Held that:- non-receipt of interest for the first three years will not be treated as interest on a doubtful loan. But if after three years the payment of interest is not received, from the fourth year onwards it will be treated as interest on a doubtful loan and will be added to the income only when it is actually received. There is no inconsisteny or contradiction between the circular so issued and section 145 of the Income-tax Act. In fact, the circular clarifies the way in which these amounts are to be treated under the accounting practice followed by the lender. The circular, therefore, cannot be treated as contrary to sec. 145 of the Income tax Act or illegal in any form. It is meant for a uniform administration of law by all the income-tax authorities in a specific situation and is, therefore, validly issued u/s119 of the Income-tax Act. As such, the circular would be binding on the Department - Following decision of UCO Bank vs. CIT [1999 (5) TMI 3 - SUPREME Court] - Decided against Revenue. Computation of book profit - Minimum alternate Tax (MAT) u/s 115JB - Held that:- the decision of Special Bench in the case of Usha Martin Ind. Ltd. (2006 (12) TMI 171 - ITAT CALCUTTA) is not applicable. - AO had rightly added both the provisions debited to Profit & Loss Account viz. provision for doubtful debts (Rs. 3,61,30,700/-) and provision for servicing securitized assets as both the provisions resulted into diminution in the value of assets.
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