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2014 (1) TMI 444 - AT - Income TaxRestricting the deduction – Expenses claimed under provision for bad and doubtful debts u/s 36(1)(viia) of the Act – Held that:- Following Kannur District Co-operative Bank Ltd. v. Asst. CIT [2012 (5) TMI 22 - ITAT COCHIN] – As per Part V of the Banking Regulation Act, 1949, the term 'banking company' also includes a 'co-operative bank' - Thus a co-operative bank falls under the definition of "banking company" - the definition given in the Explanation under section 36(1)(viia) of the Income-tax Act, a 'banking company' as defined in section 5(c) of the Banking Regulation Act, which is not a scheduled bank, is classified as a 'non-scheduled bank' - a co-operative bank, would be classified as a 'non-scheduled bank' for the purpose of section 36(1)(viia) of the Act. Netting of provisions made for bad and doubtful debts – Held that:- The provision is created at the end of every year by analysing the quality of advances or debts on certain parameters - the fresh provisions created during the year under consideration alone can be considered for the purpose of provisions of section 36(1)(viia) of the Act - the assessee has credited the entire amount of balance available in the "provision for bad and doubtful debts" account to the profit and loss account - all the debts on which the provisions were created in the earlier years have become quality assets, meaning thereby the provision is no longer required on those debts - only the net accretion to the provisions account for the purpose of section 36(1)(viia) of the Act - The net accretion has to be ascertained by analysing the quality of each asset – decided partly in favour of Assessee.
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