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2014 (9) TMI 44 - AT - Income TaxProvision towards fraud – Crystallization of loss - Whether the deduction can only be allowed if fraud is established and whether the loss claimed by the assessee can be said to have crystallized during the previous year – Held that:- The AO accepted the fact that the assessee bank has a well placed mechanism to identify frauds and initiate recovery action - the figures mentioned in the FIR is only a provisional figure which is arrived at for the purpose of filing an FIR immediately on occurrence of the fraud - The vigilance report is prepared after detailed study - there is bound to be a difference in the figures between the vigilance report and FIR lodged - Since the vigilance report is prepared after a deeper study, that figure should be considered as a loss to the assessee - the incident which resulted in irregularities/embezzlement occurred during the previous year – thus, the loss has to be held to have crystallized during the previous year – the order of the CIT(A) is upheld – Decided against Revenue. Advances made to rural branches of bank – Whether deduction u/s 36(1)(viia) can exceed the amount of provision for bad and doubtful debts - The Assessee made a claim for deduction u/s.36(1)(viia)(a) of the Act of ₹ 23,80,55,247. This was rejected by the AO for the reason that the deduction u/s.36(1)(viia) of the Act is allowed only to the extent PBDD in respect of rural advances is created in the books of accounts. - But CIT(A) allowed the claim of the Assessee - Held that:- What has to be seen by the AO is as to whether PBDD is created (irrespective of whether it is in respect of rural or non-rural advances) by debiting the Profit & Loss A/C. To the extent PBDD is so created, the Assessee is entitled to deduction subject to the upper limit of deduction laid down in Sec.36(1)(viia) of the Act. To avoid possible claim for double deduction in respect of one and the same debt first as PBDD and thereafter as Bad Debts, the legislature has already provided in Sec.36(2)(v) of the Act that where such debt or part of debt relates to advances made by an assessee to which cl. (viia) of sub-s. (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause. - Decision in the case of Catholic Syrian Bank (2012 (2) TMI 262 - SUPREME COURT OF INDIA) distinguished. - Decided in favour of revenue.
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