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2016 (6) TMI 1443 - AT - Income TaxDisallowance for provision of bad and doubtful debts on standard assets - CIT-A allowed deduction holding that the claim of the assessee fall into the main provisions of section 36(1)(viia) - as per DR CIT(A) has wrongly allowed relief to the assessee as the provisions for bad and doubtful debts was on standard assets and as per the proviso to section 36(1)(viia) only the provisions for bad and doubtful debts was allowable - AO was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure - HELD THAT:- Deduction u/s 36(1)(viia) of the Act is allowed in respect of provisions for bad and doubtful debts This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section(1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. As seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1)(viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section 36(1)(viia) of the Act. The learned CIT(A) has passed a very exhaustive and speaking order and we do not find any infirmity in the same - Decided against revenue.
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