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2016 (8) TMI 74 - AT - Income TaxDisallowance u/s 36(1)(viia) - Held that:- Deduction u/s 36(1)(viia) should be restricted to the extent of the amount of provision created in the books of account during the previous year relevant to assessment year under consideration. There is no provision in the Act enabling the assessee-bank to make good short-fall of earlier years in the subsequent years. Therefore, the contention advanced on behalf of the assessee-bank that in the subsequent year, the short-fall in previous year was made good, cannot be accepted. Disallowance of bad debts of ₹ 55,62,08,835/- u/s 36(1)(vii) - Held that:- Hon’ble Supreme Court in the case of Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT ) wherein the Hon’ble Supreme Court held that debiting P&L Account by provision for bad debts and reducing the same from the sundry debtors in the balance sheet amounts to write off. The assessee-bank had not produced any evidence that similar treatment was given in its books of account. Therefore, in the interests of justice, we remit this issue back to the file of the AO to allow the same as deduction after satisfying himself that provision for bad debts is debited to P&L account and reduced the same from sundry debtor’s account in the balance sheet. Addition u/s 14A - Held that:- As provisions of sec.14A have no application in case assets are held as stock-in-trade. Therefore, provisions of sec.14A cannot be applied in the present case. Thus we hold that no disallowance is called for under the provisions of sec.14A of the Act. Loss on account of depreciation in the value of HTM securities - Held that:- Loss arising on valuation of HTM category of securities should be allowed as revenue loss. This ground of appeal is dismissed. See Canara Bank Versus Joint CIT, LTU, Bangalore [2016 (4) TMI 429 - ITAT BANGALORE] Loss on account of mark to market loss - Held that:- As the facts emerge from the assessment order, it is clear that though derivatives are shown as investments in the books of account. However, for income-tax purposes, the same were claimed as stock-in-trade and this practice was continuously followed by the assessee-bank. Thus, for income-tax purposes, derivatives form part of the stock-in-trade. When derivatives are held as stock-in-trade, then the salutary principle for valuation of stock in trade that stock has to be valued at cost or market price whichever is lower should be followed. Loss, if any, arising as a result of such valuation should be allowed as a loss. Addition on account of sundry assets written off - AO disallowed the same treating it as bad debt written off - Held that:- In the present case, amounts written off represent services charges. It is undisputed fact that in the year of recovery the same were offered to tax. Therefore, we do not find any fault with the reasoning adopted by the CIT(A) in allowing the same as the conditions prescribed u/s 36(1)(vii) are not applicable to the present case. Therefore, this ground of appeal is also dismissed
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