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2018 (5) TMI 511 - AT - Income TaxProvision for bad and doubtful debts u/s 36(1)(vii)(a) - Held that:- The provisions are not allowable deduction and only the expenditure actually incurred or ascertained as per the system of accounting is the allowable expenditure except the provision for Bad and doubtful debts discussed above. The above classification of the provision clearly shows that it was purely general and contingent in nature. There is no indication of non-recoverability of the debt. Therefore the provision for standard assets cannot be equated with the Provision for bad and doubtful debt and the assessee’s argument that only the nomenclature is different is unacceptable. The provision is required only to meet the unexpected eventuality in the interest of the banking, but it is neither an allowable expenditure nor an ascertained liability. We hold that the provision for standard assets is not an allowable deduction and we set a side the order of the Ld.CIT(A) and restore the order of the AO. The appeal of the revenue is allowed on this ground. Provision made against the standard assets u/s 36(1)(viia) under the head ‘provision for bad and doubtful debts’ - Held that:- The assessee made the provision for bad and doubtful debts in aggregate of ₹ 6,12,89,928/- which includes provision made against standard assets amounting to ₹ 69,37,085/-. This issue was discussed in the earlier order for the assessment year 2010- 11 and confirmed the addition made by the AO allowed the appeal of the revenue. The issue in favour of revenue and against the assessee. Revenue’s appeal on this ground is allowed. Writing back of excess provision of bad and doubtful debts against non-rural advances - Held that:- There is no dispute with regard to the creation of provision for bad and doubtful debts and no dispute with regard to the fact that the assessee bank has rural branches and given rural advances. CIT(A) is squarely applicable to the assessee, hence, we do not see any reason to interfere with the order of the CIT(A). There was a mistake in CIT(A) as discussed in this order earlier which needs verification. The Ld.CIT(A) has directed the AO to verify the provision made in the books of accounts and if it is found any excess provision the same should be brought to tax. Allow the correct deduction for the relevant assessment years and excess if any claimed by the assessee may be disallowed. Accordingly, the issue is remitted back to the file of the AO to work out the correct disallowance as per the directions given in this order. The appeal of the assessee on this ground is allowed for statistical purpose.
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