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2019 (10) TMI 256 - AT - Income TaxRevision u/s 263 - deduction towards Provision for bad and doubtful debts - whether requisite specific enquiry has been conducted by the AO on the area where the Pr. Commissioner of Income Tax passed order u/s 263? - HELD THAT:- In the first part of computation at 7.5% of total income, the assessee computed the base amount at ₹ 23.11 Crore. In computation of the base amount, the assessee did not reduce the amount of depreciation of ₹ 1,34,12,388/-, which was rightly detected by the ld. CIT. It goes without saying that the deduction at 7.5% is on the total income, which obviously cannot be computed by ignoring the amount of depreciation. In other words, the assessee computed the amount at 7.5% of total income without reducing the amount of depreciation, which CIT rightly took note of. To this extent, the assessment order is found to be erroneous and prejudicial to the interest of the Revenue. When we view both the parts of the deduction u/s.36(1)(viia) of the Act in totality, it transpires that even though the assessment order was erroneous in accepting the computation at 7.5% of the income without reducing the amount of depreciation, but on entirety, the assessment order on this issue cannot be construed as prejudicial to the interest of the Revenue because the total amount of deduction u/s 36(1)(viia) is only ₹ 3.29 Crore, which is well much short of the correct qualifying amount at more than ₹ 21 Crore. That being the position, the assessment order albeit erroneous and prejudicial to the interest of the Revenue at the first part of calculation of qualifying amount at 7.5% on total income, but ceases to be prejudicial to the interest of the revenue on the overall question of granting deduction u/s 36(1)(viia) of the Act because the total amount of deduction, even after correcting the first part of the qualifying amount, remains at the same level at which it was claimed and allowed at ₹ 3,29,84,041/-. We, therefore, refuse to accept the validity of the exercise of revisionary power on this issue. Provision for NPA interest - HELD THAT:- We find that the action of the ld. CIT is lacking on this score as well. Firstly, the Assessing Officer conducted enquiry in this regard as is evident from the correspondence between the assessee and the AO, whose copies have been placed before the Tribunal. It is not as if the Assessing Officer did not enquire the issue of NPA interest. To this extent, the finding recorded by the ld. CIT is not correct. Legal position on the taxability of NPA interest, which has been dealt with by the Hon‟ble Bombay High Court in Commissioner of Income Tax Vs. CIT vs. Deogiri Nagari Sahakari Bank Ltd, [2015 (1) TMI 1218 - BOMBAY HIGH COURT] holding that NPA interest should be charged to tax on receipt basis only. As the amount of NPA interest recovered by the assessee during the year was credited to P & L account at ₹ 1.71 crore and odd, no infirmity can be found in the view canvassed by the assessee as accepted by the AO on this issue. As the amount of ₹ 1.86 Crore of NPA interest accrued but not realized, the same was not rightly credited to the P & L account. We, therefore, hold that the CIT was not justified in treating the assessment order erroneous and prejudicial to the interest of the Revenue on this score as well. Commissioner of Income Tax could not have assumed revisionary jurisdiction u/s.263 of the Act as per law. - Decided in favour of assessee.
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