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2019 (10) TMI 468 - AT - Income TaxRevision u/s 263 - claim for deduction under section 36(1)(vii) - scope of amendment - diversified views - HELD THAT:- The Finance Act, 1997 made amendment w.r.e.f. 01.04.1992 in the proviso to section 36(1)(vii) as also the substitution (w.r.e.f. 01.04.1992) of section 36(2)(v) has been necessitated in order to bring the provisions regarding allowance of bad debt of the financial institutions and corporations to which section 36(1)(viia) is applicable at par with the provisions regarding allowance of bad debts of the banks to which section 36(1)(viia) is applicable. These amendments are operative retrospectively for and from AY 1992-93. It may be mentioned here that by an amendment of section 36(1)(viia) by the Finance (No. 2) Act, 1991, the applicability of the provisions of section 36(1)(viia) has been expanded, for and from AY 1992-93, to public financial institutions, state financial corporations and state industrial investment corporations. The scope and effect of the aforesaid amendments have been elaborated by the CBDT Circular No. 763 dated 18.02.1998. As per it, clause (vii) of sub-section (1) of section 36 of the Act, provides for a deduction of the amount of any debt or part thereof which is written off as irrecoverable in the accounts of an assessee in the previous year. Clause (viia) of the same section provides for a deduction in respect of any provision for bad and doubtful debts made by a bank. To preclude the possibility of a double deduction of the same amount being claimed in the case of a bank, a proviso was added to clause (vii) by the Finance Act, 1985 and it was provided that in the case of a bank to which clause (viia) applies, the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision of bad and doubtful debts account made under that clause. Simultaneously, clause (v) was added to sub-section (2) of section 36 which provided that no deduction for bad debt shall be allowed unless the bank has debited the amount of such debt or part thereof in that previous year to the provision for bad and doubtful debts account made under clause (viia) of sub-section (1). When two views are possible and one view has been adopted by the AO. That view alone would not be sufficient to exercise powers u/s 263 by the Commissioner. Respectfully following the ratio laid down in Max India Ltd [2007 (11) TMI 12 - SUPREME COURT] , Greenworld Corporation [2009 (5) TMI 14 - SUPREME COURT] and Gokuldas Exports [2008 (7) TMI 595 - KARNATAKA HIGH COURT] we set aside the order u/s 263 passed by the Pr. CIT for AY 1997-98. - Decided in favour of assessee.
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