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2020 (8) TMI 195 - AT - Income TaxDisallowance on account of Principal NPA - addition on the ground that the provisions of 36(1)(viia) are not applicable to the assessee as the assessee is a primary Cooperative Agricultural and Rural Development Bank which is excluded from the Cooperative Bank - HELD THAT:- The assessee has not disputed that it is a primary Cooperative Agricultural and Rural Development Bank. The Cooperative Bank which is eligible for deduction under section 36(1)(vii) does not include a primary agricultural credit society or a primary cooperative agricultural and rural development bank. There are two exclusions from the broad category of cooperative banks which are (i) a primary agricultural credit society and (ii) a primary cooperative agricultural and rural development bank. Assessee being a primary cooperative agricultural and rural development bank falls in the exception provided in clause (viia) of section 36(1) of the Act. Therefore, the assessee is not entitled for deduction under section 36(1)(viia). CIT (A) has held that the assessee a primary Cooperative Agricultural & Rural Development Bank is covered under the provisions of section 36(1)(viia). After giving a finding, the LD. CIT (A) held that the assessee is entitled for deduction. CIT (A) has discussed the quantum of deduction. Thus the finding of the LD. CIT (A) is based on misunderstanding of the provisions which is in fact not applicable in the facts of the assessee’s case. Accordingly, the order of the LD. CIT qua this issue is set aside. Addition made on account of Time Barred Interest on over-due NPA loan accounts - AO has disallowed this amount and made the addition on the ground that this is a provision and, therefore, when the assessee is not covered under the provisions of section 36(1)(viia), it is not an allowable deduction - HELD THAT:- Even from the details filed by the assessee, it is not clear whether this whole amount was part of the Interest income shown in the Profit & Loss account. Further, the details filed by the assessee are not part of the audited books of account being Schedule to the Balance Sheet but it is prepared subsequently without certified by the Auditors. Even otherwise, the possibility of over-lapping between the deduction under section 36(1)(vii) and 36(1)(viia) is not ruled out when it comes to the cases of bank. It is settled proposition of law that deduction under section 36(1)(vii) is allowable in respect of any bad debts written off as irrecoverable in the books of account for the relevant accounting year but only to the extent such bad debt exceeds the credit balance in the provisions for bad and doubtful debt account made under clause 36(1)(viia). To avoid the double deduction, the proviso to section 36(1)(vii ) was inserted and the assessee has choice to choose between 36(1)(vii) and 36(1)(viia) whichever is beneficial. The finding of the LD. CIT (A) are not based on the complete details as to whether this amount on account of Time Barred Interest on NPA loans is fully satisfied the condition of section 36(2). Accordingly in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of AO to re-examine the same on the point whether the assessee has actually written off this amount. Appeal of the assessee is partly allowed for statistical purposes.
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