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2023 (5) TMI 68 - AT - Income TaxDisallowance in respect of “provision for bad-debts” - revenue argued that the “standard assets” are those assets which are adequately serviced by the borrowers; those assets can’t be said to be “bad debts”. Therefore, the assessee has wrongly characterized them as “bad debt” - HELD THAT:- As the provision made by a banking company in respect of standard assets, as per RBI guidelines, is very much allowed as deduction u/s 36(1)(viia). Ld. DR is not able to point out any contrary decision on this issue. Though we agree in principle that the provision made for standard assets is also eligible for deduction yet we are of the view that there is a strong necessity to verify whether the claim made by assessee is within the permissible limit prescribed in section 36(1)(viia) or not; therefore it would be appropriate to refer this issue back to the file of Ld. AO for the limit purpose of such verification. AO will verify the permissible limit and allow deduction within such limit. We order accordingly. We also direct the assessee to provide necessary information/calculation to Ld. AO to enable him to make such verification. These grounds are, thus, allowed in terms indicated here. Disallowance in respect of various provisions claimed by assessee - Appropriation of profits - Whether CIT(A) has erred in deleting the impugned disallowance ignoring the fact that they were provisions and not real expenditure; therefore the same were allowable to the extent of 20% of profit of business in terms of section 36(1)(viii) - HELD THAT:- The provisions/transfer to funds are allowable as deduction u/s 37(1) only if at least one of the conditions exists i.e. (i) there is an over-riding statute by which the amounts transferred to funds do not remain with / under the control of assessee; or (ii) if the assessee has “actually spent” moneys for the relevant purposes during the previous year. In the present case, the provisions of section 43A of MP/CG co-operative Societies Act relied upon by Ld. AR talks of “appropriate of profits” only. There is no material available on record by which it can be verified that either of the two conditions, as narrated earlier, is satisfied. During the course of hearing, we tried to ascertain the position of each individual item comprised from available documents in Paper-Book but could not reach to any conclusion. Therefore, the matter requires a complete verification at the stage of AO. Being so, we are of the view that this issue should be remanded to the file of Ld. AO who will make necessary verification with regard to existence of the conditions, after calling for the relevant details from assessee and thereafter take a final call in the matter. This ground is thus allowed in terms indicated here.
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