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2018 (11) TMI 258 - AT - Income TaxAddition of an amount which is related to the provision for bad and doubtful debts - whether an express provision in section 36(1)(vii) which prohibits granting deduction of any provision for bad and doubtful debts can be got over by the assessee? - Held that:- Section 36(1)(viia) is a complete answer to this query raised by the assessee wherein special provisions are made in the I.T. Act for allowing provision for bad and doubtful debts of scheduled banks, non-scheduled banks, co-operative banks etc. to the extent permissible thereunder. In fact, u/s. 36(1)(viia), the eligible banks are authorized to create provision subject to certain limits in respect of rural advances and other loans referred to therein and claim deduction of the same. This provision clearly indicates that Parliament is well aware of the risk undertaken by the banks in making advance to the rural sector in terms of the guidelines issue by the Government and the RBI and only such cases are treated as exception to the general provision contained in Explanation to section 36(1)(vii), which prohibits granting of deduction of any provision for bad and doubtful debts. Unfortunately, the present assessee is not covered by section 36(1)(viia) of the I.T. Act and so much so, explanation to section 36(1)(vii) squarely applies or in other words, the assessee is not entitled to deduction of any provision created for bad and doubtful debts, no matter such provision is created based on the prevalent accounting policies. - Decided against assessee.
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