TMI Blog2009 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... a Non-Banking Financial Company (NBFC) registered with Reserve Bank of India. As a measure of control, the RBI has issued guidelines to NBFCs to create provision for bad and doubtful debts. According to the assessee, the assessee created the provisions for bad and doubtful debts in terms of the guidelines issued by the RBI in exercise of the powers conferred on the Bank under section 45JA of the Reserve Bank of India Act, 1934 (for short the RBI Act ). However, in the course of assessment, the Assessing Officer noticed that the appellant/assessee has claimed deduction of the entire provision created for bad and doubtful debts in the computation of taxable income. Since the Explanation contained in section 36(1)(vii) of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the guidelines issued by the RBI have overriding effect over the provisions contained in the Income-tax Act, we extract hereunder section 45Q of the RBI Act and section 36(1)(vii) of the Income-tax Act, 1961. Section 45Q of the RBI Act reads as follows :- Chapter III-B to override other laws.-The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Section 36(1)(vii) of the Income-tax Act reads as follows :- Other deductions.-(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibits granting deduction of any provision for bad and doubtful debts can be got over by the assessee by relying on section 45Q of the RBI Act. In fact, section 36(1)(viia) is a complete answer to this query raised by the appellant wherein special provisions are made in the Income-tax 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, under section 36(1)(viia), the eligible Banks are authorised 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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