TMI Blog2017 (8) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Assessing Officer therefore advisedly did not proceed on such basis and that the Commissioner of Income Tax (Appeals) erred in invoking the said provision. He would draw our attention to the observations of the Tribunal in the impugned judgment, in which, in this context, it was stated that proviso to section 36(1) (vii) refers to section 36(1)(viia) and the provisions made under such subclause which admittedly is not the case here. In our opinion if that is the case, reliance of the Commissioner of Income Tax (Appeals) on the proviso to section 36(1)(vii) also would be redundant. However, by way of abundant caution, it is clarified that while granting the deduction on the said sum of ₹ 11.72 crores it may be verified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of excess provision written back of ₹ 10,00,00,000/? 2. The first question pertains to the assessee's claim of bad debts of ₹ 11.72 crores (rounded off). The respondent assessee is a cooperative bank. For the assessment year 2008-09, the assessee had filed the return of income. The assessee had claimed bad debt of ₹ 15.35 crores (rounded off) which comprised of bad debt of ₹ 11.72 crores (rounded off) shown in the statement of income and ₹ 3.62 crores (rounded off) outside such statement. The assessee requested the Assessing Officer to allow the net balance claim of bad debt of ₹ 11.72 crores. 3. The Assessing Officer questioned the assessee with respect to such claim. In response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off in the books of account of the assessee. In the present case, the assessee had not written off the bad debts in the books of accounts. A mere mention in the audit report would satisfy such requirement. He accordingly disallowed the claim of bad debt. 5. The assessee approached the Commissioner of Income Tax (Appeals) who while confirming the order of the Assessing Officer, raised an additional ground for rejecting the claim. In his opinion, proviso to section 36(1)(vii) of the the Income Tax Act, 1961 ('the Act' for short) would not allow bad debts if it does not exceed the credit balance of the bad and doubtful accounts with respect to the assessee to whom clause (viia) of the Act applies. Since assessee was a cooperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)'s reference to proviso to section 36(1)(vii), which, in turns, refers to section 36(1)(viia), to provisions made under section 36(1)(viia) which admittedly is not the case here. In view of these discussions, as also bearing in mind entirety of the case, the grievance of the assessee must be upheld. Accordingly, disallowance of deduction for bad debts, amounting to ₹ 11,72,22,554/, is deleted. 7. Having heard learned counsel for the parties and having perused the documents on record, it emerges that the assessee had actually written off the debt by squaring up the accounts of the debtors and crediting the debtor. Simultaneously, the assessee also debited the bad and doubtful debt reserve account by the corresponding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year]: [ Provided that in the case of [an assessee] to which clause (viia) applies, the amount of 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 for bad and doubtful debts account made under that clause.] Under this proviso, the claim of bad or doubtful debt would be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made in clause (viia) in case of an assessee to which such clause applies. The fact that clause (viia) applies to the assessee is not in dispute. However, Mr.Soparkar for the assessee submitted that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) confirmed the view of the Assessing Officer invoking the provision of section 41(1) of the Act. The assessee's defense that the assessee had not claimed interest expenses in the earlier years and therefore, reversal of the unclaimed expenses cannot be taxable, was rejected on the ground that during earlier period, the assessee's income from the banking business was exempt under section 80P of the Act and therefore, it was irrelevant whether the assessee had claimed such interest in the past or not. 10. The assessee carried the issue before the Tribunal. Tribunal reversed the view of the Revenue authorities making following observations: 9. As regard the addition of ₹ 10 Crores, on account of provision wri ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
