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TMI Blog2016 (6) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... ts on standard assets. 3. The brief facts of the case as noted in the assessment order are that the assessee is a Banking Company and it has been incorporated in India and is sponsored by Punjab National Bank. The case of assessee was selected for scrutiny. During the assessment proceedings the Assessing Officer observed that assessee had made a provision of Rs. 50 lacs for bad and doubtful debts. The Assessing Officer observed that out of total provisions of Rs. 50 lacs, Rs.36,75 lacs related to provision on standard assets of the assessee and therefore he made an addition of Rs.36,75,000/- on account of provision for bad and doubtful debts on standard assets. The addition was earlier deleted by CIT(A) and on appeal by the Department to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s 36(1)(viia), but claim for deduction in respect of standard assets is misplaced. Therefore, such provision of Rs.36,75,000.00 was correctly disallowed" 4. Aggrieved the assessee again filed appeal before the learned CIT(A) and learned CIT(A) again allowed relief to the assessee. 5. Aggrieved the Revenue is in appeal before us. 6. The learned DR, at the outset, submitted that learned CIT(A) has wrongly allowed relief to the assessee as the provisions for bad and doubtful debts was on standard assets and as per the proviso to section 36(1)(viia) only the provisions for bad and doubtful debts was allowable. The learned DR submitted that proviso to clause-a of section 36(1)(viia) of the Income Tax Act states that relevant Asst. Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years deduction in respect of any provision made by it for any assets classified by the Reserve Bank o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with refere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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