M/S. SHREERAMA CREDIT CO-OPERATIVE SOCIETY LIMITED,UDUPI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, UDUPI

This appeal is filed by the assessee against the DIN & Order No.ITBA/NFAC/S/250/2023-24/1051999933(1) dated 11.4.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC] for the AY 2017-18.

The sole and substantive issue involved in this appeal is not allowing the provisions made in the books of accounts of assessee towards provisions for bad debts of Rs.28,98,170 and Service Tax of Rs.92,856 aggregating to Rs.29,91,026 and that the assessee has not been given the benefit of deduction on the same of business profits u/s. 80P(20(a)(i) under Chapter VIA of the Act as per CBDT Circular No.37/2016 dated 2.11.2016.

In the impugned case, the assessee created provision for Non- Performing Assets (NPA) as bad and doubtful debts and provision for service tax which was disallowed by the AO. The CIT(Appeals) confirmed the same. Both the authorities below disallowed the provision made by the assessee for want of details as required by the authorities.

The assessee’s contention is that the above provisions made are not allowed, the assessee may be given the benefit of CBDT Circular No.37/2016 dated 02.11.2016 since the assessee is eligible for deduction under Chapter VIA.

The ld. DR relied on the orders of authorities below.

We heard the case & perused the entire material on record. The assessee is a co-operative society and claimed deduction u/s. 80P(2)(a)(i) of the Act It is not disputed that the provisions made by the assessee are not part of business activity carried on by the assessee. Since the provisions made in the profit & loss account of assessee has not been allowed as expenditure, accordingly, the corresponding profit will qualify for deduction under the relevant provisions and assessee is eligible to claim deduction under Chapter VIA of the Act. The CBDT Circular No.37/2016 dated 02.11.2016 relied on by the assessee would clearly apply in the impugned case. Following the aforesaid CBDT Circular, we hold that the assessee is eligible to claim deduction u/s. 80P(2)(a)(i) of the Act on the disallowance of provisions debited to the Profit & Loss account. Accordingly, the assessee’s appeal is allowed.