THE NASHIK ROAD DEOLALI VYAPARI SAHAKARI BANK LTD vs. DEPUTY COMMISSIONER OF INCOME TAX,

आदेश / ORDER PER R.S.SYAL, VP :

This appeal by the assessee is arising out of the order passed by the CIT(A) on 15-09-2016 in relation to the assessment year 2012-13. 2. The second ground was not pressed by the ld. AR, which is hereby dismissed.

2 ITA No.2647/PUN/2016 The Nashik Road Deolali Vyapari Sahakari Bank Ltd.,

of Rs.44,94,267/- claimed by the assessee u/s. 36(1)(viia) of the

Income-tax Act, 1961 (hereinafter also called as ‘the Act’).

claimed deduction of Rs.44,94,267/-, inter alia, on account of

provision for bad and doubtful debts @7.5% of the total income in

terms of section 36(1)(viia) of the Act. The AO observed that the

assessee did not create provision for such bad debts in its accounts

as per the mandate of section 36(2)(v) of the Act. He, therefore,

made the disallowance of this sum, which came to be upheld in the

first appeal.

material on record. Section 36(1)(viia) provides for granting

deduction in respect of any provision for bad and doubtful debts

made, inter alia, by a Co-operative Bank at the given percentage.

Section 36(2)(v) provides that where provisions of section

36(1)(viia) apply, ‘no such deduction shall be allowed unless the

assessee has debited the amount of such debt or part of debt in that

previous year to the provisions for bad and doubtful debts account

made under that clause’. It becomes apparent from the mandate of

3 ITA No.2647/PUN/2016 The Nashik Road Deolali Vyapari Sahakari Bank Ltd.,

section 36(2)(v) that the making of a provision for bad and

doubtful debts is sine qua non for claiming deduction

u/s.36(1)(viia) of the Act. Pages 14 to 16 of the paper book are a

copy of assessee’s Profit and loss account, which shows that the

assessee made a `Provision against standard assets’ for a sum of

Rs.20 lakhs. In the computation of total income, whose copy has

been placed at page 8 of the paper book, the assessee suo motu

added back the amount of such provision for the purposes of

computation of total income. It, therefore, becomes apparent that

the assessee did make a provision of Rs.20 lakhs in its books of

account, even though it was characterized as having been made for

‘standard assets’, for which no separate deduction was claimed.

The statute requires creation of provision as a mandatory pre-

condition for claiming deduction u/s. 36(1)(viia). Merely because

a different nomenclature was given to the provision of Rs.20 lakhs,

for which no separate deduction was claimed, the same does not

shed the character of a provision relating to the debts of the

assessee bank meant for the purpose of section 36(1)(viia). In our

considered opinion, the assessee cannot be debarred from claiming

deduction u/s.36(1)(viia) to the extent of such provision made in

the books of account to the tune of Rs.20 lakhs. We, therefore,

4 ITA No.2647/PUN/2016 The Nashik Road Deolali Vyapari Sahakari Bank Ltd.,

direct to grant deduction, being a sum of provision created in the books of account for a sum of Rs.20.00 lakhs, as against the deduction claimed in the computation of income at Rs.44,94,267/-.

Order pronounced in the Open Court on 20th December, 2018.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 20th December, 2018 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-1, Nashik 4. The Pr.CIT -1, Nashik िवभागीय �ितिनिध, आयकर अपीलीय 5. अिधकरण, पुणे “बी” / DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. // True copy // आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA No.2647/PUN/2016 The Nashik Road Deolali Vyapari Sahakari Bank Ltd.,

Date 1. Draft dictated on 20-12-18 Sr.PS 2. Draft placed before author 20-12-18 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *