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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Revenue By Shri Girish M. Balekundri Assessee by: Shri S.S.Kemwal (CIT-DR) सुनवाईकीतारीख / Date of Hearing: 03.01.2017 घोषणाकीतारीख /Date of Pronouncement:. 15.02.2017 आदेश / O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 29.01.2015 passed by the Commissioner of Income Tax (Appeals)-3, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.
The revenue has raised the following grounds:-
ITA No.2095.M.15 A.Y. 2011-12
1. Whether on facts and circumstances of the case and in Law, the ld. CIT(A) is justified in granting to assessee deduction for bad debts u/s.36(1)(vii) of the Act on assessee’s contention that deduction u/s.36(1)(viia) for provisions for bad debts was never claimed nor allowed in earlier year which ascertain of assessee is factually incorrect and has not been looked into specifically by the appellant commissioner?
The brief facts of the case are that the assessee filed its return of income on 29.09.2011 declaring total income to the tune of Rs.25,95,50,255/-. The return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). The case was selected for scrutiny and notice u/s.143(2) of the Act dated 02.08.2012 was issued and duly served upon the assessee. Further, notice u/s.142(1) of the Act dated 26.07.2013 was issued and duly served upon the assessee. The assessee company was in the business of banking. The assessee company has debited an amount of Rs.17,41,56,007/- in the P&L A/c. towards ‘Bad Debts Written Off’. The same has been credited to the P&L A/c. ‘Bad Debt Provision Reserve to the extent written off’ Rs.17,41,56,007/-. The amount was again claimed in the computation of income at Rs.17,41,56,007/- ‘Credit for BDDR not considered for Tax’. The Assessing Officer was of the view that the assessee did not written off the bad debts in the P&L A/c. Infact the assessee debited the P&L A/c. Bad Debts Written Off of Rs.17,41,56,007/-, the same was reversed and credited to the P&L A/c. as Bad Debt Provision Reserve to the extent of Rs.17,41,56,007/-. The fact was considered as nullified since the Bad Debts were not debited in the P&L A/c., therefore, the claim was not allowable. Feeling aggrieved, the assessee filed an appeal
ITA No.2095.M.15 A.Y. 2011-12 before the CIT(A) and the CIT(A) allowed the said claim, therefore, the revenue filed the present appeal before us. ISSUE NO.1:- 4. Under this issue, the revenue has raised the question of justification for granting the deduction for bad debts u/s.36(1)(vii) of the Act. The learned representative of the revenue has argued that the Assessing Officer has rightly considered the issue as bad debts was not debited in the P&L A/c., therefore, the bad debts was not allowable but the learned CIT(A) has wrongly allowed the claim, therefore, the order of the CIT(A) is wrong against law and facts and is liable to be set aside. However, on the other hand the learned representative of the assessee has placed reliance upon the order passed by the CIT(A). Before going further, it is necessary to advert the finding of the CIT(A) on record:- “2.4 I have perused the facts of the case and provisions of law. The assessee is a co-operative bank and till A.Y.2007-08, was not eligible for deduction under section 36(1)(viia). Nevertheless, as per RBI guidelines, it was creating a provision for bad debts by debiting the P&L A/c. However, while filing the return this provision was being added back to the gross total income. During the year, the assessee has claimed a sum of Rs.17,41,56,007/- as bad debts written off under section 36(1)(vii). The entire passed on this account are as follows: (a) The P&L A/c. has been debited with Rs.17,41,56,007/- on account of bad debts written off. 3
ITA No.2095.M.15 A.Y. 2011-12 (b) The P&L A/c. has been credited with Rs.17,41,56,007/- on account of bad debts provisions reversed to the extent written off. (c) Accounts of 1186 parties has been debited on account of the write off.
On appraisal of the above mentioned finding of the CIT(A), it is not in dispute that the assessee company is cooperative bank and till A.Y.2007-08, the assessee company was not eligible for deduction u/s.36(1)(viia) of the Act. However, the assessee company was creating the provision of bad debts by debiting the P&L A/c. in accordance with RBI guidelines. The assessee while filing the return added back the said amount to the gross total income. In the present assessment year the assessee claimed a sum of Rs.17,41,56,007/- as bad debt return of u/s.36(1)(vi) of the Act. The CIT(A) also considered the entries of the accounts which is also hereby mentioned below:- (a) The P&L A/c. has been debited with Rs.17,41,56,007/- on account of bad debts written off. (b) The P&L A/c. has been credited with Rs.17,41,56,007/- on account of bad debts provisions reversed to the extent written off. (c) Accounts of 1186 parties has been debited on account of the write off.
According to the entries, the assessee was found eligible for deduction of bad debts invoking of provision u/s.36(1)(vii) of the Act. According to ITA No.2095.M.15 A.Y. 2011-12 the provision of 36(1)(vii) of the Act the P&L A/c. has been debited and the debtors account credit that amount of bad debts written off. The CIT(A) also find support of law support by the Hon’ble Delhi Tribunal in the case of Jain Co-op. Bank Ltd. in which it is specifically held that the provision created prior to A.Y.2007-08, not claimed as a deduction, could not be taxed when written back. Therefore, the assessee has rightly reduced the said amount in its computation of income. The CIT(A) has passed the order in view of the above mentioned case. No contrary law of any kind was produced before us to distinguish the facts of the case on record. In view of the said circumstances, we are of the view that the CIT(A) has passed the order judiciously and correctly which is not require to be interfere with at this appellate stage.