Law:

Section:

Section 36 (1)(vii), read with section 143, of the Income-tax Act, 1961 - Bad debts - Assessment year 1994-95 - Whether as section 36(1)(vii) does not authorise granting of deduction of any debt unless it has been written off in accounts for previous year and it was not assessee's case that provision for bad debt claimed by it had been written off in its accounts, its claim was rightly treated as prima facie inadmissible under section 143(1)(a) - Held, yes - Whether Explanation introduced to section 36(1)(vii) by Finance Act, 2001 with effect from 1-4-1989 is only clarificatory in nature - Held, yes FACTS The assessee was a banking company. For the relevant assessment year, while processing its return under section 143(1)(a), the Assessing Officer made addition of certain amount representing provision towards bad debts. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the addition made by the Assessing Officer. On appeal to the High Court, the assessee contended that it being a scheduled bank was bound to create provision for bad debts in terms of the RBI guidelines and, therefore, unlike the case of other business concerns, its claim for bad debts should be allowed. The assessee also contended that eligibility for deduction of provision for bad debts was a debatable issue and was ceased to be so only by virtue ofExplanation introduced to section 36(1)(vii) by the Finance Act, 2001 with effect from 1-4-1989 and, therefore, for the relevant assessment year, the provision for bad debt could not be disallowed in proceedings under section 143(1)(a). HELD It could not be said that the assessee being a schedule bank, its claim under section 36(1)(vii) had to be treated differently, because from the regular assessment made under section 143(3) for the relevant assessment year, it was found that the assessee had made separate claim under section 36(1)(vii)(a ), in terms of the RBI guidelines pertaining to advances made in rural areas. Even in the regular assessment, the very same amount of provision for bad debts had been disallowed just because it was provision and assessee did not have a case that it was really written off. In other words, the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492