February 2009
Deduction u/s.36(1)(vii) for bad debt allowable independently, irrespective of deduction for provision for bad and doubtful debts allowable u/s.36(1)(viia) subject to limitation that amount should not be deducted twice
By K. B. Bhujle
Advocate
New Page 1
46 Business expenditure : Assessee bank :
Deduction of bad debt u/s.36(1)(vii) and provision for bad debt u/s.36(1)(viia)
of Income-tax Act, 1961 : A.Ys. 1993-94 and 1994-95 : Deduction u/s.36(1)(vii)
for bad debt is allowable independently and irrespective of deduction for
provision for bad and doubtful debts allowable u/s.36(1)(viia) subject to
limitation that amount should not be deducted twice.
[DCIT v. Karnataka Bank Ltd., 218 CTR 273 (Kar.)]
The assessee is a scheduled bank. For the A.Ys. 1993-94 and
1994-95 the assessee bank had claimed deduction of bad debts written off
u/s.36(1)(vii) and also deduction of provision for bad and doubtful debts
u/s.36(1)(viia) of the Income-tax Act, 1961. The Assessing Officer allowed the
claim for deduction of provision for bad and doubtful debts u/s. 36(1)(viia),
but disallowed the claim u/s.36(1)(vii) for bad debts written off. The CIT(A)
upheld the disallowance. The Tribunal allowed the assessee’s claim.
On appeal by the Revenue, the Karnataka High Court upheld the
decision of the Tribunal and held as under :
“The Tribunal was correct in holding that deduction
u/s.36(1)(vii) is allowable independently and irrespective of the provision
for bad and doubtful debts created by the assessee in relation to the advances
of the rural branches u/s.36(1)(viia), subject to the limitation that an
amount should not be deducted twice u/s.36(1)(vii) and u/s. 36(1)(viia)
simultaneously.”
