2012 (5) TMI 655 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Proviso to Section 32(1) for Depreciation Claim.
2. Non-Allowance of Provision for Bad and Doubtful Debts u/s 36(1)(viia).

Summary:

1. Applicability of Proviso to Section 32(1) for Depreciation Claim:
The assessee, a banking company, contested the restriction of its depreciation claim u/s 32(1) of the Income Tax Act, 1961, arguing that the proviso to section 32(1) is not applicable as it pertains only to the year of acquisition of the assets. The Tribunal found the assessee's claim maintainable for assets acquired prior to the relevant previous year, noting that the assets were in use for 181 days, thus exceeding the 180-day requirement. The Tribunal upheld the assessee's claim for these assets. However, for assets acquired during the relevant previous year, the Tribunal held that the second proviso to sec. 32(1) is applicable, and the assessee must furnish details of such assets and their usage.

2. Non-Allowance of Provision for Bad and Doubtful Debts u/s 36(1)(viia):
The assessee's claim for provision for bad and doubtful debts was disallowed on the grounds that it was not a banking company as of the end of the relevant previous year. The Tribunal noted that the assessee's banking license was restored on 14-09-2004, but the license remained canceled from 29-09-2001 to 14-09-2004. The Tribunal observed that the assessee was a banking company up to 21-09-2002, as per section 36A of the Banking Regulation Act, 1949. The Tribunal restored the matter to the AO for fresh adjudication, directing the AO to verify the details and issue findings on whether the provision for Rs. 48.49 lacs qualifies u/s 36(1)(viia). For the provision of Rs. 12.30 lacs towards sub-standard assets, the Tribunal directed the AO to verify if these assets include loss or doubtful assets as per RBI norms and allow the claim accordingly.

Conclusion:
The assessee's appeal was partly allowed and partly allowed for statistical purposes, with directions for fresh adjudication on specific issues by the AO.