2013 (2) TMI 40 - SCH - Income Tax

Bad debts versus Provisions for bad and doubtful debts - whether deduction of the bad and doubtful debts actually written off in view of Section 36(1)(vii) limits the deduction allowable under the proviso to the excess over the credit balance made under clause (viia) of Section 36(1) Held that - Following the decision in case of Catholic Syrian Bank Ltd.(2012 (2) TMI 262 - SUPREME COURT OF INDIA) 36(1)(vii), that the assessee would be entitled to general deduction upon an account having become bad debt and being written off as irrecoverable in the accounts of the assessee for the previous year, while the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. Thus, the proviso would not permit benefit of double deduction, operating with reference to rural loans. Therefore, we hold that provisions of Sections 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operate in their respective fields Decided in favor of assessee.

Summary

The Supreme Court of India in 2013 (2) TMI 40 - SC Order, with justices Kapadia S. H. and Madan B. Lokur, granted leave and dismissed civil appeals in favor of the assessee based on a precedent set in the case of Catholic Syrian Bank Ltd. v. CIT (2012) 343 ITR 270. No costs were ordered.