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2014 (1) TMI 945 - AT - Income TaxRevision u/s 263 of the Act - Entitlement to claim deduction u/s 36(1)(viia)(a) of the Act Held that - The benefit of Section 36(1)(viia)(a) is available only to Scheduled and Non-Scheduled Banks, co-operative banks are not entitled for the same -the assessee is carrying on banking activities - . Thus, the assessee falls within the definition of Section 5(c) of Banking Regulation Act - The assessee is a Non-Scheduled Bank and is thus entitled to claim benefit of provisions of Section 36(1)(viia)(a) of the Act the decision Asstt. CIT v. Jaipur Central Co-operative Bank Ltd. 2014 (1) TMI 833 - ITAT JAIPUR followed. Creation of provision for bad debts - Whether the assessee has created any reserve/provision for bad and doubtful debts Held that - For claiming benefit under the provisions of Section 36(1)(viia)(a) the conditions to be satisfied is that the provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction - the assessee has created provision for bad and doubtful debts may be under different nomenclature - This will not dis-entitle the assessee for claiming deduction under the provisions of Section 36(1)(viia)(a). The purpose for creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts the order of the CIT(A) set aside Decide in favour of Assessee.
Issues:
1. Whether the assessee is entitled to claim deduction u/s. 36(1)(viia)(a)? 2. Whether the assessee has created any reserve/provision for bad and doubtful debts? Analysis: Issue 1: The appeal was filed against the order passed under section 263 of the Income Tax Act, 1961 by the Commissioner of Income Tax. The Commissioner observed that the assessee, a cooperative bank, did not create a reserve/provision towards bad and doubtful debts before claiming a deduction under section 36(1)(viia) of the Act. The Commissioner held that the assessment order was erroneous and prejudicial to the Revenue's interest. The CIT directed the Assessing Officer to pass a fresh order considering the observations made. The assessee contended that cooperative banks are entitled to claim deduction under section 36(1)(viia)(a) as per the Finance Act 2007. The Tribunal analyzed the relevant provisions, including the definition of 'Rural Branch,' and concluded that the assessee, being a Non-Scheduled Bank, is entitled to claim the deduction. The Tribunal referred to a previous judgment supporting the eligibility of Central Co-operative Banks for the deduction. Issue 2: Regarding the creation of a reserve/provision for bad and doubtful debts, the assessee argued that it had created a reserve for Non-Performing Assets (NPA), which serves the same purpose. The Tribunal acknowledged that the terminology 'Reserve for NPA' was used in compliance with RBI directions. Despite the nomenclature difference, the Tribunal found that the assessee had indeed created a provision for bad and doubtful debts. The Tribunal opined that the provision made under a different name does not disqualify the assessee from claiming the deduction under section 36(1)(viia)(a). The Tribunal held that the assessment order was neither erroneous nor prejudicial to the Revenue's interest, setting aside the CIT's order under section 263 and allowing the assessee's appeal. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each issue.
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