2021 (7) TMI 984 - AT - Income Tax

Addition u/s 36 - Excess of the provision for bad and doubtful debts - provision for non-performing asset but actually with the provision has been created for bad and doubtful debts u/s 36 - HELD THAT - Profit and loss account assessee debited being provision for non-performing assets and being provision for standard assets this shows that the excess of the provision has not been claimed by assessee under section 36(1)(viia) has not been claimed. We therefore do not find any reason for the disallowance to be upheld. Accordingly these grounds raised by assessee stands allowed.

Summary

Issues:
1. Disallowance of expenditure towards Annual General Meeting
2. Disallowance under section 36(1)(viia) of the Income Tax Act
3. Liability to pay interest under section 234B and 234C of the Act

Issue 1: Disallowance of expenditure towards Annual General Meeting:
The appellant contested the disallowance of expenses incurred for the Annual General Meeting by the Learned CIT(A). The Tribunal noted that the appellant failed to provide sufficient documentation to substantiate the claim. The Coordinate Bench had previously remanded a similar issue to the AO for fresh consideration. As the appellant did not adequately support the expenses, the Tribunal decided to remand the issue back to the AO for verification. The appellant was directed to provide all relevant details to support the claim. Consequently, the grounds raised by the appellant were allowed for statistical purposes.

Issue 2: Disallowance under section 36(1)(viia) of the Income Tax Act:
The appellant challenged the disallowance made by the AO under section 36(1)(viia) of the Act, pertaining to a claim of deduction in excess of the provision for bad and doubtful debts. The Tribunal analyzed the balance sheet and submissions made by the appellant. The appellant argued that the provision was created for bad and doubtful debts, not non-performing assets. Citing a decision of the Hon'ble Karnataka High Court, the Tribunal found that the provision was in line with the norms of the Reserve Bank of India. The Tribunal observed that the excess provision had not been claimed by the appellant under section 36(1)(viia). Therefore, the Tribunal did not find any reason for the disallowance to be upheld and allowed the grounds raised by the appellant.

Issue 3: Liability to pay interest under section 234B and 234C of the Act:
The appellant denied the liability to pay interest under sections 234B and 234C of the Act, arguing that there was no additional tax liability as determined by the assessing officer. The Tribunal noted that the rate, period, and quantum of interest levied were not in accordance with the law and were not discernible from the order. However, as the issue was found to be consequential, it did not require further adjudication. The Tribunal allowed the appeal filed by the appellant.

In conclusion, the Tribunal allowed the appeal filed by the appellant concerning the disallowance of expenses towards the Annual General Meeting and the disallowance under section 36(1)(viia) of the Income Tax Act. The Tribunal also addressed the issue of liability to pay interest under sections 234B and 234C, finding it to be consequential. The judgment was pronounced on 23rd July 2021.