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2021 (8) TMI 1046 - AT - Income TaxDeduction u/s 36(1)(viia)(c) - Denial of deduction assessee has not created any provision for bad and doubtful debts in the books of accounts - CIT(A), while deciding the issue in favour of the assessee, has given a categorical finding that assessee had created a provision in the books of account of bad and doubtful debts but with the nomenclature Reserve for bad and doubtful debts - HELD THAT - We find that CIT(A) while allowing the appeal of the assessee has given a finding that though the assessee has created the provision in the books of accounts of ₹ 212.81 Crores but has claimed deduction only to the extent of ₹ 63.23 crores and since the Assessing Officer has already allowed the claim of deduction of ₹ 21.30 crores, there was no ground for addition of balance of ₹ 41.93 crores u/s 36(1)(viia)(c) of the Act. Before us, no fallacy in the findings of CIT(A) has been pointed out by the Revenue. - Decided against revenue.
Issues Involved:
1. Disallowance of deduction u/s 36(1)(viia)(c) of the Act for creating reserves for loan assets. 2. Whether creating a reserve for loan assets qualifies for deduction u/s 36(1)(viia)(c) of the Act. Analysis: Issue 1: Disallowance of deduction u/s 36(1)(viia)(c) for creating reserves for loan assets The case involved two appeals by the Revenue against the order of the Commissioner of Income Tax (A)-35, New Delhi for the Assessment Years 2011-12 & 2014-15. The first appeal for AY 2011-12 focused on disallowance of deduction u/s 36(1)(viia)(c) of the Act related to provisions for bad and doubtful debts. The Assessing Officer (AO) disallowed a deduction claimed by the assessee of &8377; 22,85,38,698/- as the provision created did not specify whether it was for bad and doubtful debts. The CIT(A) restricted the disallowance to &8377; 12,52,78,019/-, acknowledging that the provision was made for bad and doubtful debts. The ITAT Delhi upheld the CIT(A)'s decision, noting that the provision created by the assessee qualified for the deduction under the Act. Issue 2: Qualification of creating a reserve for loan assets for deduction In the second appeal for AY 2014-15, the AO disallowed a deduction claimed by the assessee of &8377; 41,93,21,447/- under u/s 36(1)(viia)(c) of the Act for provisions for bad and doubtful debts. The AO argued that the provision was not solely for bad and doubtful debts but also included provisions for standard and sub-standard assets. The CIT(A) disagreed, stating that the total provision for bad and doubtful debts in the books amounted to &8377; 212.81 crores, exceeding the deduction claimed by the assessee. The ITAT Delhi upheld the CIT(A)'s decision, ruling that since the AO had already allowed a deduction of &8377; 21.30 crores, there was no ground for additional disallowance of &8377; 41.93 crores. The appeal of the Revenue was dismissed in both cases. In conclusion, the ITAT Delhi affirmed the CIT(A)'s decisions in both appeals, emphasizing that the provisions made by the assessee for bad and doubtful debts qualified for deductions under the relevant sections of the Income Tax Act.
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