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2020 (1) TMI 995 - AT - Income TaxDeduction on provision for bad and doubtful debts u/s.36(1)((vii) as well as U/s.36(1)(viia) - HELD THAT - As decided in ow case 2018 (5) TMI 1627 - ITAT BANGALORE held that the deduction u/s.36(1)(viia) of the Act cannot be allowed unless the provision is created by debited to provision for bad and doubtful debts account - we hold that the AO was justified in disallowing the claim for deduction on account of provisions for bad and doubtful debts u/s.36(1)(viia) of the Act as admittedly the Assessee did not debit its profit and loss account any sum towards provision for bad and doubtful debts. TDS u/s 194A - Addition u/s.40(a)(ia) - non-deduction of tax at source in respect of interest paid during the financial year - non filing of Form 15G and 15H with the prescribed authority - HELD THAT - Respectfully following the decision of the Tribunal in Assessee s own case 2018 (5) TMI 1627 - ITAT BANGALORE we hold that the CIT(A) was justified in AO was justified in deleting the disallowance of interest expenses u/s.40(a)(ia) of the Act, to the extent of the disallowance relates to interest paid to persons furnished Form 15 G and Form 15 H to the assessee as no disallowance can be made u/s 40a(ia) of the Act as held by the Hon ble Karnataka High Court in the case of Sri Marikamba Transport Co. 2015 (6) TMI 181 - KARNATAKA HIGH COURT . The requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT is only procedural and that cannot result in a disallowance u/s 40a(ia) of the Act. Consequently, we uphold the order of CIT(A) and dismiss Gr.No.3 raised by the Revenue.
Issues Involved:
1. Deduction under Section 36(1)(vii) and Section 36(1)(viia) of the Income Tax Act, 1961. 2. Disallowance of interest expenses under Section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source. Issue-wise Detailed Analysis: 1. Deduction under Section 36(1)(vii) and Section 36(1)(viia) of the Income Tax Act, 1961 Relevant Grounds: - Ground Nos. 1 & 2 raised by the Revenue. Facts: - The Assessee, a rural regional bank, claimed a deduction for bad and doubtful debts under Section 36(1)(viia) without debiting the provision to the profit and loss account. - The AO disallowed the deduction, arguing that it must be debited to the profit and loss account. CIT(A) Decision: - Allowed the deduction based on ITAT Bangalore Bench's decision in Syndicate Bank Vs. DCIT. Tribunal's Observations: - Referred to the Assessee’s own case for AY 2009-10 & 2010-11, where it was held that the deduction cannot be allowed unless the provision is debited to the profit and loss account. - Cited the Hon’ble Punjab and Haryana High Court in State Bank of Patiala Vs. CIT, which supports the AO’s stance. Conclusion: - The Tribunal reversed the CIT(A)’s order and restored the AO’s disallowance, holding that the deduction under Section 36(1)(viia) must be debited to the profit and loss account. 2. Disallowance of Interest Expenses under Section 40(a)(ia) for Non-Deduction of Tax at Source Relevant Grounds: - Ground No. 3 raised by the Revenue. Facts: - The Assessee paid interest without deducting tax at source, relying on declarations in Form No.15G/15H from depositors. - The AO disallowed the interest expenses under Section 40(a)(ia) due to non-filing of these forms with the CIT. CIT(A) Decision: - Deleted the disallowance, stating that the filing of Form No.15G/H is procedural and non-compliance does not warrant disallowance under Section 40(a)(ia). Tribunal's Observations: - Referred to the Assessee’s own case for AY 2010-11, where it was held that non-filing of Form No.15G/H is procedural and does not lead to disallowance. - Cited the Hon’ble Karnataka High Court in Sri Marikamba Transport Co., which supports the CIT(A)’s stance. Conclusion: - The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s ground and confirming that non-filing of Form No.15G/H does not lead to disallowance under Section 40(a)(ia). Combined Result: - The appeals by the Revenue are partly allowed. - The cross-objections by the Assessee are dismissed as infructuous. Pronouncement: - The judgment was pronounced in the open court on January 23, 2020.
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