2023 (10) TMI 911 - AT - Income Tax

Deduction u/s 36(1)(viia) in respect of provision of the bad and doubtful debt - HELD THAT - Tribunal in appeal arising from regular assessment order 2023 (8) TMI 630 - ITAT MUMBAI has already allowed the claim of deduction under section 36(1)(viia) as the assessee was carrying a provision at the year end, which being more than the claim of deduction U/s 36(1)(viia) of the Act, therefore no disallowance was required to be made and accordingly deleted the addition. Since, the Tribunal (supra) has already allowed claim of deduction of the assessee u/s 36(1)(viia) of the Act, accordingly, following the finding of the Tribunal (supra) , we direct the Assessing Officer to allow the claim of the deduction under section 36(1)(viia) to the extent of provision for bad and doubtful debt available at the year end. Inclusion of standard asset and restructured debt as part of non-performing assets (NPA) - Since now the assessee has forgone this claim for the year under consideration, we direct the Assessing Officer to verify this fact and exclude the standard asset and restructured debt as part of provision for bad and doubtful debt and allow the claim of the assessee for deduction under section 36(1)(viia) as discussed above. Liability for interest u/s 234B - HELD HAT - As it is matter of verification whether the refund granted to the assessee u/s 143(1) exceed the refund granted on regular assessment. Before us no details of refund claimed and allowed u/s 143 (1) of the Act and refund which was due and allowed under regular assessment / reassessment , has been provided. Therefore, no infirmity in the direction of CIT(A) issued for verification. We again direct the Ao to comply with the direction of ld CIT(A), if not already complied. Accordingly, the ground of appeal of the assessee is allowed for statistical purpose. Interest u/s 244A - On perusal provisions of section 244A of the Act, we observe that legislature has provided for computation of the interest for every month or part of the month comprised in the period. Therefore, the finding of the Ld. CIT(A) that interest u/s 244A was to be calculated on annual basis is incorrect. Accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and restore the matter back to the file of the Assessing Officer for computing of the interest under section 244A of the Act in view of the provisions of section 119A(b) of the Act. The ground of the appeal of the assessee is accordingly allowed for statistical purposes.

Summary

Issues Involved:
1. Deduction under Section 36(1)(viia) of the Income Tax Act.
2. Charging of interest under Section 234D.
3. Granting of interest under Rule 119A.

Summary:

Issue 1: Deduction under Section 36(1)(viia) of the Income Tax Act
The primary issue revolves around the deduction under Section 36(1)(viia) concerning the provision for bad and doubtful debts. The assessee claimed a deduction amounting to Rs. 823,83,17,597/-, consisting of 10% of average rural advances and 7.5% of gross total income before Chapter VIA deduction. The Assessing Officer (AO) restricted this claim to Rs. 729.89 Crores, which included provisions for standard assets and restructured debt. The CIT(A) directed to allow the claim as per earlier orders. The ITAT had previously restored the issue to the AO to decide in light of the Tribunal's decision in Sarvodya Sahkari Bank Ltd., which held that the claim for provision for bad and doubtful debt should not be restricted to the provision made during the year but should be allowed to the extent of the provision available at the year-end in the books of account. The AO, however, restricted the deduction to the provision made during the year, excluding standard assets and restructured debt. The ITAT upheld the Tribunal's earlier direction, allowing the deduction based on the provision available at the year-end, and directed the AO to verify and exclude standard assets and restructured debt for the year under consideration.

Issue 2: Charging of Interest under Section 234D
The grievance of the assessee was that it was not liable for interest under Section 234D, while the CIT(A) directed the AO to verify the interest charged and modify it in accordance with the provisions of Section 234D. The ITAT found that the matter required verification to determine if the refund granted under Section 143(1) exceeded the refund granted on regular assessment. The ITAT upheld the CIT(A)'s direction for verification and directed the AO to comply with the CIT(A)'s instructions if not already done.

Issue 3: Granting of Interest under Rule 119A
The assessee contended that the AO had incorrectly computed interest under Section 244A on a monthly basis rather than annually, and thus Rule 119A(b) should apply. The CIT(A) had held that interest under Section 244A was to be calculated on an annual basis and ignored any fraction of a month. The ITAT found the CIT(A)'s interpretation incorrect, noting that Section 244A requires interest to be computed for every month or part of a month. The ITAT set aside the CIT(A)'s finding and restored the matter to the AO for recomputation of interest under Section 244A in accordance with Rule 119A(b).

Conclusion:
The appeals were partly allowed for statistical purposes, with directions for the AO to recompute the deductions and interest as per the ITAT's findings and directions. The ITAT's order emphasized the need for accurate verification and adherence to the statutory provisions concerning deductions and interest computations.