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TMI Blog2017 (11) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant has raised two substantial questions of law quoted as below:- "(1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the order of the CIT (A) deleting the disallowance of bad debts of Rs. 2,84,42,000/- claimed by the assessee by completely ignoring the fact that the assessee had not credited the amount of bad debt in the individual account of the debtors? (2) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the order of the CIT (A) agreeing in principle that exemption u/s 10 (34) of the Act is available to the assessee in respect of dividend income of Rs. 20,03,000/- despite the admitted fact that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was exempt from tax. At the same time, since there was no evidence to establish that the same had been subjected to tax in the hands of the company, the CIT remitted the matter to the Assessing Officer to verify that factual aspect. Being aggrieved, the department preferred an appeal before the Tribunal. The Tribunal took note of the provisions of Section 36(1)(viia) and found that under the said provision to allow an expenditure it is not the requirement that the bad debt should be actually written off by the assessee. Thus, in view of the Tribunal, such allowance could be claimed and allowed even upon a provision being made for that purpose by the assessee as it was a district cooperative bank that had made advances in rural areas. Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ingredients of Section 36(1)(vii) on the one hand and that it satisfies the requirements stated in Section 36(2) of the Act on the other. The proviso to Section 36(1)(vii) does not, in absolute terms, control the application of this provision as it comes into operation only when the case of the assessee is one which falls squarely under Section 36(1)(viia) of the Act. We may also notice that the explanation to Section 36(1)(vii), introduced by the Finance Act, 2001, has to be examined in conjunction with the principal section. The explanation specifically excluded any provision for bad and doubtful debts made in the account of the assessee from the ambit and scope of `any bad debt, or part thereof, written off as irrecoverable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income of Rs. 20,03,000/- was dividend income received by the assessee. Principally, therefore the amount was exempted. Merely because, the assessee did not claim that exemption at the time of filing of the return could not make the said receipt taxable in nature. This Court in the case of Commissioner of Income Tax Vs. Lucknow Public Educational Society reported in (2010) 231 CTR (All) 407 had in similar circumstance followed the principle that the department should not take advantage of the ignorance of the assessee. In so far as it is not disputed to the department that the assessee received Rs. 2,03,000/- as dividend income, it cannot be said that the same would become taxable at the hands of the assessee. It was also open to the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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