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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 ..... provision of Section 36(1)(vii) and 36(1)(viia). It was thereafter held that for the purpose of sub-section (viia) which applied to district cooperative bank that had made rural advances, it is not a requirement of law that the debt should have been written off before an allowance could be made. It was thus held that in such cases even it appears that an allowance has been made to write off a bad debt the assessee could claim such expenditure. - Decided in favour of the assessee and against the revenue. Exemption u/s 10(34) availability in respect of dividend income - claim not raised at the time of assessment - Held that:- In so far as it is not disputed to the department that the assessee received dividend income, it cannot be said tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of bad debts of ₹ 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 ₹ 20,03,000/- despite the admitted fact that the assessee had neither claimed exemption of dividend income u/s 10 (34) of the Act in its return of income nor at the time of assessment proceedings and this dividend income was not even reflected in the profit loss account submitted/f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rify 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. Disputing the correctness of the finding recorded by the Tribunal, learned counsel for the department submits, that proviso to Section 36(1)(vii) mandates that the debts should actually be written off before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 accounts of the assessee'. Thus, the concept of making a provision for bad and doubtful debts will fall outside the scope of Section 36(1)(vii) simplicitor. The proviso, as already noticed, wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 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 Assessing Officer to have examined the correct aspect himself and to grant the benefit, if the said amount was not taxable. Merely because the assessee did not raise the claim at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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