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TMI Blog2020 (10) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... account and thereafter its reversal in the computation of total income before the claim of deduction u/s.80P is that the full amount of net profit available for the benefit u/s.80P was without the effect of BDDR. To put it simply, suppose Net Profit before BDDR for the year is ₹ 300/-. Once BDDR of ₹ 100/- for the year is debited, net profit gets reduced to ₹ 200/-. Again at the time of computation of total income with the addition of ₹ 100/- back to ₹ 200/-, the total of profit again comes to ₹ 300/-, which is available for deduction u/s.80P. Thus, even without taking any deduction of BDDR, there was full deduction u/s.80P in respect of eligible income only. With the insertion of sub-section (4) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case the learned Hon ble CIT(A) is wrong in confirming the excess provision for Bad and Doubtful Debts Reserve (BDDR) of earlier years of ₹ 3,39,02,128/- written back is taxable income irrespective of the fact that every year the BDDR Provisions were disallowed from Income (added to taxable income). 2. The Hon ble CIT(A) is wrong in treating reversal of excess provision of BDDR of ₹ 3,39,02,128/- written back is taxable income. Since appellant claimed deduction u/s.36(1)(vii) in earlier years. 3. The Hon ble CIT(A) failed to appreciate the fact that deductions claimed u/s.36(1)(vii) has no way concern with written back of excess BDDR Provision and that to non reduction of taxable income. 4. The learned Income Tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r years and added it back to the total income, but it was also allowed deduction to the extent of 7.5% of total income u/s.36(1)(viia) of the Incometax Act, 1961 (hereinafter also called the Act ). He also found that prior to the assessment year 2007-08, i.e. 2006-07 and before, the assessee was claiming deduction in respect of entire total income u/s.80P of the Act. No relief was allowed in the first appeal. 4. We have heard the rival submissions through virtual court and gone through the relevant material on record. As can be seen from the grounds reproduced above that the only issue raised in this appeal is against the addition of ₹ 3,39,02,128/- made by the AO on account of Bad and Doubtful Debts Reserve for earlier year writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book, which includes provision for Bad Debts at ₹ 2,10,39,033/-, being, the net amount of the provision written back. Though the narration has been given as Income considered separately but, in fact, there is no separate declaration of net income in the computation of total income on this score. It, therefore, emerges that the assessee in the computation of total income at loss of ₹ 6.93 lakh started with the figure of Net Profit which was inclusive of ₹ 2.10 crore and reduced the same amount. The net effect of this exercise is that the assessee neither claimed any deduction on account of provision for Bad and Doubtful Debts made for the year nor offered any income on account of write back of the provision fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier years as per the RBI norms and was simultaneously adding back the same in computing the total income. To put it simply, the net effect of creating the provision and then adding back in the computation of total income is that there was no deduction claimed by the assessee at the time of creation of provision. Once the assessee did not take any deduction in the computation of total income on account of BDDR created on the basis of RBI norms, its reversal in subsequent years, cannot call for any addition. Here, it is relevant to mention that the claim of deduction u/s 36(1)(viia) of the Act is separate and independent of such provision created or reversed in the books of account as per the RBI norms. 6. The authorities below have also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to ₹ 300/-, which is available for deduction u/s.80P. Thus, even without taking any deduction of BDDR, there was full deduction u/s.80P in respect of eligible income only. With the insertion of sub-section (4) to section 80P w.e.f. 01-04- 2007, the claim for deduction u/s.80P has come to be denied to the societies like the assessee but with the simultaneous onset of the benefit of deduction u/s.36(1)(viia) by the Finance Act 2007 w.e.f. 01-04-2007. Irrespective of the fact whether it is case of the period when the assessee was eligible for deduction u/s.80P or thereafter when the benefit of section 36(1)(viia) came to be conferred, the creation of BDDR and its simultaneous addition in the computation of total income has made i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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