Relief to SBI: ITAT allows Income Tax Deduction on Bad and Doubtful Debts [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), deduction on bad and doubtful debts thereby granting relief to the State Bank of India (SBI).

The assessee is a scheduled bank and has claimed deduction under section 36(1)(viia) of the Income Tax Act, 1961 in respect of provision made for bad and doubtful debts. The assessee, while claiming aforesaid deduction under section36(1)(viia) of the Income Tax Act, 1961 calculated the aggregate monthly average advances by taking into consideration the outstanding balances of the previous month, i.e., the opening balance for computing the amount of advance as outstanding at the end of each month as per the language of Rule 6 ABA of the Income Tax Rules, 1962.

The Assessing Officer rejected the computation of the assessee and held that only incremental advances made during the month can be considered while calculating the figure of aggregate monthly average advances.

The Assessing Officer was of the view that if the opening balance is also considered it would result in the assessee claiming deduction of more than actual advance especially where the advance has not been paid back. The First Appellate Authority upheld the reasoning of the Assessing Officer on this issue. Being aggrieved, the assessee preferred further appeal before the Tribunal.

The Calcutta High Court, affirmed the findings rendered by the Division Bench of the Tribunal in Uttar Banga Kshetriya Gramin Bank vs ACIT, wherein it was held that for the purpose of section 36(1)(viia), to compute the aggregate monthly average advance made by the rural branch of scheduled Bank, the amount of advances by each rural branch as outstanding at the end of the last day of each month comprised in the previous year be taken into consideration.

A Coram consisting of Pramod Kumar, Vice President and Aby T Varkey, Judicial Member observed that “we decide the question referred for our adjudication in favour of the assessee and held that the deduction under section 36(1)(viia) r/w Rule 6 ABA is to be allowed on the total outstanding advances at the end of each month considering the opening balances.”

To Read the full text of the Order CLICK HERE

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