Indian Bank Vs ACIT (Madras High Court)
Section 36(1)(vii-a) Deduction Cannot Be Denied After Assessee Exercises Statutory Option; HC Allows Bank’s Bad Debt Deduction Claim Due to Exclusive Right of Option; Rectification Under Section 154 Cannot Curtail Assessee’s Choice Under Section 36(1)(vii-a);Madras High Court Rejects Revenue Interpretation of ‘At Its Option’ in Bad Debt Deduction Case.
In, the appeal before the Madras High Court concerned the interpretation of Section 36(1)(vii-a) of the Income Tax Act, 1961, relating to deductions for bad and doubtful debts claimed by a nationalised bank. The assessee challenged the interpretation adopted by the tax authorities, contending that it deprived the bank of the statutory option available under the provision.
For the Assessment Year 2001-2002, the bank filed its return declaring a loss of Rs. 836.73 crore. After scrutiny proceedings under Section 143(2), the assessee filed a rectification petition seeking correction of certain errors in the assessment order dated 31.03.2004. While partially allowing the rectification request, the Assessing Officer reduced the declared loss by disallowing part of the claim under the head “bad debts written off.”
The assessee challenged the order before the appellate authorities, but both the Commissioner and the Income Tax Appellate Tribunal ruled against the bank, leading to the appeal before the High Court.
