State Bank of India Vs ACIT (ITAT Mumbai)
A Special Bench of the Income Tax Appellate Tribunal (ITAT) Mumbai has ruled that deductions for provisions made for bad and doubtful debts under Section 36(1)(viia) of the Income Tax Act, 1961, read with Rule 6ABA of the Income Tax Rules, 1962, should be allowed on the total outstanding advances, including opening balances, and not merely on incremental advances made during the year. This decision, in the case of State Bank of India Vs. ACIT, resolves a conflict among ITAT benches and aligns with judgments from the Calcutta and Madras High Courts.
The core issue before the Special Bench was the interpretation of “aggregate monthly average advances” for the purpose of calculating the permissible deduction. State Bank of India, the assessee in this case, had computed this figure by considering outstanding balances from the previous month, effectively including opening balances. The Assessing Officer (AO), however, contended that only incremental advances made during the month should be considered, arguing that including opening balances would lead to repeated deductions on the same advances, particularly if they remained unpaid. The First Appellate Authority upheld the AO’s view, leading to the bank’s appeal before the Tribunal.
