South Indian Bank Ltd. Vs ACIT (ITAT Cochin)
Bad Debt deduction under 36(1)(vii) possible even if 36(1)(viia) Claim fails, Rules ITAT; Kerala ITAT applies Vijaya Bank Ruling – Permits alternate Bad Debt claim for banks
Cochin ITAT has partly allowed the appeal of South Indian Bank Ltd holding that an excess provision for bad & doubtful debts, disallowed u/s 36(1)(viia), can still be considered for deduction u/s 36(1)(vii) if the statutory conditions are satisfied.
Assessee, a private scheduled bank, had originally filed its return declaring Rs 670.58 crore as total income, which was subsequently revised to Rs 1,055.13 crore. The assessment was completed u/s 143(3) determining the total income at Rs 1,157.56 crore after various disallowances, including Rs 47.56 crore u/s 36(1)(viia) on account of classification of rural branches based on the 2011 census. AO held that these branches did not qualify for the deduction & further disallowed Rs 11.36 crore u/s 14A & Rs 43.50 crore u/s 36(1)(viii).
CIT(A) partly allowed relief by directing computation of deduction u/s 36(1)(viia) at 7.5% of the assessed income but did not allow Assessee’s plea to treat the excess provision disallowed u/s 36(1)(viia) as a bad debt written off u/s 36(1)(vii). On further appeal, the Kerala High Court remitted the matter to ITAT to specifically consider whether when a claim fails u/s 36(1)(viia), it can still be allowed u/s 36(1)(vii), relying on the Supreme Court ruling in Vijaya Bank & its own earlier decision in Federal Bank.
