TJSB Sahakari Bank Ltd. Vs DCIT (ITAT Mumbai)
ITAT Allows Bad Debt Deduction Since Cooperative Banks Had No Section 36(1)(viia) Benefit Before 2006; ITAT Deletes Addition on Recovery of Written-Off Loans Due to Double Taxation; Cooperative Banks Entitled to Bad Debt Deduction on Pre-2006 NPAs; Section 143(1) Intimation Merges With Scrutiny Assessment Under Section 143(3).
In a consolidated order concerning Assessment Years (AYs) 2017-18, 2018-19, and 2020-21, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) considered multiple appeals relating to deductions for bad debts, exempt income, employees’ provident fund contributions, and additions made during processing under Section 143(1) of the Income Tax Act.
For AY 2017-18, the dispute related to disallowance of deduction claimed under Section 36(1)(vii) for bad debts written off in the books during the relevant year. The Assessing Officer treated the write-off as a prior period expense on the ground that the loan accounts had already become non-performing assets (NPAs) and loss assets before 01.04.2006 and therefore should have been written off earlier. The assessee contended that cooperative banks were not eligible for deduction under Section 36(1)(viia) prior to AY 2007-08 and therefore no deduction for provision for bad and doubtful debts had been claimed earlier. It argued that deduction under Section 36(1)(vii) is allowable in the year in which debts are actually written off in the books.
