Rajasthan Marudhara Gramin Bank Vs DCIT (ITAT Jaipur)
“Notional” Is Not Enough: ITAT Allows Bank’s ₹40.06 Crore Deductions
Two Banking Provisions, Two Disallowances Deleted
The Jaipur Tribunal allowed Rajasthan Marudhara Gramin Bank’s claims for ₹37,41,31,381 towards mark-to-market loss on Available for Sale securities and ₹2,65,00,000 towards provision for bad and doubtful debts on standard assets. The aggregate relief amounted to approximately ₹40.06 crore.
The Tribunal held that the mark-to-market claim complied with the applicable RBI guidelines and ICDS VIII, Part B. It also followed judicial precedents permitting deduction under Section 36(1)(viia) for qualifying provisions relating to standard assets. The decision demonstrates why banking deductions require examination under the specific provisions governing banks, rather than rejection merely because an amount is described as a “provision”.
An Accepted Return Followed by Revision
The assessee, a Regional Rural Bank established under the Regional Rural Banks Act, 1976, filed its return declaring total income of ₹96,50,67,205. The original assessment under Section 143(3) accepted the returned income.
Subsequently, an order under Section 263 dated 30 March 2023 restored the assessment to the AO. In the consequential assessment, the AO disallowed the mark-to-market loss and the standard-asset provision.
The CIT(A) confirmed both disallowances through an ex parte order. Before the Tribunal, the bank contended that the appellate authority had failed to properly examine the facts and legal submissions already placed before the AO.
