Provision made by Bank for Interest on Overdue Deposits is allowable expense

Oriental Bank of Commerce Vs. Additional CIT (Delhi High Court)

The assessee – a scheduled bank had in its return claimed an ascertained liability of Rs. 17 crores towards the interest on overdue deposits. The AO was of the opinion that the liability was not in present time and had not crystallized or arisen and therefore, had to be disallowed.

In this case, there can be no doubt that the assessee/bank was not only aware of its liability on the particular aspect, but, in fact, was able to crystallize it and set it out expeditiously in its returns. The possibility of likelihood of the depositor renewing the overdue deposit or for that matter, the payment being made later, in no way deflects from the reality that the assessee is able to identify its liability at the time, when it filed its returns. In that sense-for the reasons spelt out in detail in Aggarwal and Modi’s case (supra), the liability was ascertained and not unascertained. Consequently, the question of law is answered in favor of the assessee and against the Revenue. The appeal is therefore, allowed.

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-

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