Brief of the case:
- The ITAT Hyderabad in the case of State Bank of Hyderabad vs. DCIT held that the proviso to section 36(1)(vii) applies to bad debts written off relating to rural advances, the same cannot be applied for disallowing deduction claimed on account of write off of bad and doubtful debts relating to non-rural/urban advances.
- It is because deduction in respect of provision for NPAs u/s 36(1)(viia) and deduction in respect of bad u/s 36(1)(vii) are independent of one another and no restriction has been provided to restrict any one deduction for non-rural advances unlike in case of rural advances.
Facts of the case:
- The assessee made a provision for NPAs u/s 36(1)(viia) Rs. 428.83 crores in addition to claim of bad debts of Rs. 210.74/- in its books out of which Rs. 209.08 representing provision towards non-rural advances were claimed as deduction u/s 36(2)(vii).
- AO observed that an assessee is entitled to make provision for both urban and rural advances u/s 36(1)(viia), but then proviso u/s 36(1)(vii) will apply and assessee will not be entitled to write off bad debts claimed u/s 36(1)(vii) for the amount of Rs. 209.08 crores.
- CIT (A) also upheld the order passed by AO and held that A debt cannot be claimed both on the basis of its being written off and its being part of the provision. Thus, the disallowance of bad debts claimed was upheld by CIT(A).Aggrieved assessee is in appeal before ITAT Hyderabad.
Contention of the Assessee:
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