S. 36(1)(vii)/(viia) Bad Debts: Supreme Court Reverses Full Bench Law

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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Mon, Feb 20, 2012 at 3:06 PM
Subject: Message from EGroup of SolapurCAs S. 36(1)(vii)/(viia) Bad Debts: Supreme Court Reverses Full Bench Law
To: editor@itatonline.org

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Catholic Syrian Bank Ltd vs. CIT (Supreme Court)

36(1)(vii)/36(1)(viia) Bad Debts: Banks are entitled to both deductions

 

The Supreme Court had to consider whether a bank was eligible to claim a deduction for bad debts u/s 36(1)(vii) in respect of its (rural & urban) advances and also claim a provision for bad and doubtful debts u/s 36(1)(viia) in respect of its rural advances in view of the Proviso to s. 36(1)(vii) which provides that only the excess over the credit balance in the provision for bad and doubtful debts account made u/s 36(1)(viia) can be claimed. The Special Bench of the Tribunal in DCIT vs. Catholic Syrian Bank 88 ITD 185 held that as s. 36(1)(viia) was confined to rural advances, a claim for bad debts of urban advances was not subject to the limitation of the Proviso to s. 36(1)(vii). However, the Full Bench of the Kerala High Court took a contrary view in CIT vs. South Indian Bank 233 CTR 214 (Ker) (FB) and held that a bank was entitled to claim deduction of bad debts u/s 36(1)(vii) only to extent it exceeded the provision allowed as deduction under s. 36(1) (viia). On appeal to the Supreme Court, HELD reversing the Full Bench of the High Court:

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Regards,

Editor,