Bank Can’t Claim Shortfall u/s 36(1)(viia) While Receiving Sum from Govt. After Loan Waiver | ITAT

Case Details: Virudhunagar District Central Co-operative Bank Ltd. v. PCIT - [2023] 152 taxmann.com 61 (Chennai-Trib.)

Judiciary and Counsel Details

• • Mahavir Singh, Vice President & Manoj Kumar Aggarwal, Accountant Member
  • K. Manoj Menon, Adv. & K. Chindan, (Adv.) Ld. AR’s for the Appellant.
  • R. Mohan Reddy (CIT) – Ld. DR for the Respondent.

Facts of the Case

Assessee-bank provided loans to certain customers, which Government waived off. The amount so waived off was to be received from Government. However, there was a shortfall between the amount claimed and reimbursed to the assessee. Thus, the assessee claimed deduction under section 36(1)(viia) with respect to reserve for short provision for waiver of loans.

The Assessing Officer (AO) duly allowed the claim of the assessee. However, the Principal Commissioner (PCIT) invoked revisionary proceedings on the ground that the Government could not be treated as a doubtful debtor.

The matter reached before the Chennai Tribunal.

ITAT Held

The Tribunal held that the Government could not be held to be a doubtful debtor. Consequently, the provision so made could not be considered a provision under section 36(1)(viia). Even as per the assessee’s submissions, this provision has been reversed in subsequent years and offered to tax.

Assessing Officer failed to consider this aspect while framing assessment. Therefore, the order for revision was affirmed.

List of Cases Referred to

• • Virudhunagar District Central Co-opreative Bank Ltd. v. Asstt. CIT [IT Appeal Nos. 287 to 291(Chny.) of 2018, dated 4-7-2018] (para 3.1)
  • Bharat Overseas Bank Ltd. v. CIT [2012] 26 taxmann.com 330/139 ITD 154 (Chennai) (para 3.6)
  • Dy. CIT v. Nawanshahar Central Corporative Bank Ltd. 2018 SCC Online ITAT 4037 (para 3.6)
  • Dy. CIT v. Hoshiarpur Central Co-operative Bank Ltd. 2019 SCC Online ITAT 24588 (para 3.6).