Business Expenditure – Scheduled Commercial Banks – Bad and doubtful debts – Entitled to deduction of irrecoverable debts written off u/s. 36(1)(vii) in addition to the deduction of provision for bad and doubtful debts u/s. 36(1)(viia).

The Assessing Officer noticed that for the relevant assessment year, while the assessee had claimed a deduction of a sum of Rs.3,36,78,394 under clause (vii) of s/s. (1) of section 36, the assessee had also claimed a deduction in terms of section 36(1)(viia) to the extent of Rs.5,75,00,000 and therefore, being of the opinion that the deduction claimed u/s. 36(1)(vii) being less than the amount claimed u/s. 36(1)(viia) disallowed the entire amount of deduction claimed u/s. 36(1)(vii). It was this dispute which had been carried to the first appellate authority by the assessee which was not successful but in the appeal before the Appellate Tribunal, the Tribunal purporting to follow its decision in the case of the very assessee for the assessment years 1990-91 to 1993-94 and having allowed the assessee’s appeals for the relevant assessment year thought it fit to allow the appeal for the year relevant to the subject-matter of the appeal.

The High Court while examining the very questions in the case of the very assessee and for the years 1993-94 and 1994-95, had answered similar questions in favour of the assessee and against the Revenue and dismissed the appeals as per the judgment dated 19th March, 2008 [Deputy CIT vs. Karnataka Bank Ltd. [2009] 316 ITR 345 (Karn)].

The Supreme Court held that the issue involved in these cases was covered in favour of the assessee, vide its judgment in the case of Catholic Syrian Bank Ltd. v. CIT reported in (2012) 343 ITR 270.