I. Recent Updates:
1. Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax, CIVIL APPEAL NO. 1143 of 2011 , Date of Judgment: 17/02/2012, SUPREME COURT OF INDIA
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).
Firstly, CBDT itself has recognized the position that a bank would be entitled to both the deduction, one under clause (vii) on the basis of actual write off and another, on the basis of clause (viia) in respect of a mere provision. Further, to prevent double deduction, the proviso to clause (vii) was inserted which says that in respect of bad debt(s) arising out of rural advances, the deduction on account of actual write off would be limited to the excess of the amount written off over the amount of the provision allowed under clause (viia). Thus, the proviso to clause (vii) stood introduced in order to protect the Revenue. It would be meaningless to invoke the said proviso where there is no threat of double deduction. In case of rural advances, which are covered by the provisions of clause (viia), there would be no such double deduction.
The proviso limits its application to the case of a bank to which clause (viia) applies. Clause (viia) applies only to rural advances. This has been explained by the Circulars issued by CBDT. Thus, the proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii).
(Please click here for Judgment)
2. Late Dr. B.V.Raju Vs. Asst. Commissioner of Income tax, ITA No. 1034/Hyd/2004, Date of Pronouncement: 13/02/2012, ITAT- HYDERABAD
Issue: Whether the amount received for non- competence fees pursuant to non competence agreement was chargeable to capital gain by taking nil cost in terms of section 55(2)(a) of the Act.
Held:
The sum in question was not paid for transfer of any intangible right in respect of manufacture, production or process of cement. So that provisions relating to capital gains are therefore not attracted. The amount was paid for “not carrying out any activity in relation to any business” and would fall within the ambit of Section 28(va)(a) of the Act. The payment in question clearly falls under the category of a payment for “not carrying out any activity in relation to any business” which at the relevant point of time of accrual in the hands of B.V.Raju, viz., 27.10.1999, was a capital receipt not chargeable to tax. Such receipts became taxable on and from 1-4-2003. The amount received belongs to AY 00-01, so the provision of section 28(va)(a) were not applicable. Therefore the receipts in question were capital receipts and not chargeable to tax in AY 00-01. For the reasons given above, the order of CIT(A) is upheld and the appeal by the Revenue is dismissed.
(Please click here for Judgment)
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