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Deduction u/s 36(1)(viia) of it act

RAJESH SONI (INSPECTOR) (25 Points)

22 December 2011  

hi all

if somebody wants to claim the deduction u/s 36(1)(viia)(b) of the IT Act, is it mendatory to make a provision in the books of accounts or mere claiming it in the computation of income will entitle it to the deduction without actually debiting the amount in P&L account.


 8 Replies

CA PARAS BAFNA (Practising CA ) (33408 Points)
Replied 22 December 2011

In my view, deduction is allowable only when provision for the same has been made in the books of account.

 

2 Like

Hari Wadhwa (CA in Practice) (485 Points)
Replied 23 December 2011

Dear Rajesh

 

1) Provision under the income Tax Act read as (only relevant provision produced below): -

 

36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28

[(viia) 45 [46  in respect of any provision for bad and doubtful debts made by—

(b)  a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);]

 

 

 

2) Conclusion/Interpretation: -

 

The highlighed words above         "deductions provided for"          indicates that deductions which are provided (allowed) by the legislature to the assessee in the clauses produced ahead in sec 36 (which are part of sec 36 itself) (pls note that sub clauses are also part of there parental clauses) which he can claim.

 

 

However, legislature intentionally used the words  "in respect of any provision"   .............made             later in clause (viia), which works as a pre condition for any expense item to become eligible to be claimed as deduction under section 36 (its clauses & sub clause are integral part of sec 36 & hence pls read these with sec 36- from very first line).

 

 

- Thus, MAKING of PROVISION is MANDATORY.

2 Like

CA Kiran Sutrave (CA) (424 Points)
Replied 23 December 2011

To claim deduction you will have to make a provision first.

RAJESH SONI (INSPECTOR) (25 Points)
Replied 23 December 2011

thanks for the response 

CA Mudit Agarwal PGDFM,MCP,IFR (Dy. Manager (Taxation)) (289 Points)
Replied 23 December 2011

i m fully agree with Mr. Hari Wadhwa..... Provision is required to be made in the accounts for claiming deduction u/s 36(i)(viia)..

srinivasulu ramteja and co. (article student) (37 Points)
Replied 24 November 2012

Can any suggest me .. what is the treatement as per income tax for the Bad dets arised on the Employee advance.... and can you quote the section as per inocme tax act

CA Ruben Balooni (Professionalism ™) (1319 Points)
Replied 24 November 2012

Originally posted by : srinivasulu ramteja and co.

Can any suggest me .. what is the treatement as per income tax for the Bad dets arised on the Employee advance.... and can you quote the section as per inocme tax act

Such bad debts shall be allowed as deduction u/s 37(1) and not u/s 36(1)(vii)

Aditya (CHARTERED ACCOUNTANT) (179 Points)
Replied 10 January 2015

Whether this provision u/s 36(1)viia to be made on only Bad and doubtful assets as per RBI norms or all loan & advances inculding standard assets, sub standard assets please reply

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