Income Tax Appellate Tribunal (ITAT) Delhi’s recent decision in the matter of Oriental Bank of Commerce vs. ACIT (ITAT Delhi) has influential implications for the treatment of bad debts claimed by the bank u/s 36(1)(vii) of the Income Tax Act, 1961. The petition related to the AY 2017-18 and was filed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)].
The case is towards the disallowance of bad debts claimed Rs. 4545.89 crores u/s 36(1)(vii) by the Assessing Officer (AO). The CIT(A) kept the disallowance, quoting different reasons along with the applicability of Explanation 2 below section 36(1)(vii) introduced by the Finance Act, 2013. ITAT Delhi discovered merit in the argument of the appellant, reinforced by legal precedents and factual consistency.
The decision of the ITAT highlighted that the poor debts asserted via the appellant were different from those stated u/s 36(1)(viia), and therefore, the deduction u/s 36(1)(vii) must be permitted. The tribunal remarked that the appellant had fulfilled the conditions stated by the Supreme Court in the matter of Vijaya Bank vs. CIT regarding the actual write-off of bad debts.
ITAT laid on its former decisions and the dismissal of the petition of the revenue by the Hon’ble Delhi High Court in the identical cases for preceding the assessment years specifying a successive judicial stance on the problem. The tribunal repeated that no significant question of law emerges in the ongoing matter, aligning with its previous rulings and the decisions of the High Court.
The decision of ITAT Delhi to permit the Oriental Bank of Commerce’s poor debts claim u/s 36(1)(vii) shows a balanced interpretation of the pertinent statute provisions and the judicial precedents. Transparency is been furnished by the ruling on the eligibility criteria for claiming tax deductions associated with bad debts, ensuring a fair and consistent application of tax regulations. This ruling seems to have a significant impact on identical cases concerning banks and financial institutions asserting bad debts under the Income Tax Act.
| Case Title | Oriental Bank of Commerce Vs ACIT |
| Citation | ITA No. 849/Del/2023 |
| Date | 20.02.2024 |
| Assessee by | Shri K.V.S.R. Krishna, CA |
| Department by | Shri T. James Singson, CIT-DR |
| Delhi ITAT | Read Order |