ITAT grants relief to Indus Bank on loss due to credit cards business

ITAT grants relief to Indus Bank on loss due to credit cards business

The assessing officer had rejected the claims of the bad debts

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has provided relief to IndusInd Bank and held that debts arising from the credit card business shall be allowable as business loss, deductible under the Income Tax Act, 1961.

The assessee bank was deriving an income of Rs.152.32 crores from its total credit card business of Rs.2030 crores. Out of this, Rs.8.34 crores were claimed as bad debts under the IT Act.

The bank offered income from the credit card business as income under the head 'Profits and gains of business or profession' and the assessing officer (AO) taxed it accordingly. But the claim of bad debts as the business loss was rejected.

The tribunal comprising Vikas Awasthy (judicial member) and M Balaganesh (accountant member) noted that offering income under the IT Act by the assessee meant that the claim of bad debts was to be routed through provision for bad and doubtful debts accounts. It would be relevant if the provision was created under the IT Act.

ITAT stated, "The assessee duly drew our attention from the computation of income that the total amount of bad debts of Rs.179,25,17,964 is reduced by the amount of brought forward provision for bad and doubtful debts claimed under the Act in the preceding year of Rs.159,78,14,026 and only the balance amount of Rs.19,47,03,938 was claimed as deduction as bad debts."

The bench observed, "The bad debts arising from the credit card business included the total bad debts reflected by the assessee. Hence, we have no hesitation to hold that the loss arose out of banking business and hence is liable as deduction under the IT Act."