The Mumbai Bench of the Income Tax Appellate Tribunal, in KBC Bank Naamloze Vennootschap v. Assistant Commissioner of Income Tax, International Tax Circle 3(1)(2), Mumbai, examined additions relating to the reversal of a general provision for standard assets, forfeiture of a security deposit, short grant of tax deducted at source credit and consequential computation issues.
The appeal arose from an assessment order dated 29 September 2025 passed under Section 147 read with Section 144C(13) of the Income Tax Act, 1961, for Assessment Year 2016-17. The assessee, a foreign company, had raised objections before the Dispute Resolution Panel against the variations proposed in the draft assessment order. The final assessment was thereafter completed in conformity with the DRP’s directions.
Case Details
Case: KBC Bank Naamloze Vennootschap v. ACIT, International Tax Circle 3(1)(2), Mumbai
Forum: Income Tax Appellate Tribunal, “I” Bench, Mumbai
Bench: Smt. Beena Pillai, Judicial Member and Shri Arun Khodpia, Accountant Member
Appeal No.: I.T.A. No. 8160/Mum/2025
Assessment Year: 2016-17
Date of Hearing: 28 April 2026
Date of Pronouncement: 13 July 2026
Background of the Dispute
The principal dispute concerned an addition of Rs.3.14 crore representing the reversal of a general provision for standard assets or general loan losses. The amount was added under the normal provisions of the Act and was also considered while computing book profit under Section 115JB.
The assessee contended that the underlying provision had not been claimed as a deduction in the earlier year when it was created. Therefore, its subsequent write-back could not be treated as taxable income. It was further submitted that the amount had already been reflected as a negative expense in the profit and loss account and appropriately adjusted in the computation of income.
The assessee also challenged an addition of Rs.1,04,42,250 made while computing book profit under Section 115JB on account of provision for forfeiture of a security deposit. According to the assessee, this amount had already been added back suo motu, and a further adjustment by the Assessing Officer resulted in a double addition.
Reversal of General Provision for Standard Assets
The Tribunal noted that the assessee had credited the amount relating to general loan loss or standard asset provision after making certain adjustments. The net amount was shown as a negative expense in the profit and loss account.
While computing taxable income, the assessee had also made a corresponding adjustment. The Tribunal observed that, prima facie, the amount had already increased the accounting income because it was reflected as a negative expense, while the corresponding reduction was made in the tax computation. The combined effect appeared to be neutral.
The Tribunal held that where the accounting and tax adjustments result in a nil effect, the same amount cannot again be brought to tax. However, since the complete financial records were not available before it, the Tribunal restored the issue to the Assessing Officer for verification.
The Assessing Officer was directed to verify the relevant financial statements and allow the assessee’s claim relating to the general provision for loan loss in accordance with the facts on record. Grounds concerning the addition under the normal provisions and Section 115JB were accordingly allowed for statistical purposes.
Double Addition While Computing Book Profit
On the issue of forfeiture of the security deposit, the Tribunal accepted the principle that an amount already added back by the assessee while computing book profit cannot be added a second time by the Assessing Officer.
The Tribunal found that the assessee had claimed to have suo motu added back the amount of Rs.1,04,42,250 in its computation under Section 115JB. Accordingly, a further addition of the same amount would result in an impermissible double adjustment.
The Assessing Officer was directed to delete the disallowance after factual verification. The Tribunal thus allowed the relevant ground of appeal.
TDS Credit and Consequential Issues
The assessee claimed TDS credit of Rs.2,05,07,427, whereas the Assessing Officer had granted credit of only Rs.50,47,728. The difference of Rs.1,54,59,699 was therefore disputed.
The Tribunal restored the matter to the Assessing Officer for fresh verification and directed that the admissible TDS credit be granted in accordance with the facts and supporting records.
The issues concerning the amount of refund, interest under Sections 234B and 234C and initiation of penalty proceedings were treated as consequential or premature. These matters were also restored to the Assessing Officer for reconsideration in light of the final determination.
Reassessment Grounds Not Pressed
Although the assessee had challenged the validity of the reassessment notice under Section 148 on grounds including limitation and change of opinion, these grounds were not pressed during the hearing. The Tribunal therefore proceeded to decide the appeal on merits.
Decision of the Tribunal
The ITAT allowed the assessee’s appeal for statistical purposes.
The ruling reiterates that the same amount cannot be subjected to tax twice merely because it appears in different components of the accounting and tax computation. Before sustaining an addition, the Assessing Officer must examine the actual treatment given to the amount in the profit and loss account as well as in the computation of taxable income or book profit.
The decision also emphasises that adjustments under Section 115JB must be based on the actual computation made by the assessee. Where the assessee has already added back an inadmissible amount, a second addition by the Assessing Officer would result in duplication and must be deleted after verification.
