Lenders to have final say in NPA classification: HC

In what would provide a major relief to banks who are plagued with fears of rising defaults and bad debt, the Bombay High Court has ruled that the decision of a bank in assessing a debt as bad is the final word for writing it off and claiming deduction on income tax (I-T). The high court delivered the judgement after hearing an appeal filed by the I-T department against deductions claimed by Oman International Bank. The court ruled in favour of the bank stating that the classification of bad debt is a commercial decision of the assessee (bank in this case) and once an entry is made in its accounts, it would be established as bad debt. The judgement was delivered in February this year. The onus is on the department to show that the debt is not bad if it is not satisfied with the reasoning of the assessee.