Administrative circulars cannot override statutory language; Calcutta HC allows Indian Bank’s ₹96.65 Crore deduction claim

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Published 29 October 2026

Case: Indian Bank v. Commissioner of Income Tax
Court: Calcutta High Court
Statutes: Income-tax Act, 1961 — s.36(1)(vii-a)(a)
Source: SCC Times

Bottom Line Up Front (BLUF)

The Calcutta High Court held that administrative circulars cannot override statutory language. The court allowed Indian Bank's ₹96.65 Crore deduction claim for doubtful and loss assets, stating that the phrase "at its option" in Section 36(1)(vii-a)(a) of the Income-tax Act, 1961, must be given its ordinary meaning and cannot be treated as surplusage.

Ratio Decidendi · Legal Principle Established

Administrative circulars issued by the Central Board of Direct Taxes (CBDT) cannot override or restrict the plain and unambiguous language of a statutory provision. The expression "at its option" in Section 36(1)(vii-a)(a) of the Income-tax Act, 1961, grants an option to banks to claim a deduction for provisions made for doubtful and loss assets, and this statutory option cannot be curtailed by circulars.

Practice & Procedural Impact for Advocates

Advocates should argue that statutory provisions take precedence over administrative circulars when there is a conflict. Litigants, particularly banks, can rely on the plain meaning of Section 36(1)(vii-a)(a) of the Income-tax Act, 1961, to claim deductions for provisions for doubtful and loss assets, irrespective of restrictive circulars.

Key Legal Takeaways

1Statutory language prevails over administrative circulars.
2The phrase "at its option" in Section 36(1)(vii-a)(a) of the Income-tax Act, 1961, grants a clear option to banks.
3Banks can claim deductions for provisions for doubtful and loss assets as per the statute, not restricted by circulars.

The Legal Issue The core legal issue before the Calcutta High Court was whether administrative circulars issued by the Central Board of Direct Taxes (CBDT) could override or restrict the plain meaning of a statutory provision, specifically Section 36(1)(vii-a)(a) of the Income-tax Act, 1961. Indian Bank sought to claim a deduction of ₹96.65 Crore for provisions made for doubtful and loss assets, relying on the statutory language which includes the phrase "at its option". The revenue department, presumably relying on circulars, disputed this claim.

Court's Reasoning The Calcutta High Court held that the expression "at its option" under Section 36(1)(vii-a)(a) of the Income-tax Act, 1961, could not be treated as surplusage or deprived of its ordinary meaning. The court emphasized the principle that administrative circulars cannot override the clear and unambiguous language of a statute. By including the phrase "at its option", the legislature explicitly granted banks the discretion to claim such deductions. Any circular attempting to limit this statutory option would be ultra vires the Act itself. The court found that the bank was entitled to exercise this option as provided by the statute.

What Follows Following this decision, the Calcutta High Court allowed Indian Bank's deduction claim of ₹96.65 Crore for doubtful and loss assets. This means the bank will be able to reduce its taxable income by this amount. The ruling clarifies that statutory provisions, particularly those granting options or rights, cannot be curtailed by administrative circulars, providing a clear precedent for other financial institutions facing similar disputes regarding Section 36(1)(vii-a)(a) of the Income-tax Act, 1961.