Tribunal rules bad debt provision as actual write-off, not falling under Income Tax Act section 115JB

The Tribunal upheld the CIT(A)'s decision, ruling that the provision for bad and doubtful debts amounting to Rs. 94,22,355/- was an actual write-off, not just a provision. Consequently, it did not fall under the provisions of section 115JB of the Income Tax Act, 1961. The Revenue's appeal was dismissed.

---

---

Issues Involved:
1. Deletion of the addition made by the AO of Rs. 94,22,355/- on account of 'provision for bad and doubtful debts' in the computation of book profit under section 115JB of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Deletion of Addition by AO on Account of 'Provision for Bad and Doubtful Debts'

The Revenue appealed against the order of the CIT(A)-10, Kolkata, which deleted the addition of Rs. 94,22,355/- made by the AO under section 115JB of the Income Tax Act, 1961. The AO had disallowed the assessee's claim, stating that the 'provision for bad and doubtful debts' should be added back to the book profit as per section 115JB. The AO's rationale was based on the language of section 115JB, which mandates that book profit should be increased by the amount set aside as provision for liabilities, other than ascertained liabilities, or for diminution in the value of assets.

Upon appeal, the CIT(A) found that the assessee had actually written off the bad debts amounting to Rs. 94,22,355/- in its books, which was not contested by the Department. This finding was based on the Supreme Court's judgments in Vijaya Bank vs. CIT, Southern Technologies Ltd. vs. CIT, and T.R.F. Ltd. vs. CIT, which clarified that a mere provision does not qualify for deduction unless it is an actual write-off.

The CIT(A) noted that the assessee had reduced the amount from Sundry Debtors in the audited balance sheet, which constituted an actual write-off, not just a provision. Therefore, the CIT(A) concluded that clause (c) or (i) of Explanation (1) to sub-section (2) of section 115JB was not applicable.

The Tribunal upheld the CIT(A)'s decision, reiterating that the provision for bad and doubtful debts was an actual write-off. The Tribunal referenced its own decision in DCIT vs. The Peerless General Finance & Investments Co. Ltd., which dealt with similar issues. The Tribunal emphasized that if the provision is not merely debited in the profit and loss account but also simultaneously obliterated from the asset side of the balance sheet, it constitutes an actual write-off, not attracting the provisions of section 115JB.

The Tribunal concluded that the CIT(A) had rightly allowed the assessee's claim, as the provision of Rs. 94,22,355/- was an actual write-off and did not attract clause (i) or (c) of Explanation (1) to sub-section (2) of section 115JB. Consequently, the appeal of the Revenue was dismissed.

Conclusion:
The Tribunal confirmed the CIT(A)'s order, holding that the provision for bad and doubtful debts amounting to Rs. 94,22,355/- was an actual write-off and not merely a provision. Therefore, it did not attract the provisions of section 115JB, and the Revenue's appeal was dismissed.

---