TaxTMI 
TaxTMI 
2001 (4) TMI 203
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....e assessee for Rs. 2,30,31,442 which had been debited to the P&L a/c. A reference was also made by the Assessing Officer to the Auditor's note No. 4 which, for the benefit of this order, is being reproduced as under: "Dues of Rs. 3,95,28,975 from M/s. Anchemedue Ltd. in respect of Tanzania Project are outstanding. The company had taken Export Credit Guarantee Corporation insurance cover to the extent of 90% of the dues i.e. Rs. 3,55,76,078. The project Exports made by the Company was under an unconditional and irrevocable guarantee issued by National Bank of Commerce, Tanzania. The customer viz., M/s. Anchemedue Ltd. as well as the guarantor bank have failed to pay the instalments of Rs. 2,08,68,416 which have become due upto 31-3-1989. Th....
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....ction 80HHC 19,58,507 ---------------- 9,19,607 ---------------- A sum of Rs. 2,75,882 was held to be income chargeable to tax (30% of the above amount of book profits). 3. The matter was carried before the CIT(A) who held that provisions for doubtful debts was not on account of any contingencies but was on account of real loss which was ascertainable at the time of completion of the accounts and was not covered by any clause of the Explanation to section 115J. It was also held by him that the issue was covered by two decisions of the Tribunal as Apollo Tyres Ltd. v. Dy. CIT [1992] 43 ITD 464 (Coch.) and ITO v. Kesho Ram [1993] 199 ITR 164 (Punj. & Har.). Aggrieved by the same, revenue is in appeal before the Tribunal. 4. The lear....
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....y was raised from the Bench as to how the amount for doubtful debts could be described on account of any liability, inasmuch as the assessee was not required to pay any sum to any person. Faced with the situation, the learned Sr. D.R. submitted that this aspect should be considered in broader sense. According to him, the legislature intended to add back all the provisions made by the assessee and therefore, such provision should also be considered as liability. He again relied on the decision of the Madras High Court mentioned above, wherein such issue was considered on the footing that it was a case of liability. He has also referred to the recent decision of the Bombay High Court in the case of CIT v. Echjay Forgings (P.) Ltd. [2001] 116 ....
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.... CIT v. General Insurance Corpn. of India [2001] 114 Taxman 13. It was further submitted by him that such amount could not be written off without the permission of Reserve Bank of India. Therefore, the claim of the assessee cannot be rejected on the ground that party account was not written off. He also relied on the decision of the Bombay High Court in the case of Jethabhai Hirji & Jethabhai Ramdas v. CIT [1979] 120 ITR 792 wherein it has been held that honest judgment of businessman has to be seen from the facts of the case for allowing the claim of bad debt and such claim of assessee cannot be rejected merely because the assessee had not taken recourse to recover the amount by filing suits in Court of Law. Regarding the decision of the ....
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....r doubtful debts fall within the clause (c) of the above Explanation. 7. The perusal of the aforesaid clause shows that (1) there must be provision made by the assessee; (2) such provision must be to meet the liability of the assessee; and (3) such liability should be other than the ascertained liability. Further, it is seen that clause (a) of the Explanation speaks of the adjustment of the 'provision for losses of subsidiary companies'. This makes it clear that the legislature did not intend for adjustment to all types of provisions irrespective of their nature. Had it been so intended, it could have mentioned as "all provisions made by assessee" instead of specifying the two types of provisions. Consequently, if any provision made by the....