2014 (10) TMI 857

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.... be added back to the book profit under Section 115JA of the Income Tax Act, 1961 (for short hereinafter referred to as 'the Act'). 2. The assessee is carrying on business in banking. In respect of the assessment year 1999-2000 the assessee filed the return of income computing its total income under the regular provisions of the Act as well as under Section 115JA of the Act. The assessee had claimed deduction under the provision for bad and doubtful debts of Rs. 8,73,11,283/- and provision for loss of assets of Rs. 1,20,00,000/-. The Assessing Authority held that the provision for doubtful and bad debts is not an ascertained liability and it is only a provision made by the assessee to safeguard against future losses, if any the a....

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....r Section 115JA of the Act in terms of explanation to Section 115JA of the Act, in particular clauses (c) and (g)'. 4. This Court had an occasion to consider the said question in the case of CIT v. Yokogawa India Ltd. [2012] 204 Taxman 305 wherein it was held as under :- "In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, it was held that item (c) of the Explanation is not attracted to the facts of the case. Item (c) in Sections 115JA and 115JB(1) are identical. In order to attract the Explanation, the debt which is doubtful or bad ....

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....rely debiting the impugned bad debt to the profit and loss account and, therefore, the Parliament stepped in by way of Explanation to say that a mere reduction of profits by debiting the amount to the profit and loss account per se would note constitute actual write off. The Apex Court accepted the said legal position. However, it was clarified that besides debiting the profit and loss account and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its account by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on....