TaxTMI 
TaxTMI 
2017 (1) TMI 319
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....intains books of accounts in accordance with the provisions of Companies Act and the mandate of the Reserve Bank of India as applicable to an NBFC. Parallelly, it maintains books in accordance with the provisions of the Income Tax Act 1961 (in short 'the Act') for the purpose of computation of income there under. Adverting to the first issue, the Assessee, in finalizing its corporate accounts made a provision in respect of debts advanced by it that were not realizable. For the purpose of Income Tax, the bad debts were written off in the Profit and Loss Account and claimed as a deduction in the computation of income in terms of section 36(1)(vii) of the Act. The claim was disallowed by the assessing officer vide order dated 30.12.2008, but allowed by the Commissioner of Income Tax (Appeal) (in short CIT(A)) by order dated 25.2.2010 and the Tribunal by its order dated 16-12-2010, against which the present appeal is filed. 3. Since the impugned order of the Tribunal has made reference to orders of the appellate authorities for previous assessment years, we refer to the history of assessments commencing AY 1995-96 onwards wherein the identical issue as in the present year ar....
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....ethod of write off of a debt adopted by the Assessee was not in accordance with the prescription by the Supreme Court in the cases of Southern Technologies vs. The Joint Commissioner of Income Tax, Coimbatore (187 TAXMAN 346) and Vijaya Bank vs. Commissioner of Income Tax (190 TAXMAN 257). He would thus urge that the order of the Tribunal be reversed and the order of the Assessing Officer disallowing the claim of bad debts be restored. 6. In reply, Mr.Eshwar, learned Senior Counsel would submit that the maintenance of two sets of books is perfectly in order. In any event, this objection of the Department was not maintainable at this stage for the reason that the CIT(A) in order dated 25.02.2010 had specifically adjudicated upon this aspect of the matter, holding that the maintenance of two sets of financials, one in compliance of the Companies Act and the other in accordance with the provisions of the Income Tax Act, was in order, upholding the same. No ground had been raised before the Tribunal challenging this conclusion of the CIT(A) and the Department had allowed it to become final. On merits, he would state that the bad debts, having been written off in the Profit and the L....
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....d Debts Recovery to the extent of Rs. 1,90,75,851/-. This has been shown in Schedule J of Profit & Loss Account Income from operations Bad Debts Recovery. 9. Our attention has also been invited to the Profit and Loss account that substantiates the above methodology. Thus, it is clear that the claim of bad debts relates to debts actually written off and not a provision made in this regard. The Supreme Court in the case of Vijaya Bank (supra) explaining the methodology for proper write-off set out in accordance with the Judgment of the Supreme Court in Southern Technologies (supra) states as follows: To understand the above dichotomy, one must understand how to write off. If an assessee debits an amount of doubtful debt to the P&L Account and credits the asset account like sundry debtors Account, it would constitute a write off of an actual debt. However, if an assesse debits provision for doubtful debt to the P&L Account and makes a corresponding credit to the Current liabilities and provisionson the Liabilities side of the balance sheet, then it would constitute a provision for doubtful debt. In the latter case, assesse would not be entitled to deduction after 1-4-1989.....
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....ose and the other for I.T. purpose, is relevant and was not considered by any authorities in the preceding A.Ys. 11. It is a settled principle of law that having accepted an issue for several years, the Department, if it wishes to later agitate the same, should provide proper justification for the change in view. Both the order of assessment dated 30.12.2008 as well as the memorandum of tax case (appeal) filed in 2013 are silent as to why the issue has been suddenly raked up at a distance of more than a decade and the contents of the e-mail in response to a communication by Standing Counsel on 21.11.2016, certainly cannot supplement either. (Chief Election Commissioner Vs. Mohinder Singh Gill (1978 AIR SC 851). That apart, the justification set out in the e-mail is in itself, factually incorrect. The fact that the Assessee maintains two sets of books, one for the purpose of Companies Act and other for the purpose of the Income Tax Act and the differing treatment of bad debts in both was well within the knowledge of the assessing officer from 1994 when the issue was first raised as would be apparent from the orders of the Tribunal for earlier years. To say that these facts were u....