TaxTMI 
TaxTMI 
2005 (7) TMI 70
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....ether, on the facts and circumstances of the case, and in view of the provisions of section 36(1)(vii), an assessee other than a banking company can be allowed a claim for a bad debt on the basis of a mere provision?" We have heard learned counsel for the parties and perused the record. The relevant assessment year is 1997-98. For this year the assessee claimed bad debt of Rs. 3 lakhs. The Assessing Officer disallowed it on the ground that it was shown as a provision for bad and doubtful debts in the books of the assessee, but the assessee had not actually written off the bad debt of Rs. 3 lakhs as irrecoverable in its books of account. The assessee is a limited liability company, manufacturing control systems and equipment. It received three orders from M/s. Ignifluid Boilers India Limited for Rs. 15 lakhs, Rs. 16,17,000 and Rs. 1,50,000 respectively. The orders were completed on February 3, 1996, and invoices were raised. The customer thereafter made part payment and confirmed the balance of Rs. 9,93,350 as on July 29, 1996. The assessee tried to realise the balance from the customer by follow-up letters, fax messages and telephone calls on several occasions, but despite....
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....cial institution..." (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (iv) where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988 or any earlier assessment year), and the Assessing Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply". Learned counsel for the Department submitted that a mere provision of bad debt is not sufficient to get the benefit of the above provision and it is only when the debt is actually written off as irrecoverable in the books of account that a claim for bad debt can be allowed as a deduction. On the other hand, the submission of learned counsel for the assessee is that it was only by an inadvertent mistake committed by the assessee that a narration was made in the profit and loss account as "provision for bad debt". On ....
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....ounts and not on the basis of a mere provision. Learned counsel for the assessee has relied on the decision of the Supreme Court reported in CIT v. Asea Ltd. [2002] 258 ITR 407 (Bom) where deduction of a bad debt was allowed on the basis of a provision. However, the above decision was rendered in the context of section 36(1)(vii) as it stood prior to 1989. Hence the said decision is clearly distinguishable. Learned counsel for the assessee then contended that the Revenue never objected to the fact of the debt becoming bad in the year of account, but only objected to the fact that it has not been written off as irrecoverable in the assessee's accounts. In our opinion, the principle of plain or literal interpretation has to be applied in interpreting a taxing statute. As observed by Lord Cairns in Partington v. Attorney General [1869] LR 4 HL 100: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind. On the other hand if the court seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law t....
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....est on the assessee's own contribution to an unrecognized provident fund could be treated as salary. The Supreme Court of India held that the language of section 17(3) was plain and unambiguous, and hence the said amount was not salary but income from other sources and taxable under section 56. In Polestar Electronic P. Ltd. v. Addl. CST [1978] 41 STC 409; AIR 1978 SC 897, the question was whether sales outside Delhi would also be included in taxable income. The Supreme Court held that the section used the word "resale" simpliciter, and hence it referred to all resales and could not be limited to resales within Delhi alone. Thus the Supreme Court went by the plain language of the statute, and did not speculate on the intention of the Legislature. In Hansraj Gordhandas v. H.H. Dave, Asst. Collector [1978] 2 ELT 350, the Supreme Court of India considered the language of a notification under the Central Excise Tariff and held that all that was required for claiming an exemption was that the cotton fabric must be produced on power looms owned by the co-operative society. There was no further requirement in the language of the notification that the cotton fabric must be produced b....