TaxTMI 
TaxTMI 
2019 (3) TMI 219
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....-tax (Appeals), in so far it is prejudicial to the interest of the appellant is bad and erroneous in law and against the facts and circumstances of the case. 2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the disallowance of provision made towards non-performing investments of Rs. 97,00,000/- even though the same has become irrecoverable and was made as per the direction of Reserve Bank of India. 3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in law and in facts in allowing Rs. 53,250/- under section 36(1)(viia) instead of Rs. 2,39,429/-. 4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in....
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..... 04. The Ld. AR had submitted that the assessee had obtained licence from RBI to run the banking business. The assessee filed return of income for A. Y. 2012-13 declaring loss of Rs. 89,12,597/-. The AO passed order u/s.143(3) where, in para 5.2 the AO had recorded that the assessee had not written off the debts in its books of account and the assessee is still showing the debts as balance in the assets of the balance sheet. Further it was pointed out by the AO that the assessee had debited the provision for bad and doubtful debts in the profit and loss account which clearly shows that the assessee had not written off such amounts in its books of account. On the basis of the above the AO had disallowed the provision for bad and do....
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....only a provision in its accounts for bad debts and interest thereon and even though the amount is not actually written off by debiting the profit and loss account of the assessee and crediting the amount to the account of the debtor, the assessee was still entitled to deduction under section 36(1)(vii). (See CIT v. Jwala Prasad Tiwari [1953] 24 ITR 537 (Bom) and Vithaldas H. Dhanjibhai Bardanwala v. CIT [1981] 130 ITR 95 (Guj)). Such state of law prevailed up to and including the assessment year 1988-89. However, by insertion (with effect from April 1, 1989) of a new Explanation in section 36(1)(vii), it has been clarified that any bad debt written off as irrecoverable in the account of the asses see will not include any provision ....
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....the learned counsel, in view of the insertion of the said Explanation in section 36(1)(vii) with effect from April 1, 1989, a mere debit of the impugned amount of bad debt to the profit and loss account would not amount to actual write off. According to him, the Explanation makes it very clear that there is a dichotomy between actual write off on the one hand and a provision for bad and doubtful debt on the other. He submitted that a mere debit to the profit and loss account would constitute a provision for bad and doubtful debt, it would not constitute actual write off and that was the very reason why the Explanation stood inserted. According to him, prior to the Finance Act, 2001, many assessees used to take the benefit of deduct....