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TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 813
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....bank vs. CIT 323 ITR 166 is applicable to both banking and non-banking companies. 3. The first issue raised by the assessee is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the disallowance under the provision of 36(1)(va) r.w.s. 2(24)(x) of the Act. 4. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of manufacturing and trading of Ceramics Tiles Chemicals. The AO during the assessment proceedings found that the assessee has deposited Employees Contribution to PF/ESI beyond the due date specified under the relevant Act i.e. PF/Employees State Insurance for an amount of Rs. 1,73,835/- only. As per the AO such deduction was not allowed in pursuance to the provisions of section 36(1)(va) of the Act r.w.s. 2(24)(x) of the Act. Accordingly, the AO the same and added the sum of Rs. 1,73,835/- to the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the Ld. CIT(A), who confirmed the order of the AO. 6. The Ld. AR before us filed a paper book running from pages 1 to 51 and left the issue on hand at the discretion of the Bench. 7. On the other hand Ld. DR vehemently....
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....deduction under the provision of Act. Therefore the same was disallowed and added back to the total income of the assesse. 11. Aggrieved assessee preferred an appeal before the Ld.CIT(A), who confirmed the order of the AO by observing as under: As the case at hand appellant has debited the provision for doubtful debt and credited the liability side also with the provisions of doubtful debt admittedly the ratio of judgment of Hon'ble Supreme Court in the case of Vijaya bank is clearly against the appellant. Hence, I do not find any merit in the argument of appellant and the action of AO disallowing this sum of Rs. 55,69,760/- is upheld. Ground no.2 of the appeal is dismissed. 12. Being aggrieved by the order of Ld. CIT(A) the assessee is in appeal before us. 13. The Ld. AR before us contended that the assesse has adjusted the provision made against the trade receivable shown in the Balance sheet as on 31/03/2014. Accordingly he contended that the provision made by the assessee with respect to the trade receivable are eligible for deduction. 14. On the other hand Ld. DR vehemently supported the order of the authorities below: 15. We have heard the rival contentions of both th....
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....d, as stated hereinabove. In other words, the amount of loans and advances or the debtors at the year-end in the balance-sheet is shown as net of the provisions for impugned debt. However, what is being insisted upon by the Assessing Officer is that mere reduction of the amount of loans and advances or the debtors at the year-end would not suffice and, in the interest of transparency, it would be desirable for the assessee-bank to close each and every individual account of loans and advances or debtors as a pre-condition for claiming deduction under section 36(1)(vii) of 1961 Act. This view has been taken by the Assessing Officer because the Assessing Officer apprehended that the assessee-bank might be taking the benefit of deduction under section 36(1)(vii) of1961 Act, twice over. [See Order of CIT (A) at pages 66, 67 and 72 of the Paper Book, which refers to the apprehensions of the Assessing Officer]. In this context, it may be noted that there is no finding of the Assessing Officer that the assessee had unauthorisedly claimed the benefit of deduction under section 36(1)(vii), twice over. The Order of the Assessing Officer is based on an apprehension that, if the assessee fails ....
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....vances or debtors on assets side of balance sheet amounts to writing off for grant of deduction. Moreso, disallowance for failure to close individual account of each debtors in account books is not justified. Further that, we have also carefully considered the judgment passed by the Hon'ble Jurisdictional High Court in the case of CIT-vs-Vodafone Essar Gujarat Ltd. While deciding the identical issue in favour of the assessee, the Hon'ble High Court took into consideration of the judgment passed in the matter of Vijaya Bank and observed as follows: "16. We may however, appreciate the implication of the ratio laid down by the Supreme Court in case of Vijaya Bank (supra), on the true interpretation of clause(i) to the explanation 1 and the decisions of Karnataka High Court in cases of Yokogawa India Ltd. (supra) and Kirloskar Systems Ltd. (supra). Vijaya Bank (supra) was a case arising under section 36(1)(vii) of the Act. The assessee before the Supreme Court was a bank. The issue considered by the Supreme Court was whether it was imperative for the assessee bank to close the individual account of each of its debtors in its books or a mere reduction in the loans and advances or ....
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....ss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989." 17. The Supreme Court (in Vijaya Bank) further observed as under : "7. One point needs to be clarified. According to Shri Bishwajit Bhattacharya, learned Additional Solicitor General appearing for the Department, the view expressed by the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [supra] was prior to the insertion of the Explanation vide Finance Act, 2001, with effect from 1st April, 1989, hence, that law is no more a good law. According to the learned counsel, in view of the insertion of the said Explanation in Section 36(1)(vii) with effect from 1st April, 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 ....
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....ould constitute a write-off of an actual debt. On the other hand, if an assessee debits provision for doubtful debt to the Profit and Loss account and makes a corresponding credit to the current liabilities and provisions on the liabilities side of the balance sheet, then it would constitute a provision for doubtful debt and in such a case after 1.4.1989, the assessee could claim no deduction under section 36(1)(vii) of the Act. 19. This principle was further clarified in case of Vijaya Bank (supra) by observing that in case on hand, the assessee besides debiting the profit and loss account and creating a provision for bad and doubtful debt, had simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the asset side of the balance sheet and consequently, at the end of the year, the figure of loans and advances or the debtors on the asset side of the balance sheet was shown as net of the provision for the bad debt. Thereafter, the Supreme Court rejecting the Revenue's contention that for the bank to take benefit of section 36(1)(vii), must close the account of the debtors, decided the question in fa....