TaxTMI 
TaxTMI 
2022 (2) TMI 688
X X X X Extracts X X X X
X X X X Extracts X X X X
....10 March 2016, 26 December 2016 and 03 July 2017) is erroneous and prejudicial to the interest of the Revenue, in so far as the AO has not added back to the Total Income, an amount of Rs. 45,54,317 Lakhs representing provision for doubtful debts under provisions of Clause (vii) of Sub-Section 1 to See 36 of the Income Tax Act, 1961. 3. The Learned CIT has erred in not following the decision of Jurisdictional Hon'ble Karnataka High Court in case of M/s Sandvik Asia Limited (I.T.A. Nos. 563 C/w 564/2006) wherein under identical facts, the Hon'ble High Court has held that provision for doubtful debtors debited to P&L a/ c and simultaneously reduced from the Total Debtors, need not be added back to Total Income under provisions of Clause (vii) of Sub-Section 1 to See 36 of the Act. 4. The Learned CIT has erred in not following the decision of the Hon'ble Supreme Court in case of M/s Vijaya Bank (323 I'I'R 166). 5. The Learned CIT has erred in stating that the above cited decisions are distinguishable from the fact, of the Appellant. 6. Having regard to the fact that the Learned CIT in connection with the proceedings under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5. In this context, the assessee stated that it amounts actual of write off of debts and relied on the following judicial pronouncements:- (i) CIT v. M/s.Sandvik Asia Limited [ITA Nos.563 C/w 564/2006 (judgment dated 21st February, 2012)] - Karnataka High Court. (ii) Vijaya Bank v. CIT [(2010) 323 ITR 166 (SC)] 6. However, the CIT rejected the contentions raised by the assessee and passed the impugned order directing the A.O. to duly verify the claim of provision for bad and doubtful debts, afresh. The relevant finding of the CIT, reads as follows:- "5................. It is clear from the P & L A/c that the issue in question is clearly mentioned as provision for doubtful debts and the facts in the case laws cited are distinguishable from the facts of the present case. 6. From the foregoing facts as narrated above, it is obvious that the claim of the assessee has not been duly verified and the claim of provision of doubtful debts is set aside and remitted back to the file of the assessing officer for considering it afresh after giving due opportunity of being heard to the assessee and pass an order in accordance with law. With the above dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,905/- for the assessment year 1998- 99. Since the methodology followed by the assessee to write off was not in accordance with the provisions of Section 36(1)(vii) of the Income Tax Act, 1961, it's claim was not allowed. Aggrieved by the said order, the assessee preferred appeal to the Commissioner of Income Tax (Appeals). The appellate Commissioner held the writing off does not necessarily require credit to be given to each debtor's account. If bad debts are debited in profit and loss account and credited to another account named as "bad debt reserve account, bad debt suspense account etc," the requirement of writing off is met even though individual debtor's accounts are not credited. Therefore, he held, the Assessing Officer was not justified in disallowing the provision for doubtful debts in each assessment year. 3. Aggrieved by the said order, the Revenue preferred appeal to the Tribunal, which has confirmed the said order. However, the Tribunal held that it is not made mandatory that the write off can be only by squaring-up the account of debtors, The law is that the write off should be made in the accounts. In this case the assessee has debited the prof....
X X X X Extracts X X X X
X X X X Extracts X X X X
....off of an actual debt. However, 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. In the latter case, the assessee would not be entitled to deduction after April 1, 1989". "8. Coming to the second question, we may reiterate that it is not in dispute that Section 36(1)(vii) of the 1961 Act applies both to banking and non-banking businesses. The manner in which the write off is to be carried out has been explained hereinabove. It is important to note that the assessee Bank has not only been debiting the profit and loss account to the extent of the impugned bad debt, it is simultaneously reducing the amount of loans and advances or the debtors at the year-end, 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 the 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 debt....