TaxTMI 
TaxTMI 
2022 (11) TMI 183
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibution of Ayurvedic veterinary medicines. For ay 2011-12, the assessee filed return of income on 25.9.2011. by declaring 3,80,71,754. The case was selected for scrutiny under CASS and notice u/s. 143(2) was duly served on the assessee. The AO completed the assessment by making an addition of Rs,44,57,060 claimed by the assessee towards provision for doubtful debts debited in the P&L Account on the ground that it was an unascertained liability. The AO made the addition in both income under normal provisions of the Act as well as book profits u/s. 115JB. Aggrieved, the assessee filed an appeal before the CIT(A). 3. Before the CIT(Appeals), the assessee submitted that the assessee has made a provision for bad & doubtful debts by debiting t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore decided in favour of the appellant." 5. Since the CITAA has not deleted the addition made to 115JB while allowing the appeal, the assessee preferred an appeal before the Tribunal on this specific point raising the following grounds:- 1. "That the order of the Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests 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 not providing specific finding that the provision for bad and doubtful debts amounting to Rs. 44,57,060 cannot be added to book profits computed u/s 115JB of the Act even though he has accepted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in this regard relied on the decision of the Hon'ble Supreme Court in the case of CIT v. HCL Comnet Systems & Services Ltd., 305 ITR 409 (SC). The ld. AR also submitted that provision for bad & doubtful debt shall not fall under clause (i) of Explanation 1 to sub-section (2) of section 115JB. Since in assessee's case, the said provision is reduced from the balance of sundry debtors that would amount to actual write off which would not be hit by the provisions of Explanation 1 to sub-section (2) of section 115JB. The ld. AR in this regard placed reliance on the decision of Karnataka High Court in the case of CIT v. Kirloskar Systems Ltd. (40 taxmann.com 124). The ld. AR also brought to our attention various other judicial pronouncements that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liability; and the provision should be for other than ascertained liability, i.e., it should be for an unascertained liability. In other words, all the ingredients should be satisfied to attract Item (c) of the Explanation to section 115JA. In our view, Item (c) is not attracted. There are two types of "debt". A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case "debt" under consideration is "debt receivable" by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the prob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tful debts is reduced from the sundry debtors from the financial year end 31.3.2011. The extract of Note 10 to the financials is given below:- 10. From the above, it is clear that the assessee has adjusted the provision of bad & doubtful debts against the sundry debtors and following the decision of the Hon'ble Supreme Court in the case of Vijaya Bank v. CIT [2010] 323 ITR 166, which is followed in the decisions of Kirloskar Systems Ltd. (supra) and Yokogawa India Ltd. (supra) by the Hon'ble jurisdictional High Court, we hold that the provision made by the assessee for bad & doubtful debts is the actual write off and not a mere provision and therefore cannot be adjusted under clause (i) of Explanation 1 to sub-section (2) of section 115J....