2022 (11) TMI 183

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..... 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 the P&L account and on the assets side, the ....

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....ince 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 the decision of the jurisdictional High Court in favour of the ass....

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.... 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 he relied on during the course of appellate proceedings. 7. The ld. DR relied on th....

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....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 probable diminution in the value of asset, i.e., debt which is an amount receivable by the assessee.....