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2018 (4) TMI 993 - ITAT HYDERABADDisallowance of sales tax demand - allowable busniss expenditure - Held that:- We are of the opinion that the amount of sales tax is not in the nature of ‘penalty’ and is allowable as ‘business expenditure’. As relying on Chemical Constructions case [1998 (11) TMI 52 - MADRAS High Court] we are of the opinion that sales tax so levied on assessee is not in the nature of penalty and is an allowable expenditure as per the provisions of the Act. AO is directed to allow the amount. - Decided in favour of assessee Disallowance of bad debts written off - AO disallowed the amount stating that assessee has not taken any genuine effort in collecting the outstanding debts like - writing letters to the above Debtors frequently and sending legal notices - Held that:- The orders of the authorities cannot be upheld on this issue. The provisions of Section 36(1)(vii) have been amended w.e.f. 01-04-1989. The provision has been amended to state that any amount of bad debt or part thereof which is written off as irrecoverable in the accounts of assessee for the previous year is allowable as a deduction. See case of T.R.F. Ltd., Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] - since the amount is written off in the books of account as irrecoverable, we direct the AO to allow the amount.- Decided in favour of assessee Addition towards bad debts provision written back - MAT computation - Held that:- Neither the AO nor the CIT(A) has examined the issue in the correct perspective. If the provision for bad and doubtful debts is not allowed as a deduction in the year in which the provision was made, the same cannot be considered as income in the year in which the provisions were written back. The accounting under the company law stands on a different footing from the computation of income in the income tax proceedings. Since the statement given by assessee and extracted above has not been examined by the AO and CIT(A) [even though they are provided before them], we are of the opinion that this aspect should be examined by the AO and in case the provisions are not allowed in the respective years in the respective computations as explained before us, then, AO is directed not to treat the amounts as income in the year under consideration to that extent. The issue under MAT provisions also is directly covered by Explanation-1 of Section 115JB. Therefore, AO is directed to exclude the amounts from both normal computation and MAT computations, subject to verification that so much of the amount has not been allowed in the year of making the provision. Ground is considered allowed for statistical purposes.
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