2016 (12) TMI 171 - AT - Income Tax

Disallowance of Bad Debts Written off - Held that - Admittedly the amounts written off as stated above includes a sum of ₹ 51,95,96,000/- relating to the assessment year 2009-10 which the assessee claims as deduction under section 36(1)(vii) . We find that if this deduction is allowed, then it would amount to double deduction granted to the assessee, in view of the fact that the assessee has already granted deduction under section 36(1) (viia)(c) of the Act in view of making provision in the year 2003-04. Since the bad debts written off in the current assessment year do not exceed credit balance in the provision for bad and doubtful debts account, the authorities below have rightly disallowed the amount claimed as deduction by the assessee, inasmuch as the intention of the legislature was to see that deductions for bad debts in respect of the very same amount covered by clause (viia) of the Act is not again claimed under clause (vii) of the Act. With this view of the matter, we do not find any merits in the contention of the Ld. AR. Hence, we find that the orders of the authorities below do not warrant any interference and the same are hereby upheld. This ground of appeal of assessee is dismissed.

Summary

Issues:
Disallowance of bad debts written off under section 36(1)(vii) of the Income Tax Act, 1961 for the Assessment Year 2009-10.

Analysis:
The appeal arose from the order of the CIT(A)-VI, Kolkata, regarding the disallowance of bad debts written off by the assessee, an Industrial Investment Bank, amounting to ?51,95,96,000 for the AY 2009-10. The assessee had filed a revised return declaring a loss of ?74,72,10,744. The AO disallowed the bad debts written off, leading to the appeal. The CIT(A) upheld the disallowance, prompting the assessee to appeal further.

The main contention was whether the bad debts written off exceeded the credit balance in the provision for bad and doubtful debts account, as required by section 36(1)(vii) of the Act. The assessee argued that the account referred to in the proviso to section 36(1)(vii) was different from the provision for bad and doubtful debts account in the financial statements. The authorities below disallowed the deduction, stating that it would result in a double deduction since the assessee had already claimed a deduction under section 36(1)(viia)(c) for the provision made in the AY 2003-04.

The Tribunal found that the assessee had made provisions for bad and doubtful debts in previous years and had periodically written off amounts. The unabsorbed portion left after these write-offs was still significant. Considering the total write-offs and provisions, allowing the deduction for the bad debts written off in the current assessment year would result in a double benefit for the assessee. Therefore, the Tribunal upheld the orders of the authorities below, dismissing the appeal of the assessee.

In conclusion, the Tribunal held that the disallowance of the bad debts written off was justified as it would lead to a double deduction for the same amount already covered under a different provision of the Act. The appeal of the assessee was dismissed, and the orders of the lower authorities were upheld.