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2022 (12) TMI 880 - AT - Income TaxAdjustment of bad debts for the purpose of book profits u/s.115JB - HELD THAT - If the provision for bad and doubtful debts which is debited to the P L account would constitute actual write off if the same is reduced from loans dvances / debtors to reflect the net balance in the statement of financials. In assessee s case, in the financials for the year ended 31.3.2012 pg. 30 57 of PB , we notice that the assessee had shown the net amount for trade receivables after adjusting the provision for doubtful debts. Considering the ratio laid down by the Hon ble Supreme Court in the case of Vijaya Bank 2010 (4) TMI 46 - SUPREME COURT in our view the assessee has actually written off the bad debts as of 31.03.2012. Assessee has written of the debts which is an asset and therefore the CIT(A) has correctly considered the issue under clause (i) and not under clause (c). The plain reading of the above provisions make it clear that the provision made towards diminution in the value of asset has to be added. In assessee s has we have already held that the bad debts have been actually written of and is not a provision following the decision of the Apex Court in the case of Vijaya Bank 2010 (4) TMI 46 - SUPREME COURT . Accordingly, the actual write off of the asset cannot be considered as an addition under clause (i) of Explanation 1 to section 115JB. With regard to the contention of the ld DR that the decision of the jurisdictional High Court in the case of Yokogawa India Ltd 2011 (8) TMI 766 - KARNATAKA HIGH COURT is not applicable, in our view though the question of law relates to whether the Appellate Authorities were correct in holding that the provisions made for bad and doubtful debts cannot be added back in accordance with the Explanation (c) to Section 115JB(1) of the Act, the ratio laid down by the Hon ble High Court is that the if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. We therefore hold that the bad debts which is reduced from the asset side of the debts which amounts to actual write off cannot be adjusted for the purpose of book profits u/s.115JB. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of depreciation on goodwill. 2. Disallowance of deduction under Section 10AA. 3. Disallowance of club expenses. 4. Addition of provision for bad debts to book profits under Section 115JB. 5. Disallowance under Section 14A added to book profits under Section 115JB. 6. Levy of interest under Sections 234C, 220(2), and 234B. Detailed Analysis: 1. Disallowance of Depreciation on Goodwill: The judgment does not provide specific details on this issue, indicating that it was not a focal point of the appeals or the tribunal's decision. 2. Disallowance of Deduction under Section 10AA: Similarly, the judgment does not elaborate on this issue, suggesting it was not a primary concern in the appeals. 3. Disallowance of Club Expenses: The judgment does not discuss this issue in detail, implying it was not central to the tribunal's decision. 4. Addition of Provision for Bad Debts to Book Profits under Section 115JB: The assessee argued that the amount of Rs. 50,22,576 was an actual write-off of bad debts and should not be added back to book profits under Section 115JB. The CIT(A) disagreed, stating that the amount was a provision for doubtful debts and not an actual write-off, thus justifying its addition to book profits. The Tribunal, however, sided with the assessee, referencing the Supreme Court's decision in Vijaya Bank v. CIT, which held that if a provision for doubtful debts is reduced from loans and advances/debtors in the balance sheet, it constitutes an actual write-off. The Tribunal concluded that the assessee had indeed written off the bad debts, and thus, the amount should not be added back to book profits under Section 115JB. 5. Disallowance under Section 14A Added to Book Profits under Section 115JB: The CIT(A) provided relief to the assessee by deleting the adjustment to book profits towards Section 14A disallowance. The Tribunal dismissed the revenue's appeal on this matter due to the tax effect being less than Rs. 50 lakhs, as per CBDT Circular No. 7/2019. 6. Levy of Interest under Sections 234C, 220(2), and 234B: The assessee contested the levy of interest under Sections 234C, 220(2), and 234B, arguing that the disallowance was not tenable. However, the judgment does not provide a detailed analysis or conclusion on this issue, indicating it may not have been a primary focus of the tribunal's decision. Conclusion: The Tribunal allowed the assessee's appeal regarding the addition of provision for bad debts to book profits under Section 115JB, following the Supreme Court's ruling in Vijaya Bank v. CIT, and dismissed the revenue's appeal due to the tax effect being below the monetary limit as per CBDT Circular. The other issues, including disallowance of depreciation on goodwill, deduction under Section 10AA, club expenses, and levy of interest, were not discussed in detail, suggesting they were not central to the tribunal's decision.
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