9911796707
TMI Blog2001 (4) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been debited to the P L a/c. A reference was also made by the Assessing Officer to the Auditor's note No. 4 which, for the benefit of this order, is being reproduced as under: "Dues of Rs. 3,95,28,975 from M/s. Anchemedue Ltd. in respect of Tanzania Project are outstanding. The company had taken Export Credit Guarantee Corporation insurance cover to the extent of 90% of the dues i.e. Rs. 3,55,76,078. The project Exports made by the Company was under an unconditional and irrevocable guarantee issued by National Bank of Commerce, Tanzania. The customer viz., M/s. Anchemedue Ltd. as well as the guarantor bank have failed to pay the instalments of Rs. 2,08,68,416 which have become due upto 31-3-1989. The claim of the Company for recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08,68,416 ---------------- 28,78,114 Less: Deduction under section 80HHC 19,58,507 ---------------- 9,19,607 ---------------- A sum of Rs. 2,75,882 was held to be income chargeable to tax (30% of the above amount of book profits). 3. The matter was carried before the CIT(A) who held that provisions for doubtful debts was not on account of any contingencies but was on account of real loss which was ascertainable at the time of completion of the accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then assessee should have written off the account of the party itself instead of reducing the sundry debtors in the balance-sheet. In this connection, he relied on the decision of the Madras High Court in the case of Dy. CIT v. Beardsell Ltd. [2000] 162 CTR 467 which directly covers the issue before us. 4.1 In the course of hearing, a query was raised from the Bench as to how the amount for doubtful debts could be described on account of any liability, inasmuch as the assessee was not required to pay any sum to any person. Faced with the situation, the learned Sr. D.R. submitted that this aspect should be considered in broader sense. According to him, the legislature intended to add back all the provisions made by the assessee and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt could be written off either by crediting the party account or by giving corresponding entry of credit to the bad and doubtful account. In this regard, he relied on the decision of the Gujarat High Court in the case of Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1983] 143 ITR 166 which has also been followed by the Bombay High Court in the case of CIT v. General Insurance Corpn. of India [2001] 114 Taxman 13. It was further submitted by him that such amount could not be written off without the permission of Reserve Bank of India. Therefore, the claim of the assessee cannot be rejected on the ground that party account was not written off. He also relied on the decision of the Bombay High Court in the case of Jethabhai Hirji Jethabhai Ramdas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f items specified therein. The case of the Revenue is that the issue in the present case is governed by clause (c) of the Explanation which provides that amounts set aside to the provision made for meeting the liabilities other than the ascertained liabilities. So the question for our consideration is whether the provision made by the assessee for doubtful debts fall within the clause (c) of the above Explanation. 7. The perusal of the aforesaid clause shows that (1) there must be provision made by the assessee; (2) such provision must be to meet the liability of the assessee; and (3) such liability should be other than the ascertained liability. Further, it is seen that clause (a) of the Explanation speaks of the adjustment of the 'provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, we would like to discuss the case law relied upon by the learned Sr. DR. The decision of the Madras High Court in the case of Beardsell Ltd proceeds on the assumption that provision for doubtful debt was the provision for liability. It is on this basis, it was held that the provision towards irrecoverable debt could not be excluded unless it was ascertained one. The aspect of the issue considered by us was neither argued nor considered before/by the Court and hence the said case is quite distinguishable. Similarly the Bombay High Court in the case of Echjay Forgings (P.) Ltd. did not consider the aforesaid aspect. The Court decided the issue in favour of the assessee on the ground that the contention of the assessee that provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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