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TMI Blog2012 (12) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... ade advances, inventories, work-in-progress and fixed assets aggregating to Rs. 236.18 crores, in addition to the loss declared by the assessee in its original return. The Assessing Officer disallowed the claim of deduction of 236.18 crores claimed by the assessee in the revised return. In the original assessment order as well as rectification order, book profits under section 115JB were determined at Rs. 54,57,346/-. 3. Aggrieved by the order of Assessing Officer, the assessee preferred an appeal before CIT(A). In the appeal before the CIT(A) the assessee raised as many as 12 grounds and an additional ground to carry forward loss computed under normal provisions of the Income Tax Act, 1961. 4. The authorised representative appearing before the CIT(A) admitted that the following three grounds are main grounds of appeal requiring adjudication:- "i) Disallowance of claim for deduction of Rs.2,36,17,64,930/- towards write off of bad debts/trade advances/inventories/assets & CWIP is incorrect. ii) Computation of book profit without deducting Rs. 2,36,17,64,930/- being the value of the exceptional items written off in the books after computing profit of the business for the year. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only pertains to telecasting rights but also other aspects such as bandwidth, software licenses, production of TV episodes, production of animation films etc. The expenses towards bandwidth and software licenses are of capital in nature and hence cannot be considered as revenue loss. 2.3 The CIT(A) ought to have seen that loans and advances are reflected in the balance sheet under the heading exceptional items in schedule 18 and are not reflected in the P & L account. Hence it is a below the line item and has been routed through a different name in the balance sheet. 2.4 It is also submitted that the evidences for breakup of advances written off have been produced by the assessee for the first time before the CIT(A) and the CIT(A) failed to give an opportunity to the Assessing Officer in terms of Rule 46A. 3.1 The CIT(A) erred in allowing bad debts written off to the tune of Rs. 2,26,90,990/- 3.2 It is submitted that as in the case of loans and advances the bad debts are also not reflected in the P & L account and they are reflected in schedule 18 of the balance sheet under the heading exceptional items. The claim is not routed through P and L account. 4.1 The CIT(A) erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87,18,07,529 8. On the other hand, D.R. appearing for the revenue submitted that the CIT(A) has erred in allowing the following claims of the assessee:- Loans & advances written off to the tune of Rs. 30,74,52,104 Bad debts written off Rs. 2,26,90,990 Inventories written off Rs. 53,76,14,307 He further submitted that the CIT(A) has erred in allowing the deduction claimed by the assessee under section 115JB of the Act. He submitted that loss claimed by the assessee in the return of income is not genuine. The D.R. also submitted written submissions during the course of argument. In order to support his contentions/submissions, he relied on the following judgements:- i) Hasimara Industries Ltd. Vs. CIT., 231 ITR 842(SC) ii) CIT Vs. R.Chiambaranatha Mudaliar, 240 ITR 552 iii) Allied Electronics & Magnetics Ltd. Vs. DCIT., 304 ITR 160 iv) CIT Vs. Swamiji Mills Ltd., 342 ITR 250(Mad) The D.R. submitted that the assessee had only filed four papers before the Assessing Officer during the course of assessment including letter dated 5.8.2008 and details of assets written off for the assessment year 2006-07. Except for the four papers which are at page nos.1 to 4 of the pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not submitting these documents to the Assessing Officer. The assessee has relied on the case of Gulf Oil Corporation Ltd. (supra), Sabra Impex Ltd. (supra) and Kopran Drugs Ltd.(supra). The facts of the said cases and the ratio laid down by the Tribunal in the aforementioned cases are totally different from the issue in hand. Therefore, the judgements relied on by the Authorised Representative do not come to the rescue of assessee or to support the contentions/submissions made by the counsel for the assessee. 11. The CIT(A) has rejected the calculations made by the Assessing Officer under the provisions of section 115JB of the Act. We are of the view that the Assessing Officer has rightly made calculations - reducing the book profits by inventories written off, advances written off, discarded assets and bad debts written off. The Assessing Officer has made calculations as per the provisions of section 115JB of the Act and has rightly observed in his order that "the book profit cannot be adjusted except for the items specified in the section". The items aforementioned by the assessee are not specified in section 115JB. Therefore, the deduction claimed by the assessee in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for deduction is made. The term "written off" in accounting practice means that an account which was previously shown as asset must be transferred to the expense account or the profit and loss account. The writing off of bad debts without charging the same in the profit and loss account is not a write off at all. In the present case, the assessee had not written off the debts in the books of account as per provisions of section 36(1)(vii). The CIT(A) has erred in discarding the view of the Assessing Officer by terming it as a short sight. The principles of accounting are to be followed strictly while giving treatment to the adjustments and recording findings thereon. It would not be out of place to mention here that the assessee intends to write off debts terming than to be 'Bad' which it had acquired from the amalgamating companies. Moreover, the assessee is claiming write off of bad debts in violation of the provisions of section 36(2)(i) as well. The relevant extract of the provision is reproduced hereinbelow:- "36(2) (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous ..... 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