2016 (4) TMI 252

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..... appreciating that as per the accounting standards the provisions are either shown separately in the balance sheet or may be reduced from the concerned asset/liability as per the practice followed by the assessee for writing its books of accounts? 2. Whether the Tribunal is correct in debiting the P & L account, the assessee as reduced the amount from the debtors thereby reducing the value of the asset without appreciating that provision of clause (i) of explanation 1 to section 115JB require that the net profit as shown in P & L account should be increased by the amount, or amount set aside as provision for diminution in the value of asset if any debited to the P & L account and reduction o the provision from the debtors is only a requirem .....

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..... ps:- "8. In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore it was held that Item (c) of the Explanation is not attracted to the facts of the case. Item (c) in s. 115JA and 115JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision is made which .....

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..... egal position. However it was clarified that besides debiting the P&L a/c and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet was shown as net of the provision for the impugned bad debt. Then the said amount representing bad debt or doubtful debt cannot be added in order to compute book profit. Therefore, after the Explanation the assessee is now required not only to debit the P&L as/c but simultaneously al .....

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