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TMI Blog2019 (3) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri. Laliet Kumar, Judicial Member For the Assessee : Shri. Ramasubramanyam, CA For the Revenue : Shri. Vikram Suryavamshi, Addl.CIT ORDER PER LALIET KUMAR, JUDICIAL MEMBER : The present appeal is filed by the assessee against the order of the CIT (A), Davangere, dt.28.09.2017, for the assessment year 2012-13. 02. Following grounds are raised by the assessee ; 1. That the order of the learned commissioner of income-tax (Appeals), in so far it is prejudicial to the interest of the appellant is bad and erroneous in law and against the facts and circumstances of the case. 2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the disallowance of provision made towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re me in this regard and find that the assessee's contentions are not tenable because what is debited in P L account is only a provision and not a crystallised liability. Any provision is to be added back to the income declared, therefore it is held that the entire BDDR of ₹ 97,00,000/debited to the Profit Loss a/c is to be disallowed. The AO is directed to verify the same and accordingly, bring the same to tax. Thus the ground fails. 04. The Ld. AR had submitted that the assessee had obtained licence from RBI to run the banking business. The assessee filed return of income for A. Y. 2012-13 declaring loss of ₹ 89,12,597/-. The AO passed order u/s.143(3) where, in para 5.2 the AO had recorded that the assessee had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of this court in the case of Southern Technologies Ltd. v. Joint CIT reported in [2010] 320 ITR 577 , (in which one of us S. H. Kapadia J. was a party) had an occasion to deal with the first question and it has been answered, accordingly, in favour of the assessee, vide paragraph 25, which reads as under (page 604) : Prior to April 1, 1989, the law, as it then stood, took the view that even in cases in which the assessee (s) makes only a provision in its accounts for bad debts and interest thereon and even though the amount is not actually written off by debiting the profit and loss account of the assessee and crediting the amount to the account of the debtor, the assessee was still entitled to deduction under section 36(1)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n after April 1, 1989. 7. One point needs to be clarified. According to Shri Bishwajit Bhattacharya, the learned Additional Solicitor General appearing for the Department, the view expressed by the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [1981] 130 ITR 95 was prior to the insertion of the Explanation vide the Finance Act, 2001, with effect from April 1, 1989, hence, that law is no more a good law. According to the learned counsel, in view of the insertion of the said Explanation in section 36(1)(vii) with effect from April 1, 1989, a mere debit of the impugned amount of bad debt to the profit and loss account would not amount to actual write off. According to him, the Explanation makes it very clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 95 , a mere debit to the profit and loss account was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only to debit the profit and loss account but simultaneously also reduce loans and advances or the debtors from the assets side of the balance-sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of the provisions for the impugned bad debt. This aspect is lost sight of by the High Court in its impugned judgment. In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under section 36(1)(vii) of 1961 Act as there was an actual write off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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