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TMI Blog2021 (7) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 36(1) - HELD THAT:- Assessee has claimed deduction for the provision of doubtful debts which was adjusted against the trade receivables as evident from the relevant schedule of the Balance Sheet of the assessee. we hold that the assessee is entitled to claim the deduction with respect to the provisions made by it against the trade receivables in the given facts and circumstances. Accordingly, we are not convinced with the finding of the authorities below and therefore the same deserves to be reversed. - Decided in favour of assessee. - ITA No.2412/AHD/2018 - - - Dated:- 9-7-2021 - Shri Rajpal Yadav, Vice President And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri A.C. Shah, A.R For the Revenue : Shri S.S. Shukla, Sr.D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-8, Ahmedabad, arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2014-2015. 2. The assessee has raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income referred to in section 28 and as per section 36(1)(va) such sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 apply, the assessee shall be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date i.e. date by which the assessee is required as an employer to credit the employee's contribution to the employee's account in the relevant fund, in the present case, the provident fund and ESI Fund under the Provident Fund Act and ESI Act. 8.1 There is no ambiguity to the fact that the assessee failed to deposit Employees Contribution to PF/ESI with in the due date specified under the relevant Act i.e. PF/Employees State Insurance. Thus the assessee is not entitled for the deduction for such amount of contribution to PF/ESI as discussed above in view of the judgment of Hon ble Gujarat High Court. In view of the above we do not find any merit in the ground of appeal raised by the assessee. Hence the ground of appeal of the assessee is hereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see shall not include any provision for bad and doubtful debts81 made in the accounts of the assessee;] 15.1 As per the above explanation there remains no ambiguity to the fact that the provisions made by the assessee with respect to the bad and doubtful debts will not be eligible for deduction. However, we find that the Hon ble Supreme Court in the case of Vijaya bank Vs. CIT reported in 323 ITR 166 has observed that the assessee is eligible for deduction with respect to the provisions made against the debtors provided it were claimed in the profit and loss account as well as such provision was adjusted against the sundry debtors/ bad and doubtful debts as shown in the balance sheet. The question raised before the Hon ble Supreme Court in the case of Vijaya Bank (supra) which reads as under: The second question which arises for determination in these civil appeals is, whether it is imperative for the assessee-bank to close the individual account of each debtor in its books or a mere reduction in the Loans and Advances Account or Debtors to the extent of the provision for bad and doubtful debt is sufficient? 15.2 The above question was answered by the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t its debtors. If individual accounts are to be closed, then the debtor/defendant in each of those suits would rely upon the Bank statement and contend that no amount is due and payable in which event the suit would be dismissed. 15.3 In the case on hand we have seen the relevant page of profit and loss account placed on page 39 of the paper book where the assessee has claimed deduction for the provision of doubtful debts amounting to ₹ 55,69,760/- which was adjusted against the trade receivables as evident from the relevant schedule of the Balance Sheet of the assessee placed on page 34 of the paper book. 15.4 Besides this we also note that the tribunal in the own case of the assessee for the assessment year 2013-14 involving identical facts and circumstances has allowed the issue on hand in its favour in ITA No. 2521/AHD/2017 vide order dated 17.5.2019. The relevant extract is reproduced as under: 6. Heard the respective parties, perused the relevant materials available on record. It appears that the assessee has actually debited the provision of ₹ 5,23,625/- to Profit and Loss account in respect of such doubtful debts and the same was also reduced i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in case of Southern Technologies Ltd. v. Jt. CIT [2010] 320 ITR 577/187 Taxman 346, in which the following observations were made : 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)(vii). [See CIT v. Jwala Prasad Tiwari (1953) 24 ITR 537 (Bom.) and Vithaldas H. Dhanjibhai Bardanwala v. CIT (1981) 130 ITR 95 (Guj.)] Such state of law prevailed up to and including the assessment year 1988-89. However, by insertion (with effect from April 1, 1989) of a new Explanation in section 36(1)(vii), it has been clarified that any bad debt written off as irrecoverable in the account of the assessee will not include any provision for bad and doubtful debt made in the accounts of the assessee. The said amendment indicates that before April 1, 1989, even a provision could be treated as a write off. However, af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual write off. To this extent, we agree with the contentions of Shri Bhattacharya. However, as stated by the Tribunal, in the present case, besides debiting the Profit and Loss Account and creating a provision for bad and doubtful debt, the assessee-Bank had correspondingly/simultaneously obliterated the said provision from it's accounts by reducing the corresponding amount from Loans and Advances/debtors on the asset side of the Balance Sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as net of the provision for impugned bad debt . In the judgement of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala [supra], 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 asset 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and not a mere provision. Respectfully, relying upon the judgment cited above, we do not hesitate to conclude that the assessee is entitled to be allowed the provision for bad and doubtful debts on the identical facts and circumstances of the case since it has debited the provision of ₹ 5,23,625/- to the Profit and Loss account in respect of doubtful debts and also reduced the same amount in the balance sheet from sundry debtors trade receivable. Such reduction from sundry debtors amounts to actual write off and hence we are of the considered opinion to delete the addition made by the authorities below. We order accordingly. 15.5 At the time of hearing, the learned DAR drew our attention on the various orders of the Hon ble Courts and the Tribunal. But in our considered view those judgments are not applicable to the facts of the present case in the given circumstances. 15.6 In view of the above, we hold that the assessee is entitled to claim the deduction with respect to the provisions made by it against the trade receivables in the given facts and circumstances. Accordingly, we are not convinced with the finding of the authorities below and therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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