9911796707
TMI Blog2019 (5) TMI 1884X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961 (hereinafter referred as to the Act ) arising out of the order dated 01.03.2016 passed by the DCIT, Circle 4(1)(2), Ahmedabad for the Assessment Year 2013-14 with the following grounds: 1. The learned CIT(A) has erred in confirming addition of ₹ 2,21,627/- under Section 36(1)(va) read with Section 2(24)(x) in as much as the assessee has paid such contribution before the end of accounting year for all months except for the month of February and March and the Gujarat High Court decision in the case of CIT V/s. GSRTC 366 ITR 170 is not applicable on the facts of the case. 2. The learned CIT(A) has erred in confirming addition of provision for bad and doubtful debts of ₹ 5,23,625/- under Section 36(1)(vii) in as much as the assessee is covered by SC decision in the case of CIT vs. Vijya Bank 323 ITR 166 (SC). 2. Ground No.1 : At the time of hearing of the instant appeal the Learned Counsel appearing for the assessee submitted before us that he does not want to proceed with this ground of appeal. Therefore, the same is dismissed as not pressed. 3. Ground No.2 : This ground of appeal relates to confirming addition of provision fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the Profit and Loss account in respect of doubtful debts and the same amount is reduced in the balance sheet from sundry debtors trade receivable which is evident from the balance sheet in Note No.14 to the accounts which was also placed before the Learned CIT(A), however, without any result. The reduction from the sundry debtors amounts to actual write off as held by the Hon ble Apex Court in the case as cited above as also submitted by the Learned AR. The said judgment is applicable to the non-banking company also. In that view of the matter, he prayed for deletion of addition made by the authorities below. On the contrary, the Learned DR relied upon the order passed by the authorities below. 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 in the balance sheet from sundry debtors/trade receivable. It also appears from the records that the judgment passed by the Hon ble Supreme Court in the case of Vijaya Bank has been distinguished by the authorities belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, after April 1, 1989, a distinct dichotomy is brought in by way of the said Explanation to section 36(1) (vii). Consequently, after April 1, 1989, a mere provision for bad debt would not be entitled to deduction under Section 36(1)(vii). To understand the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondingly/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 provisions for impugned bad debt. This aspect is lost sight of by the High Court in it's impugned judgement. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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