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TMI Blog2012 (2) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... 08) 215 CTR (Bom) 158 : 313 ITR 137. On the other hand, the learned counsel for the assessee relied upon the decision from Hon'ble Delhi High Court in the case of CIT vs. AIMIL Limited and others; (2010) 188 Taxman 265 : (2010) 321 ITR 508 (Del). 3. We have considered the rival submissions and perused the material available on file. Brief facts of the case are that before the learned Assessing Officer the assessee challenged the addition of ₹ 37,76,800/- made on account of employees contribution towards provident fund by submitting the breakup of such contribution towards PF ESIC. As per the Assessing Officer, the contributions were paid beyond the dates provided u/s 43B read with Explanation, consequently, he made disallowance u/s 36(1)(va) of the Act. On appeal, learned Commissioner of Income Tax (Appeals) deleted the addition which is under challenge before this Tribunal. 3.1 If the provisions of section 43B read with section 36(1)(va) of the Act are kept in juxtaposition with the facts of the present appeal, the only requirement of the Act is that the deduction cannot be disallowed under section 43B of the Act, if the actual payment is made before the due dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of doubtful debts of ₹ 1,46,07,788/- by placing reliance upon the decision from Hon'ble Apex Court in the case of Vijay Bank vs. CIT (323 ITR 166) without appreciating the fact that the ratio laid down in that case is applicable in case of banks and not in other cases, in view of the provisions of section 36(1)(vii) read with section 36(2) of the Act and in view of the decision in Southern Technologies Limited (320 ITR 557) (SC). 4.1 The learned CIT DR advanced the argument which is identical to the ground raised by further submitting that it was a provision only and not the actual debts. On the other hand, the learned counsel for the assessee defended the impugned order. 4.2 We have considered the rival submissions and perused the material available on file. The learned Assessing Officer disallowed the claim on the plea that the assessee made mere debit entry in the profit and loss account which is not sufficient. The claim of the assessee is that the amount of provision was adjusted in the figures of debtors which was reduced in its accounts. The sum and substance of the arguments of the learned CIT DR is that the entry made by the assessee was merely a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful debts to the tune of ₹ 1,46,07,788/- but actually considered the doubtful debts to the tune of ₹ 1,95,02,650/- (page 26 of the paper book). The Assessing Officer on inner pages 4 and 5 of the assessment order has discussed the issue by adding the amount of ₹ 1,40,07,788/- to the total income of the assessee by observing that the assessee in his reply has nowhere mentioned that the amount which was written off as recoverable in the accounts of the assessee for the previous year, until and unless it is written off as a recoverable in his books of account, therefore, it is not allowable. We find that rather the copy of the audited balancesheet was filed before the Assessing Officer (pages 8 to 37 of the paper book) as mentioned earlier from pages 21 and 26 it is clear that the assessee has charged an amount of ₹ 1,46,07,788/- to the profit and loss account and correspondingly, the said amount was reduced from the figures of debtors. We are of the view, once the amount debited to the profit and loss account is carried to the balance-sheet and the corresponding amount is reduced from the debtors accounts, depicted on the asset side of the balance-sheet, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Southern Technologies Limited; (2010) 320 ITR 577 (paragraph 25 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 u/s 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 account of the assessee. The said amendment indicates that before 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 deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the current liabilities and provisions on the liability side of the balancesheet then it would constitute a provision for doubtful debt, therefore, in the latter case, the assessee would not be entitled to deduction after 1.4.1989. The Hon'ble Apex Court, in view of these facts, in the case of Vijay Bank (supra) consciously reproduced para 26 of the decision from Southern Technologies Limited (supra). After 1.4.1989 honesty of assessee s judgment is relevant. In order to take advantage of this provision, the assessee is required to establish that a debt due has become a worthless debt. It is not necessary for the assessee to show that he has failed to recover the debt despite taking legal action. The assessee is also not expected to say that he had become pessimistic about the prospect of the recovery of the debt in question. At the same time, the Department cannot insist on demonstrative and infallible proof that the debt has become debt. The only requirement is amendment In the circumstances, we find that the assessee is entitled to benefit of deduction under section 36(1)(vii) of the Act as there was an actual write off by the assessee, therefore, we affirm the stand o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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