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TMI Blog2022 (11) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME COURT] which is followed in the decisions of Kirloskar Systems Ltd. [ 2013 (12) TMI 9 - KARNATAKA HIGH COURT] and Yokogawa India Ltd. [ 2011 (8) TMI 766 - KARNATAKA HIGH COURT] by the Hon ble jurisdictional High Court, we hold that the provision made by the assessee for bad doubtful debts is the actual write off and not a mere provision and therefore cannot be adjusted under clause (i) of Explanation 1 to sub-section (2) of section 115JB. Hon ble Supreme Court in the case of HCL Comnet Systems [ 2008 (9) TMI 18 - SUPREME COURT] has clearly laid down that when the provision is made against a debt receivable, cannot be equated with a provision for liability and therefore cannot be adjusted under clause (c) of Explanation 1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the P L account and on the assets side, the same is reduced from the balance of debtors. The assessee also submitted that the AO has made addition by relying on clause (i) of Explanation 1 to sub-section (2) of section 115JB which is not correct since the assessee has actually written off the amount by adjusting the provision against the debtors. The assessee relied on the decision of Supreme Court in the case of Vijaya Bank v. CIT [2010] 323 ITR 166 (SC) wherein it was held that the adjustment of provision for bad and doubtful debts if reduced from the debtors or loans advance from the assets side of the balance sheet, then Explanation 1 section 115JA/115JB is not attracted. The assessee further relied on the decision of the Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the jurisdictional High Court in favour of the assessee. 3. That the learned Commissioner of Income Tax (Appeals) ought to have held that the provisions for bad and doubtful debts amounting to Rs. 44,57,060 is not an unascertained liability and therefore, not liable for addition under clause (c) in Explanation 1 to section 115JB of the Act. 4. That the learned Commissioner of Income Tax (Appeals) ought to have held that the provisions for bad and doubtful debts amounting to Rs. 44,57,060 is not a mere provision for diminution in the value of any asset as the same is debited to profit and loss account and reduced from the trade receivables on assets side of the balance sheet and therefore, it will not fall under the claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of appellate proceedings. 7. The ld. DR relied on the order of the CIT9A) 8. We have heard the rival submissions and perused the material on record. We notice that the CIT(A) has accepted the contentions of the assessee with regard to the fact that the provision for doubtful debts is an ascertained liability.The CIT(A) has deleted the adjustment made by stating that the assessee while computing the income under normal provisions of the Act already disallowed the provision and adding the same would amount to double addition. However, the CITA did not adjudicate the addition made by the AO to the book profits u/s. 115JB. We notice that the Hon ble SC in the case of HCL Comnet Systems (supra) has considered a similar iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the 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, in our view Item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the Assessing Officer was not justified in adding back the provision for doubtful debts of Rs. 92,15,187 under clause (c) of the Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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