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TMI Blog2024 (11) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... s eligible for the deduction as per section 36(1)(vii) of the Act, the Ld.CIT(A) had not considered the records properly and gave a finding that the assessee had failed to demonstrate. We found that the balance sheet as well as the other records produced by the assessee would demonstrate that the said amounts were written off by deducting the same in the P L account and thereafter the said set off was also properly recorded in the balance sheet and therefore the balance amounts after deducting the same of Rs. 94 Lakhs has been taken into consideration for the purpose of arriving the financial status of the assessee. he finding of the Ld.CIT(A) is without appreciating the facts properly and hence we are in agreement with the arguments advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. Thereafter, the case was selected for scrutiny and in the scrutiny assessment, the AO had disallowed the claim made for provision for bad and doubtful debts and provision for doubtful advances aggregating Rs. 94 Lakhs on the ground that the debtor s accounts are not closed and the debts are not written off as irrecoverable. The AO also disallowed the additional depreciation claimed by the assessee for the reason that the assessee had used the assets for less than 180 days and hence restricted the additional depreciation to 10%. The assessee challenged the said order before the Ld.CIT(A). The Ld.CIT(A) had accepted the claim of the additional depreciation whereas confirmed the disallowance of provision of bad and doubtful debts and adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en off were in the nature of trade advances in connection with the business of the appellant and are revenue in nature and hence were eligible to be claimed as revenue business expense. b) The Ld. CIT(A) ought to have noted that the appellant had debited the Provision for doubtful advances to the Profit Loss Account of the year and simultaneously reduced the said amount from the amount of Loans and Advances in the Balance Sheet. The provision for doubtful advances is not a general provision created by the appellant but is an actual write off of specifically identified trade advances. Accordingly, the said provisions are in the nature of write off of doubtful advances eligible for deduction while computing the taxable income. The appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision for doubtful advances and the net effect would be zero. The assessee had written off the said amounts of Rs 94,00,066 in the profit and loss account in respect of the bad and doubtful debts and advances and also reduced the said amount of provision from the amount of trade receivables on the asset side of the balance sheet. We have also perused the invoice wise details and the balance in the ledger folios in respect of the 3 assessee s which comes about Rs. 29,00,066/. The assessee in their respective ledger folios had written off the outstanding balances by stating that being debtors accounts set off against provision. Therefore, as per the documents submitted by the assessee, it is very clear that the assessee had written off the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at purpose, it was not necessary to close individual account of each of its debtors in its books. In the present case also, the assessee had written off the bad and doubtful debts and advances by debiting the P L account and also the balance sheet was prepared after considering the said written off and the debtors account has been closed by making necessary entries such as being debtors accounts set off against provision and therefore the present issue is squarely covered by the judgement of the Hon ble Supreme Court cited supra. In view of the above said facts we allow the appeal filed by the assessee. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 12th November, 2024. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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