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2012 (5) TMI 22 - AT - Income TaxDeduction u/s 36(1)(viia) of the Act - Provision for bad and doubtful debts - The assessee is assailing the decision of Ld CIT(A) in holding that the Provision for bad and doubtful debts created during the year should be netted off by the amount of provision created in earlier years and written back during the year and the amount of net provision so arrived at is only to be considered for the purpose of allowing deduction u/s 36(1)(viia) of the Act. - held that:- the decision in the case of The Lord Krishna Bank Ltd. [2010 (10) TMI 860 - Kerala High Court] shall apply to the assessee herein. We agree with the contention of the assessee that the provision for bad and doubtful debts newly created during the year under consideration should not be netted against the amount written back or reversed. However, there might be a situation that the provision created for a particular debt needs enhancement and in that situation, only the enhanced amount should be treated as the new provision for the purpose of sec. 36(1)(viia) of the Act. Hence the claim of quantum of new provision made by the assessee, needs verification at the end of the AO. If the assessee has created a new provision on a particular asset by fully reversing the opening balance of provision relating to that asset, then the net accretion should only be treated as new provision. The appeal of the revenue is allowed and the appeal of the assessee is partly allowed.
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