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2012 (8) TMI 733 - AT - Income TaxProvision for obsolete stock written back - AY 02-03 - dis-allowance on ground that there is no provision under the Act to allow deduction for obsolete stock, hence provision for same written back would not be reduced from taxable income - assessee explained that though for AY 2001-02, provision for obsolete stock was made, however no deduction was claimed for same while computing total income - in view of no deduction claimed, subsequent reversal shall be deducted from the total income - Held that:- In view of the conflicting claim made by the parties and considering the contentions of assessee that an income which has already been taxed is again being taxed, we think it proper to restore the matter back to the file of the AO who shall examine the issue as to whether the assessee in fact has not claimed deduction of provision for obsolete stock Provision for bad debts written back - AY 03-04 - dis-allowance - assessee explained that though for AY 2001-02, provision for bad debts was made, however no deduction was claimed for same while computing total income - in view of no deduction claimed, subsequent reversal shall be deducted from the total income - Held that:- Since no provision for doubtful debts is allowed in the I.T. Act, if the provision is debited to the P/L A/c, it must be added back while computing total income. However, if it is credited to the P/L A/c as happens when it is written back, then the income is artificially increased while computing the income as per I.T. Act, the provision so credited has to be reduced from the total income. If not reduced would lead to taxing income twice. Since the entire provision created has already been offered to tax in the AY 2001-02, hence it is justified to allow the deduction of same - Decided in favor of assessee.
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