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2013 (12) TMI 9 - HC - Income TaxProvision for bad debts – Held that:- The assessee is entitled to the benefit of rejection under Section 36(1)(vii) of the Income Tax Act, 1961 (for short ‘the Act’) when there is an actual write off by the assessee in its book – Following COMMISSIONER OF INCOME TAX VS. YOKOGAWA INDIA LTD [2011 (8) TMI 766 - KARNATAKA HIGH COURT] - Adjustment of provision for bad and doubtful debts is reduced from the loans and advances or the debtors from the assets side of the balance sheet - The assessee is now required not only to debit the P and L account but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet – Decided against Revenue. Provision for gratuity and leave encashment – Held that:- Following Bharat Earth Movers Vs. Commissioner Of Income Tax Reported [2000 (8) TMI 4 - SUPREME Court] - An assessee who is maintaining the accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business – Keeping in view the accepted principles of commercial practice and accountancy - The liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date - The gratuity payable and encashment of earned leave is not a contingent liability and provision thereof is deducted – Decided against Revenue.
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