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2015 (2) TMI 64 - AT - Income TaxDisallowance of Provision for Doubtful Debt - Held that:- As decided in Vijaya Bank Vs. Commissioner of Income-tax [2010 (4) TMI 46 - SUPREME COURT] to understand the dichotomy, one must understand `how to write off'. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor's account, it would constitute a write off of an actual debt. However, if an assessee debits `provision for doubtful debt' to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989. Since both the lower revenue authorities have not examined the issue in the light of the above decision, therefore, in the interest of justice, the matter is restored back to the file of the Assessing Officer for examining the issue de-novo. - Decided in favour of assessee for statistical purposes. Penalty u/s 271(1)(c) - Held that:- Since we have already set aside the addition towards provision for doubtful debts as aforesaid vide para no. 7 to 7.3, the penalty levied on this account is hereby quashed accordingly.- Decided in favour of assessee. Disallowance of Provision for Contractual Obligations - Held that:- The fact that the assessee had incurred a sizable portion of the provision as expenditure and the same has been allowed by the Assessing Authority itself is supporting the claim of the assessee that the expenses are accrued and the liability ascertained and the provisions are made on factual basis and they were not in the nature of any contingency of future expenses. The legal character of the provision for contractual obligation is in a way similar to the provision for warranty/ guarantee. Therefore, the discussion made in respect of the issue regarding provision of warranty equally applies to the provision for contractual obligations also. we restore back the issue to the file of the Assessing Officer for examining the issue de-novo. - Decided in favour of assessee for statistical purposes.
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