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2015 (7) TMI 641 - AT - Income TaxProvisions for wage arrears - addition made for the purpose of computing books profits U/s.115JB and also for computing the total income as per the normal provisions of the Act - Held that:- As submitted by the Ld. A.R, if the assessee has made a commitment in the draft wage settlement before the Joint Commissioner of Labour, to that extent it will be an ascertained liability of the assessee company because at least to that extent the assessee company will have to make the payment. However, these aspects can be verified only from the draft wage settlement agreement and the same is not before us for our perusal. Therefore, we remit back the issue to the file of Ld. Assessing Officer to examine the draft wage settlement agreement in the light of the decisions relied upon by the assessee and pass appropriate order as per merit and law. - Decided in favour of assessee for statistical purposes. Disallowance of provision for doubtful debts - Held that:- The decision rendered by the Hon’ble Apex court in the case of M/s.Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT) is not applicable considering the facts of the assessee’s case. In that case, the assessee is a bank who draws its account as per the guidelines provided by the Reserve Bank of India (RBI). There are legal implications for writing off the debts in the accounts of bank by crediting the debtor’s accounts. The system of accounting is also different. Various classifications with respect to debtors are drawn in the books of accounts as per the norms specified by the RBI. In such circumstances, the Hon’ble Apex Court had held that it would suffice to reduce the bad debts in the statement of accounts and actual write off bad debts in the books of accounts would not be necessary. With respect to other assessees, the Hon’ble Apex Court had categorically held in the case TRF Ltd. Vs. DCIT reported in [2010 (2) TMI 211 - SUPREME COURT ] that “it is not necessary for the assessee to establish the debt had become irrecoverable. It is enough if the bad debts are written off as irrecoverable in the books of accounts of the assessee.” For the above reasons, we find that the action of the Revenue is appropriate in the case of the assessee which is not a Bank governed by the rules of RBI and accordingly we hereby hold that the amount of ₹ 1,42,321/- shown as provision for bad debts which is not credited to the accounts of the debtors and thus written off cannot be allowed as deduction while computing the income of the assessee - Decided against assessee. Disallowance 5% of the dividend income U/s.14A as expenses incurred for earning the exempt dividend income CIT (A) deleting the disallowance holding that invoking the provisions of Rule 8D is not in order - Held that:- On this issue we find the finding of the Ld. CIT (A) to be in order because Rule-8D of the Rules has come into effect from 24.03.2008 relevant to the assessment year 2008-09. Therefore, the aforesaid rules will not be applicable to the case of the assessee, since the relevant assessment year is 2007-08. Moreover on this issue, this Bench of the Tribunal has been consistently taking a view that 3% of the exempt income can be treated as the expenditure incurred for earning such income and accordingly such amount has to be disallowed. Therefore in the case of the assessee also, we hereby hold that 3% of the dividend income which is exempt from tax shall be treated as the expenditure incurred for earning such dividend income and the same shall be disallowed as allowable deduction. It is ordered accordingly. - Decided against revenue.
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