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2017 (1) TMI 319 - HC - Income TaxAllowability of claim for bad debts - maintenance of two sets of book - Held that:- The books maintained for the purposes of the Companies Act duly approved by the Board of Directors and placed before the shareholders at the Annual General Body Meeting of the Company being contain inter alia the profit and loss account for the relevant previous year prepared in accordance with the provisions of Part II-III of Schedule VI to the Companies Act 1956 will form the basis of an assessment in terms of Chapter XII-B, Special Provisions relating to certain companies, that provide for an assessment of Minimum Alternate Tax (MAT). The Income Tax Act requires for the assessee to follow a parellelly consistent method of accounting in accordance with section 145 thereof. The books maintained for the purposes of the Income Tax Act shall comply with the provisions of section 145 and shall form the basis for an assessment thereunder. The error in the order of assessment is the juxtaposition of the two books by the assessing officer. The creation of a provision for bad debts in the corporate accounts thus does not, in any way, impact the claim of bad debt u/s 36(1)(vii) of the Act in the regular computation of income. This submission of the department stands rejected. The claim of bad debts relates to debts actually written off and not a provision made in this regard. The Supreme Court in the case of Vijaya Bank (2010 (4) TMI 46 - SUPREME COURT ) explaining the methodology for proper write-off set out in accordance with the Judgment of the Supreme Court in Southern Technologies (2010 (1) TMI 5 - SUPREME COURT OF INDIA) states as if an assessee debits an amount of doubtful debt to the P&L Account and credits the asset account like sundry debtors Account, it would constitute a write off of an actual debt. However, if an assesse debits provision for doubtful debt to the P&L Account and makes a corresponding credit to the Current liabilities and provisionson the Liabilities side of the balance sheet, then it would constitute a provision for doubtful debt. In the latter case, assesse would not be entitled to deduction after 1-4-1989. In view of the above, the Assessee has, in accordance with the provisions of Section 36 (1)(vii), written off the bad debt and the claim is allowable. Substantial Question is answered in favour of the assessee
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