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2019 (9) TMI 994 - AT - Income TaxDisallowance of bad debt under proviso to section 36(1)(vii) - HELD THAT:- Explanation to Section 36(1)(vii), introduced by the Finance Act, 2001, has to be examined in conjunction with the principal section. The explanation specifically excluded any provision for bad and doubtful debts made in the account of the assessee from the ambit and scope of 'any bad debt, or part thereof, written off as irrecoverable in the accounts of the assessee'. The concept of making a provision for bad and doubtful debts will fall outside the scope of Section 36(1)(vii) simplicitor. The proviso, as already noticed, will have to be read with the provisions of Section 36(1)(viia) of the Act. Once the bad debt is actually written off as irrecoverable and the requirements of Section 36(2) satisfied, then, it will not be permissible to deny such deduction on the apprehension of double deduction under the provisions of Section 36(1)(viia) and proviso to Section 36(1)(vii). This does not appear to be the intention of the framers of law. The scheduled and non-scheduled commercial banks would continue to get the full benefit of write off of the irrecoverable debts u/s 36(1)(vii) in addition to the benefit of deduction of bad and doubtful debts under Section 36(1)(viia). There is no double deduction claimed by assessee in the computation of total income. Proviso to section 36(1)(vii) ensure that double deduction will not be allowed, the said proviso provides that in cases where clause (viia) applies, the amount of deduction relating to bad-debt under section 36(1)vii) shall be limited to the amount by which debt or part thereof exceed the credit balance in the provision of bad and doubtful debts. CIT(A) has correctly allowed the deduction under section 36(1)(vii), which we affirmed. Hence, this ground of appeal is dismissed. Disallowance of gratuity payment after close of previous year - HELD THAT:- Section 43B also makes it clear that such gratuity payment are allowable as deduction on the basis of actual payment made prior to date of filing of return of income. In Taparia Tools Ltd. vs. JCIT [2015 (3) TMI 853 - SUPREME COURT] held that as a general rule, revenue expenditure to be allowed in the year in which incurred. We have noted that the AO instead of examining the liability and the actual payment of gratuity disallowed it holding that it pertains to earlier years. As we have noted that revenue expenditure to be allowed in the year in which incurred. CIT(A) allowed it by following the same principle.We have noted that the CIT(A) has given categorical finding that actual payment was made during May 2011 i.e. prior to date of filing of return. Therefore, we do not find any infirmity or illegality in the order passed by ld. CIT(A). - Decided against revenue
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