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2020 (6) TMI 572 - HC - Income TaxDisallowance of the bad debts written off u/s 36(1)(vii) read with Section 36(2) - income was not offered to tax and there was no subsisting debt perverse - whether debt which was written off during the relevant year was offered to income in Previous year or earlier years? - HELD THAT:- Supreme Court dealt with Section 36(1)(vii) of the Act, which was amended with effect from 01.04.1989 in ‘SOUTHERN TECHNOLOGIES LTD. VS. JT. CIT’ [2010 (1) TMI 5 - SUPREME COURT] it was inter alia held that after 01.04.1989, a mere provision for bad debt would not be entitled to deduction under Section 36(1)(vii) of the Act. Further held that if an assessee debits an amount of doubtful debt to profit and loss account and credits the asset account like sundry debtors account, it would constitute a right of an actual debt. However, if an assessee debits ‘provision for doubtful debit’ to profit and loss account and makes a corresponding credit to current liabilities and provisions on the liabilities side of the balance sheet then it would constitute a provision for doubtful debt. It was thus held that in the latter case the assessee would not be entitled to deduction after 01.04.1989. The aforesaid decision was referred to with approval in VIJAYA BANK [2010 (4) TMI 46 - SUPREME COURT]. From the close scrutiny of the orders passed by the assessing officer, Commissioner of Income Tax (Appeals) as well as Income Tax Appellate Tribunal, we find that aforesaid aspect of the matter has not been examined. Therefore, the impugned orders are quashed and the matter is remitted to the assessing officer to ascertain twin questions viz., (i) whether debt which was written off during the relevant year was offered to income in Previous year or earlier years, (ii) whether the assessee has debited the amount of doubtful debt to profit and loss account and has reduced the same from the asset side of the balance sheet. The matter is remitted to the assessing officer for de novo consideration of the aforementioned aspect.
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