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2020 (10) TMI 658 - AT - Income TaxDeduction u/s.80P - excess provision for Bad and Doubtful Debts Reserve (BDDR) of earlier years written back is taxable income - appellant claimed deduction u/s.36(1)(vii) - full amount of net profit available for the benefit u/s.80P was without the effect of BDDR - HELD THAT:- As seen from the assessee’s return of income for the assessment year 2006-07, being the period, when it was eligible for deduction u/s 80P that it added back BDDR and thereafter claimed deduction u/s 80P on the full amount of income. Again the net effect of this exercise is that the creation of BDDR in the books of account by means of debit to the Profit and loss account and thereafter its reversal in the computation of total income before the claim of deduction u/s.80P is that the full amount of net profit available for the benefit u/s.80P was without the effect of BDDR. To put it simply, suppose Net Profit before BDDR for the year is ₹ 300/-. Once BDDR of ₹ 100/- for the year is debited, net profit gets reduced to ₹ 200/-. Again at the time of computation of total income with the addition of ₹ 100/- back to ₹ 200/-, the total of profit again comes to ₹ 300/-, which is available for deduction u/s.80P. Thus, even without taking any deduction of BDDR, there was full deduction u/s.80P in respect of eligible income only. With the insertion of sub-section (4) to section 80P w.e.f. 01-04- 2007, the claim for deduction u/s.80P has come to be denied to the societies like the assessee but with the simultaneous onset of the benefit of deduction u/s.36(1)(viia) by the Finance Act 2007 w.e.f. 01-04-2007. Irrespective of the fact whether it is case of the period when the assessee was eligible for deduction u/s.80P or thereafter when the benefit of section 36(1)(viia) came to be conferred, the creation of BDDR and its simultaneous addition in the computation of total income has made it clear that, in fact, no deduction was claimed by the assessee in this regard. Once the assessee did not claim any deduction in respect of BDDR, there can be no question of taxing the reversal of BDDR in a subsequent year, as has been the case under consideration. We, therefore, overturn the impugned order on this score and hold that the ld. CIT(A) was not justified in upholding the addition to the total income. The same is directed to be deleted.
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