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2021 (8) TMI 510 - AT - Income TaxBad Debts - Disallowance of amounts written being notice pay etc debited to employees at the time of their separation in the earlier years and credited to Income / expense Salaries & allowances but could not be recovered - whether CIT [A] has erred in not deleting the Write off of amounts treated as income / credited to expense in earlier years and written off in the current as they are allowable under sections 28 and 37 of the Act? - whether all these three items would fall within the category of debt and even if they do not fall within the category of that whether such expenses are allowable as business expenditure? - contention of the assessee has been through out that the transactions have occurred during the course of business and routed through P&L A/c - HELD THAT:- Amounts which are recoverable from the employees under different items would certainly fall within the ambit of the debt. Undisputedly, in this case, so far item related to shortage of garments is concerned and returning of uniform, both these items are directly related to the course of business of the assessee. Therefore, the authorities below ought to have allowed the claim of the assessee. I, therefore, direct the Assessing Officer to delete the addition. However, in the case where the employees had left employment without paying mandatory notice pay, the assessee has not brought on record that what steps were taken to recover this amount to demonstrate that in fact these were recoverable from the employees. In the absence of such evidence, no interference is called for. Thus, Ground of appeal No.1 raised by the assessee is partly allowed. Disallowances made under normal provisions are not includable to book profits/ income computed u/s 115JB - HELD THAT:- In agreement with the Ld. Counsel for the assessee that as per the explanation 2 of section 115JB of the Act, the amount disallowed could not have been added for the purpose of section 115JB of the Act. We therefore, direct the Assessing Officer to compute book profits as per explanation 2 of section 115JB of the Act. Thus, Ground of appeal No.2 raised by the assessee is allowed.
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