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2022 (3) TMI 712 - AT - Income TaxDisallowance of provision for Bad Debt Written off - assessee has made a provision for bad and doubtful debts @ 2.5% of sundry debtors on sale of power and claimed that such provision is required to be made in terms of Electricity (Supply) Annual Account Rule, 1985 - assessee is into business of generation, transmission and distribution of electricity to consumers in the State of Tamil Nadu - HELD THAT:- In the present case, the assessee is into business of generation, transmission and distribution of electricity to consumers in the State of Tamil Nadu. As claimed by the assessee, it has made ad-hoc provision @ 2.5% on total sundry debtors at the end of financial year as provision for bad and doubtful debts for possible bad debts arise in the future course of business in terms of Part IV of Electricity (Supply) Annual Account Rule, 1985. As claimed by the assessee, the assessee has not examined individual consumer account and identified possible bad debt accounts to make provision. The assessee has made provision on ad-hoc basis on total sundry debtors without identifying individual bad debt accounts as irrecoverable. Therefore, in the given facts and circumstances of this case, what we understand is that provision made by the assessee at fixed percentage on sundry debtors is only a mere provision for bad & doubtful debts, but not written off of actual bad debts which is irrecoverable. Therefore, from the facts of present case, it is very clear that the assessee has made ad-hoc provision for bad and doubtful debts on fixed percentage in terms of certain regulatory requirements without identifying individual consumers accounts as bad debts which is irrecoverable. Therefore, provision made by the assessee for bad and doubtful debts is only a provision, but not actual written off of bad debts which is irrecoverable. Hence, we are of the considered view that the assessee is not entitled for deduction towards provision made for bad and doubtful debts u/s. 36(1)(vii) of the Income Tax Act, 1961. CIT(A), after considering relevant facts has rightly upheld additions made by the Assessing Officer towards disallowance of provision for bad and doubtful debts. Hence, we are inclined to uphold the findings of learned CIT(A) and reject grounds taken by the assessee - Decided against assessee.
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