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2022 (12) TMI 880 - AT - Income TaxAdjustment of bad debts for the purpose of book profits u/s.115JB - HELD THAT:- If the provision for bad and doubtful debts which is debited to the P&L account would constitute actual write off if the same is reduced from loans & dvances / debtors to reflect the net balance in the statement of financials. In assessee’s case, in the financials for the year ended 31.3.2012 [pg. 30 & 57 of PB], we notice that the assessee had shown the net amount for trade receivables after adjusting the provision for doubtful debts. Considering the ratio laid down by the Hon’ble Supreme Court in the case of Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT] in our view the assessee has actually written off the bad debts as of 31.03.2012. Assessee has written of the debts which is an asset and therefore the CIT(A) has correctly considered the issue under clause (i) and not under clause (c). The plain reading of the above provisions make it clear that the provision made towards diminution in the value of asset has to be added. In assessee’s has we have already held that the bad debts have been actually written of and is not a provision following the decision of the Apex Court in the case of Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT]. Accordingly, the actual write off of the asset cannot be considered as an addition under clause (i) of Explanation 1 to section 115JB. With regard to the contention of the ld DR that the decision of the jurisdictional High Court in the case of Yokogawa India Ltd [2011 (8) TMI 766 - KARNATAKA HIGH COURT] is not applicable, in our view though the question of law relates to whether the Appellate Authorities were correct in holding that the provisions made for bad and doubtful debts cannot be added back in accordance with the Explanation (c) to Section 115JB(1) of the Act, the ratio laid down by the Hon’ble High Court is that the if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. We therefore hold that the bad debts which is reduced from the asset side of the debts which amounts to actual write off cannot be adjusted for the purpose of book profits u/s.115JB. - Decided in favour of assessee.
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