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2023 (6) TMI 520 - AT - Income TaxDeduction towards Provision for bad debts - Addition u/s 36(1)(vii) - Amount of debts not write off - CIT- A deleted the addition - Alternative argument of allowable business loss u/s. 28 - HELD THAT:- As per provisions of Sec. 36(1)(vii) of the Act, any bad debt write off as irrecoverable in the accounts of the assessee, would not include any provision for bad debts made in the accounts of the assessee. In other words, w.e.f.01.04.1989, a mere provision for bad debts per se was not entitled for deduction u/s. 36(1)(vii) of the Act, and this legal position is reiterated by the Hon’ble Supreme Court in the case of Southern Technologies Ltd [2010 (1) TMI 5 - SUPREME COURT]. Therefore, it is very clear that in order to claim deduction for any bad debts, such bad debts should be write off as irrecoverable in the accounts of the assessee by debiting into P & L A/c and crediting into sundry debtor’s account in the books of accounts of the assessee. In this case, the assessee has made a mere provision for bad debts without actual write off bad debts in the books of accounts of the assessee by crediting into respective debtors account. Therefore, in our considered view, the assessee did not satisfied the conditions prescribed u/s. 36(1)(vii) r.w.s. 36(2) of the Act, to claim deduction towards bad debts. Hon’ble Supreme Court in the case of Southern Technologies Ltd. [2010 (1) TMI 5 - SUPREME COURT] very clearly held that write off of bad debts cannot include any provision for bad debts made in the accounts of the assessee. Thus the assessee is not entitled for deduction towards provision for bad and doubtful debts, because, the conditions prescribed u/s. 36(1)(vii) r.w.s.36(2) of the Act, are not satisfied. The Ld.CIT(A) without appreciating relevant facts deleted the additions made by the AO, and thus, we reversed the findings of the Ld.CIT(A) and sustained the additions made by the AO towards disallowance of provision for bad debts. Alternative arguments of the assessee in light of provisions of Sec. 28 - W e find that once any expenditure or allowance falls under particular provision of Income Tax Act, 1961, then, said expenditure/allowance cannot be considered under general provision of sec. 37(1) or 28 of the Act, for deduction. We are of the considered view that the assessee cannot claim deduction towards provision for bad debts as business loss u/s. 28 of the Act, since, the claim of the assessee directly fall under the provisions of Sec. 36(1)(vii) of the Act, and thus, we reject the alternative claim of the assessee for deduction towards provision for bad debts u/s. 28 of the Act. Decided against assessee.
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