TMI Blog2002 (11) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant had not written off bad debts of Rs. 11,98,000 by debiting the P L a/c and further holding that the amount of bad debts should be struck off from the ledger account of the party and the balance sheet and further that assessee has not satisfied the conditions laid down under s. 36(1)(vii) of the Act for allowing deduction. The appellant craves to add, alter, amend, modify or vary from the aforesaid grounds of appeal at or before the time of hearing." 3. At the time of hearing of the appeal, the learned authorised representative submitted that the CIT was not justified in invoking the provisions of s. 263 of the IT Act as the order passed by the AO was not prejudicial to the interest of the Revenue nor is it erroneous and, therefore, it was suggested that the jurisdiction under s. 263 of the IT Act has been wrongly invoked by the CIT. 4. The record transpires that the AO has allowed claim under s. 80-I at 25 per cent of the adjusted profits of eligible unit under s. 80-I without reducing it by an amount of deduction under s. 80-HH. 5. The record also transpires that the CIT was with the opinion that profits under s. 80-I have to be computed after deducting the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under s. 80-I is to be allowed on the profit and gains without reducing deduction allowable under s.80-I and 80HH. 9. Respectfully following the settled legal proposition that the deduction under s. 80-I is to be allowed incidental to the deduction under s. 80HH from the gross total income, we feel that the CIT was not justified in interfering with the order of the AO on this score. 10. This brings us to another ground of appeal pertaining to writing off of bad debts amounting to Rs. 11,98,000 by debiting the same to the P L a/c, but the same had been credited to the provisions for bad and doubtful debts instead of crediting the individual debtor s account and thus, reducing the amount receivable from them. On this issue, the learned authorised representative during the course of hearing submitted that there was sufficient compliance with the provisions of s. 36(1)(vii) of the IT Act. For the sake of convenience we may refer to s. 36(1)(vii). "Subject to the provisions of sub-s. (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the account of the assessee for the previous year." To this section with retrospective effect on1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en reproduced above and stated that the assessment involved in this case was asst. yr. 1993-94 and the Explanation to the s. 36(1)(vii) of the Act was added with retrospective effect on 1st April, 1989. After having said so, it was suggested by the learned Departmental Representative that the assessee had written off bad debts by debiting P L a/c but no credit on the debtor s account was correspondingly made. As per the learned Departmental Representative this was a simultaneous action which is required and in the absence of either of them, the provisions of s. 36 cannot be said to be complied with. 15. To appreciate the arguments advanced, we may refer to some material dates. In this case the assessment year involved is 1993 and the AO completed the assessment vide his order dt.31st March, 1995. Notice under s. 263 of the IT Act was issued on26th Sept., 1996and the CIT passed order under s. 263 on1st Dec., 1996. According to the learned counsel for the assessee there is an inherent fallacy in the order of the CIT because in accordance with the law prevailing at the time of passing of the order, there was sufficient compliance with the provisions of s. 36(1)(vii) of the IT Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot initially included by the assessee. This action of the CIT was questioned before the High Court. The High Court quashed the order of the CIT on the ground that CIT was not justified in invoking the jurisdiction under s. 263 on account of amendment in law and reopen a proceedings which have already been terminated but in the present case the CIT immediately after the completion of the assessment proceedings by the AO invoking the jurisdiction under s. 263 as according to the CIT the AO was not justified in granting relief to the assessee on account of written off debts and ultimately disallowed the claim. This appeal against the order of the CIT before this Tribunal was instituted on25th March, 1997, and came up for disposal on21st Aug., 2002. In the meantime, an amendment to s. 36(1)(vii) was carried out by the Finance Act of 2001 by addition of an Explanation to the section by which it stands mandated by the legislature that while making a claim for writing off debt not only a debit entry needs to be made in the P L A/c, but a simultaneous credit needs to be given in the account of the party. 19. The question is what is the effect of this amendment on the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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