TMI Blog1995 (2) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... on for doubtful debts and, as such, could not be treated as bad debts. The assessee filed an application under section 154 for deletion of the adjustment. It was contended before Assessing Officer that the adjustment could not be made in respect of a provision for doubtful instalments, as its allowability was a debatable issue. The Assessing Officer rejected the application under section 154. 3. It was contended before the learned CIT(A) that since the " provision for doubtful overdue instalments under Hire Purchase Agreement " had been debited to the profit and loss account, the assessee should be treated to have satisfied the conditions laid down under section 36(1)(vii), read with section 36(2). In this regard, reliance was placed on the decision in the case of Vithaldas H. Dhanjibhai Bardanwala and Industrial Credit Investment Corpn. of India Ltd. v. IAC [1990] 32 ITD 315 (Bom.). It was further contended that since the Courts have held that once the condition for 'writing off' is satisfied and the concerned amount has been debited to the profit and loss account and credited to Bad Debt Reserve account, it was not necessary to actually write off the concerned bad debt in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idly be held to be write-off of irrecoverable debts so as to be treated as bad debt. Secondly, this claim was not made with reference to any specific debts which were perceived to be bad debt, rather it was a provision of an ad hoc nature and was part of the annual exercise which the assessee made in all the preceding years and the subsequent years. With a view to buttress his argument, the learned departmental representative referred to the annual reports and accounts of the assessee for the immediately preceding and subsequent years. In the accounts for all these years, the claim of deduction on account of " provision for doubtful overdue instalments under Hire Purchase Finance Agreements " has been reversed in the immediately succeeding year to the last rupee. In all these years, a separate claim of deduction had always been made in respect of the debts which were perceived as 'bad debts'. According to the learned departmental representative, debiting the profit and loss account with the total amount of overdue instalments under Hire Purchase Agreements and treating them collectively as doubtful debts and making provision for them could not be held to be equivalent to write off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, written off. In the present case, it was not claimed that the amounts of the individual debts were written off or that those debts were perceived by the assessee to be irrecoverable. The words used in the disputed claim were for "doubtful overdue instalments ". The word doubtful cannot be interpreted as equivalent to irrecoverable. Moreover, what was sought was a deduction in collective and omnibus way of all the overdue instalments under the Hire Purchase Finance Agreements. On being enquired by the Bench as to whether this amount of Rs.1,69,37,818 represented the total of the expired hire purchase agreements or operative agreements, the learned counsel for the assessee stated that this amount was in respect only of expired hire purchase agreements. But the word 'expired' is also conspicuous by its absence in the entry for deduction in Schedule 10. 8. At this stage, it would be useful to discuss the Court/Tribunal decisions cited on behalf of the assessee. The decision of the Bombay High Court in Khatau Junkar Ltd.'s case purports to lay down the principle that disallowance of claim for deduction can be made only on the basis of information available in the return a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned debt in the books of the assessee. No further requirement can be spelt out from the express language used by the Legislature. It is not necessary that the assessee must also post corresponding entries in the ledger account of the concerned parties and should close those accounts." We are afraid that even this decision cannot offer any material assistance to the assessee. Firstly, the assessee has not sought deduction in respect of bad debt and has not posted entries in the bad debt reserve account. What it has done is to debit the profit and loss account with the total amount of overdue instalments and credit " provision for doubtful overdue instalments account ". As has already been stated, the doubtful overdue instalments cannot be treated as equivalent of bad debts so as to invite the application of this decision of the Gujarat High Court. Moreover, even on its own showing and contention of the assessee, these overdue instalments have not been perceived as irrecoverable by the assessee itself. The assessee has nowhere stated in its accounts that the amount of Rs. 1,69,37,818 was irrecoverable and has been written off as such--Rather the claim was made only in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
