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2016 (6) TMI 651 - KARNATAKA HIGH COURT

2016 (6) TMI 651 - KARNATAKA HIGH COURT - TMI - MAT computation - Provisions made for Bad and Doubtful debts - Held that:- As besides debiting the P&L a/c and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the d .....

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amount of loans and advances/debtors is shown as net of the provisions for the impugned bad debt. Therefore, in the first place 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 s. 115JA or JB is not at all attracted. See Yokogawa India Ltd.[2011 (8) TMI 766 - KARNATAKA HIGH COURT] - ITA NO. 245/2015 - Dated:- 7-6-2016 - MR. JAYANT PATEL AND MR. B.SREENIVASE GOWDA JJ. For the Appellant: Sri Dilip Ad .....

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was a common order of the Tribunal in respect of a different assessment year and in the other matter where the value of tax effect was exceeding ₹ 20,00,000/- (Rupees twenty lakhs), ITA No.244/2015 was preferred and this Court vide order dated 10.03.2016 disposed of the appeal. He submitted that as such, the present matter will be covered by the aforesaid decision of this Court but as it is a common order, the present appeal can be said as maintainable even if the tax effect is less than t .....

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tandards the provisions are either shown separately in the balance sheet or may be reduced from the concerned asset/liability as per the practice followed by the assessee for writing its books of accounts? 2. Whether the Tribunal is correct in debiting the P & L account, the assessee as reduced the amount from the debtors thereby reducing the value of the asset without appreciating that provision of clause (i) of explanation 1 to section 115JB require that the net profit as shown in P & .....

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ITA No.244/2015. 8. We may record that this Court in the aforesaid decision observed thus: The revenue has preferred the present appeal by raising the following substantial questions of law: 1. Whether the Tribunal was correct in holding that the assessee has reduced the provision so made from the sundry debtors in the balance sheet and hence the same cannot be considered as provision but is the write off of bad debts without appreciating that as per the accounting standards the provisions are .....

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d by the amount, or amount set aside as provision for diminution in the value of asset if any debited to the P & L account and reduction of the provision from the debtors is only a requirement under the Companies Act? 2. We have heard Mr. K.V.Aravind, learned counsel appearing for appellants-revenue and Mr.A.Shankar, learned counsel appearing for respondent-assessee. 3. We may record that the Tribunal, while considering the appeal, at paragraphs 25 and 26 has observed thus: 25. We have perus .....

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en placed before us, shows that aggregate amount of sundry debtors was ₹ 107,34,96,981 from which assessee had deducted the provision of ₹ 2,04,24,768. What was reflected by assessee in its balance sheet under the head debtors was only the net amount. In such circumstances, we are of the opinion that judgment of Hon ble Apex Court in Vijaya Bank (Supra) as well as that of Hon ble jurisdictional High Court in Yokogawa India Ltd., (supra), would come to its aid. In the case of Yokogawa .....

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attracted to the facts of the case. Item (c) in s. 115JA and 115JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision is made which is in the nature of diminution in the value of any asset wo .....

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ya Bank vs. CIT (supra) where the apex Court had an occasion to consider his explanation. It accepted the argument on behalf of the Revenue to the effect that the explanation makes it very clear that there is a dichotomy between actual write off on the one hand and provision for bad and doubtful debt on the other, A mere debit to the profit and loss account would constitute a bad and doubtful debt, but it would not constitute actual write off and that was the very reason why the explanation stoo .....

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ng the P&L a/c and creating a provision for bad and doubtful debt, the assessee correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the assets side of the balance sheet and, consequentially, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet was shown as net of the provision for the impugned bad debt. Then the said amount represe .....

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