TMI Blog2005 (7) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... : MARKANDEY KATJU., F. M. IBRAHIM KALIFULLA. JUDGMENT The judgment of the court was delivered by Markandey Katju C.J.- This appeal under section 260A of the Income-tax Act, 1961, has been filed by the Department challenging the order of the Income-tax Appellate Tribunal dated March 19, 2003, by which the appeal of the Revenue has been dismissed by the Tribunal. The appeal was admitted by the court on the following substantial questions of law: "1. Whether, on the facts and circumstances of the case, the Tribunal was right in allowing the assessee's claim for a bad debt, when the bad debt had not actually been written off in the books of account? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in allowing the claim for bad debt on the ground that the provision had been shown under the head 'Expenditure' in the annual report of the assessee-company? 3. Whether, on the facts and circumstances of the case, and in view of the provisions of section 36(1)(vii), an assessee other than a banking company can be allowed a claim for a bad debt on the basis of a mere provision?" We have heard learned counsel for the parties and perused the record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the Assessing Officer to allow the bad debts as claimed by the assessee. The order of the learned Commissioner of Income-tax (Appeals) is confirmed. It is ordered accordingly." The relevant portions of section 36 of the Income-tax Act after the amendment with effect from April 1, 1989, read as follows: "36.(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-... (vii) subject to the provisions of sub section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year;... (viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank... (b) a bank being a bank incorporated by or under the laws of a country outside India... (c) a public financial institution..." (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (iv) where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is established to have become a bad debt in the previous year." Thus prior to April 1, 1989, even if the debt has not been written off as irrecoverable in the accounts of the assessee, it could still be allowed as a bad debt if the assessee could establish that in fact it had become a debt in the previous year. After the amendment by Act 4 of 88 with effect from April 1, 1989, the essential requirement for a claim of "bad debt" to be allowed is that it should have been written off as irrecoverable in the accounts of the assessee for the previous year. Thus for and from the assessment year 1989-90, the requirement as to the writing off of the debt as irrecoverable has become essential for a claim of "bad debt" to be allowed. Thus, it is now a mandatory condition that deductions can be allowed as bad debts only when it is actually written off as irrecoverable in the accounts and not on the basis of a mere provision. Learned counsel for the assessee has relied on the decision of the Supreme Court reported in CIT v. Asea Ltd. [2002] 258 ITR 407 (Bom) where deduction of a bad debt was allowed on the basis of a provision. However, the above decision was rendered in the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied One can only look fairly at the language used." In A.V. Fernandez v. State of Kerala [1957] 8 STC 561; AIR 1957 SC 657, the Supreme Court of India stated the principle as follows: "If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter." In CIT v. G. Hyatt [1971] 80 ITR 177; AIR 1971 SC 725, the question was whether under section 17(3) of the Income-tax Act, 1961, the interest on the assessee's own contribution to an unrecognized provident fund could be treated as salary. The Supreme Court of India held that the language of section 17(3) was plain and unambiguous, and hence the said amount was not salary but income from other sources and taxable under section 56. In Polestar Electronic P. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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