TMI Blog2014 (5) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities i.e. either AO or the CIT (Appeals) has examined the issue under consideration from this angle and as the entire facts are not available for us to adjudicate the issue, we, in the interest of substantial justice, set aside the orders of the lower authorities and remand the matter back to the file of the Assessing Officer for adjudication of the issue afresh as per law in the light of the discussions made hereinabove. Needless to mention that the AO shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue afresh. - IT Appeal No. 779 (Ahd.) of 2011 [ASSESSMENT YEAR 2007-08] - - - Dated:- 30-5-2014 - G.C. Gupta And N.S. Saini, JJ. P.L. Kureel for the Appellant. ORDER N.S. Saini, This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) dated 16.11.2010. 2. Ground no. 1 2 of the appeal are directed against the order of Commissioner of Income Tax (Appeals) deleting the addition of ₹ 11,09,378/- made u/s. 14A of the Act. 3. We have heard the Departmental Representative, perused the orders of lower authorities and materials available on record. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure has to be made while computing the income of the assessee. We find that the Hon'ble Madras High Court in the case of Simpson Co. Ltd. v. Dy. CIT [Tax (Appeal) No. 2621 of 2006, dated 15-10-2012] held that the Tribunal was justified in upholding the estimated disallowance of 2% of gross dividend income as the expenditure, as being incidental to the earning of dividend income u/s. 14A of the Act as the assessee had not furnished the details of expenditure incidental to earning of dividend income, estimation was made of the expenditure attributable to dividend income at 2% of the gross dividend income. Respectfully following the above decision of the Hon'ble Madras High Court, we estimate the expenditure incurred towards earning of exempt dividend income of ₹ 11,61,400/- at 2% of the gross dividend income which works out to ₹ 23, 228/-. We, therefore, set aside the orders of the lower authorities and direct the Assessing Officer to restrict the disallowance u/s. 14A of the Act to ₹ 23,228/-. Thus, the ground of appeal of the Revenue is partly allowed. 8. Ground no. 3 4 of the appeal are directed against the order of the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; The Hon'ble Punjab Haryana High Court in the case of State Bank of Patiala v. CIT [2005] 272 ITR 54/143 Taxman 196 has held as under: A bare perusal of section 36(1)(viia) as applicable to assessment year 1985-86 shows that the deduction allowable under section 36(1)(viia) is in respect of the provision made. Therefore, making of a provision for bad and doubtful debt equal to the amount mentioned in the said section is a must for claiming such deduction. 12. We find that Hon'ble Punjab Haryana High Court has laid emphasis on the words 'any provision for bad and doubtful debt made by' to hold that charging of provision in the profit and loss account is mandatory. Therefore, let us examine the wordings of the section 36(1)(vii) and 36(1)(viia): (a) Section 36(1)(vii) - Bad-debts written-off (b) Section 36(1)(viia) - Provision for Bad and Doubtful Debts Provision of section 36(1)(vii) reads as under: (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; Provision of section 36(1)(viia) reads as under: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 36(1)(viii), there is no requirement that the same should be created in the same previous year in which deduction is to be allowed. The relevant provision reads as under: (viii) in respect of any special reserve created by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development in India or by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the total income (computed before making any deduction under this clause and Chapter VIA) carried to such reserve account: Therefore, it is seen that whereas 'provision for bad and doubtful debts' u/s. 36(1)(viia) can be claimed in respect of provision made in any preceding previous year subject to the limitations made therein, the deduction for actual bad debts can be claimed only in the previous year in which it was actually written off in the books of account. Similarly, the reserve created u/s. 36(1)(viii) can be claimed in respect of provisions made in any preceding prev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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