TMI Blog2019 (9) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... et the full benefit of write off of the irrecoverable debts u/s 36(1)(vii) in addition to the benefit of deduction of bad and doubtful debts under Section 36(1)(viia). There is no double deduction claimed by assessee in the computation of total income. Proviso to section 36(1)(vii) ensure that double deduction will not be allowed, the said proviso provides that in cases where clause (viia) applies, the amount of deduction relating to bad-debt under section 36(1)vii) shall be limited to the amount by which debt or part thereof exceed the credit balance in the provision of bad and doubtful debts. CIT(A) has correctly allowed the deduction under section 36(1)(vii), which we affirmed. Hence, this ground of appeal is dismissed. Disallowance of gratuity payment after close of previous year - HELD THAT:- Section 43B also makes it clear that such gratuity payment are allowable as deduction on the basis of actual payment made prior to date of filing of return of income. In Taparia Tools Ltd. vs. JCIT [ 2015 (3) TMI 853 - SUPREME COURT] held that as a general rule, revenue expenditure to be allowed in the year in which incurred. We have noted that the AO instead of examining the lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il income. The Assessing Officer while passed the assessment order besides the other disallowances disallowed bad-debts written off ₹ 7,79,92,836/- and gratuity payment of ₹ 3,26,86,648/- On appeal before the ld. CIT(A), both the disallowances//additions were deleted. Therefore, aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us. 3. We have heard the submission of ld. Departmental Representative (DR) for the revenue and ld. Authorized Representative (AR) of the assessee and gone through the orders of lower authorities with the assistance of representative of the parties. Ground No.1 relates to disallowance of bad-debt written off. The ld. DR for the revenue supported the order of Assessing Officer. The ld. DR for the revenue relied upon the order of Assessing Officer. The ld. DR further submits that assessee has directly claimed ₹ 7,79,92,836/- as bad-debt in the computation of income. The assessee has not written off the said amount in the Profit Loss Account. The assessee not clarified under which provision, the bad-debt was claimed. As bad-debt was not written off in the Profit Loss Account, the same was not al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer disallowed the claim of bad-debt by taking view that entire liability worked out by the assessee. The assessee has not clarified the issue but merely claimed that entire amount has been paid in April 2011. The submission of assessee was not repudiated by assessing officer in express manner. Before the ld. CIT(A), the assessee furnished written submission dated 16.10.2014 explaining the bad-debt written off of ₹ 1.13 crore in respect of 47 borrowed accounts as well as in respect of amount of ₹ 6.66 Crore advanced to Madhavpura Mercantile Cooperative Bank Ltd. 8. The ld. CIT(A) after considering the contention and the submission of assessee passed the following order: 3.5 The facts of the case, the stand taken by the A.O. in the assessment order and the contentions raised by the learned authorized representative of the appellant company during the appellate proceedings as well as the written submissions made are considered. The claim for deduction made by the appellant u/s. 36(1)(vii) of the Act, on account of Bad Debts written off, has two components. The first one is with regard to the ₹ 6,66,52,645/- in respect of amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted. Write off of individual accounts of 47 debtors, aggregating to ₹ 1,13,40,191/- 3.7. The AO has not examined and discussed this issue at all in the assessment order. He has merely included this amount as a part of the 'total disallowance of Bad Debts. DECISION: 3.8. It is evident from the written submissions and paper book-filed during the appellate proceedings that the appellant had filed a detailed reply with enclosures before the AO on 30.08.2013 so as to explain the admissibility of the claim of Bad Debts written off. It is seen from the paper book that the appellant had submitted copy of the list of 47 accounts that were written off; which contained further details such as the outstanding amounts, before the AO on 30.08.2013. The paper book also states that the statutory auditor's certificate and a copy of the Board resolution were also filed before the AO in support of the claim of write off of Bad Debts aggregating to ₹ 1,13,40,191/-. However, the AO has not examined this issue and passed a speaking order, justifying the disallowance, on this issue. 3.9. In this case, the write off is not reflected in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had explained the methodology of write off. On the facts and in the circumstances of the case, I hereby hold that the write off of Bad Debts, as per the methodology followed by the appellant, also qualifies for a deduction u/s. 36(l)(vii) of the Act, Accordingly the disallowance is hereby deleted. 9. The Hon ble Supreme Court in Catholic Syrian Bank Ltd. vs. CIT (supra) held that the language of Section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It applies to all banks, commercial or rural, scheduled or unscheduled. It gives a benefit to the assessee to claim a deduction on any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. This benefit is subject only to Section 36(2) of the Act. It is obligatory upon the assessee to prove to the assessing officer that the case satisfies the ingredients of Section 36(1)(vii) on the one hand and that it satisfies the requirements stated in Section 36(2) of the Act on the other. The proviso to Section 36(1)(vii) does not, in absolute terms, control the application of this provision as it comes into operation only when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation of income. In the notes to the audit report, the assesse mentioned that due to enhancement of gratuity limit from ₹ 3.50 lakhs to ₹ 10 lakhs following the amendment to the Payment of Gratuity Act, 1972, the gratuity liability as per actuarial valuation of book is ₹ 447.42 lakhs. However, as per RBI Circular dated 24.05.2011, bank has been allowed to bank gratuity liability over a period of five years in five equal installments starting from year ending 31.03.2011. Accordingly, the bank has provided ₹ 81,71,662/- towards gratuity liability being first installment of amortization and balance of ₹ 3.26 crore is shown under the head Bank Revenue Expenditure under the head Other Assets . The Assessing Officer correctly treated the as Bank Expenses. 12. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee further submits that the Assessing Officer without appreciating the fact disallowed the claim of gratuity. The entire payment is allowable as deduction in the relevant previous year in which it was paid. In support of his submission, the ld. AR of the assessee relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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