TMI Blog2013 (2) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... of doubtful debts for the assessment years 1996-97 and 1998-99. The assessee had adopted in the P L account provision for doubtful debts of ₹ 16,94,455/- for the assessment year 1996-97 and ₹ 8,32,905/- for the assessment year 1998-99. Since the methodology followed by the assessee to write off was not in accordance with the provisioned os section 26(1)(vii) of the Income Tax Act, 1961 it's claim was not allowed. Aggrieved by the said order, the assessee preferred appeal to the Commissioner of Income Tax (Appeals). The appellate commissioner held the writing off does not necessaelly require credit to be given to each debtor s account. If bad debts are debited in profit and loss account and credited to another account name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 604) Prior to April 1, 1989 the law as it them stood, took the view that even in cases in which the assessee makes only a provision in its accounts for bad debts and interest thereon and even though the amount is not actually written off by debting the profit and loss account of the assessee and creditting the amount to the account of the debtor, the assessee was still entitled to deduction under section 36(1)(vii), See CIT Vs. Jwala Prasad Tiwari 1953 24 ITR 537 (Bom) and Vithaladas H. Dhanjibhai Vs. CIT 1981 130 ITR 95 (Guj). Such state of law Prevailed up to ant including the assessment year 1988-1989. However, by insertion with effect from April 1, 1989 of a new Explanation in section 36(1)(vii), it has been clarified that any bad d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year end as statsd hereinabove. In other words, the amount of loans and advanced or the debtors at the year end in the balance sheet is shown as net of the provisions for the impugned debt. However, what is bsing insisted upon by the assessing officer is that mere reduction of the amount of loans and advances or the debtors at the year end would not suffice and in the interest of transparency, it would be desirable for the assessee bank to close each and every individual account of loans and advances or debtors as a pre condition for claming deduction under section 36(1)(vii), of the 1961 Act. This view has been taken by the Assessing officer because the assessing officer apprehended that the assessee-bank might br taking the benefit of de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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