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2021 (6) TMI 361

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..... isions and found that the case of the assessee is squarely covered by the ratio laid down in the said decisions. We also find that the addition made by the AO is tax neutral. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance Deduction for provisions for bad and doubtful debts on the ground that claim by the assessee was an afterthought - HELD THAT:- We find that the issue raised by the assessee is squarely covered by the decision of the Apex Court in the case of Vijay Bank [ 2010 (4) TMI 46 - SUPREME COURT ] wherein as held that for the purpose of claiming the deduction under section 36(1)(vii) of the Act it is sufficient to debit the profit loss account and correspondingly reduce the amount from sundry debtors and it is not necessary to close the individual account of all debtors in the books. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to allow the deduction. Ground No.2 is allowed. Addition bad and doubtful debts and provisions for the doubtful advances to the book profit computed under section 115JB by treating it as provisions for unascertained liability within the meaning of clause c of exp .....

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..... ent. (i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of amortized license fees of ₹ 23,95,81,194/- without appreciating the fact that when NTP 1999 had been enunciated and accepted by the assessee; assessee's claim u/s.35ABB under earlier telecom policy was not in accordance with law. (ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in allowing the appeal and allowing the entire deduction u/s. 35ABB of ₹ 40,24,22,970/- claimed by the assessee contrary to the order of Ld. CIT(A)-XIII, New Delhi in assessee's own case for A.Y.2000-01 which in fact was relied upon by the Ld. CIT(A)-V New Delhi. (iii) Whether on the facts and circumstances of the case and in law, the Ld. C1T(A) was right in allowing the entire deduction u/s. 35ABB of ₹ 40,24,22,970/- claimed by the assessee contrary to the order of ITAT I Bench, New Delhi, in assessee's own case for A.Y.2001-02 which in fact was relied upon by the Ld. CIT(A)-V New Delhi. 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in allowin .....

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..... t report in form 3CD for A.Y. 2005-06 a copy of which is filed at page No.36 of the paper book. The AO during the assessment proceedings has wrongly treated these expenses as repair and maintenance expenses and accordingly called upon the assessee vide order sheet entry dated 12.11.2007 as to why these should not be added back to the income of the assessee which was replied by the assessee vide letter dated 04.12.2007 submitting that the details of repair and maintenance and further submitted that prior period expenses can not be disallowed as these are not in fact prior period but expenses crytalised during the year as the assessee is following mercantile system of accounting. 5. In the appellate proceedings, the appeal of the assessee was dismissed by the Ld. CIT(A) by observing and holding as under: 5.1. Finding on Ground of appeal No.III In facts of the case the A.O. has disallowed the foregoing prior period expenses (described as Repair and Maintenance expenses in the Order) on the ground that since the assessee is following the Mercantile System of accounting, therefore any expenditure in the nature of prior period will not be allowable expenditure during the year .....

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..... iling the return of income, a copy of which is filed at page No.56 to 57 of the paper book and the assessment was completed accordingly. Subsequently, during the appellate proceedings before the Ld. CIT(A), the assessee has raised an additional ground requesting the Ld. CIT(A) to allow the provisions for bad and doubtful debts since the assessee has not only debited the profit loss account under the head provision for bad and doubtful debts but also reduced the same from the sundry debtors in the balance sheet and thus it amounted to write off of debts of the assessee. However, the Ld. CIT(A) rejected the additional ground raised by the assessee by holding that the assessee has correctly added back the amount of ₹ 1,97,50,000/- being provisions for bad and doubtful debts and now the claim vide additional ground is a an afterthought. 9. The Ld. A.R. submitted before the Bench that the assessee has debited the said amount of provisions for bad and doubtful debts amounting to ₹ 1,97,50,000/- in the financial statement, schedule No.14 and simultaneously reduced the said provisions for bad and doubtful debts from sundry debtors in the balance sheet in schedule 5 a cop .....

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..... t loss account as provisions for bad and doubtful debts and doubtful advances amounting to ₹ 1,97,50,000/- and ₹ 70,60,000/- respectively. The AO during the course of assessment observed that provisions for bad and doubtful debts and doubtful advances are not allowable while computing book profit under section 115JB of the Act for the reason that these provisions are created towards unascertained liability. The AO observed that there is no correlation between the provisions made and actual write off of debts and advances. Besides, the AO also noted that the assessee could not furnish the specific details as to the period and amount for which the provisions were actually made and consequently added the same to the income of the assessee. 16. In the appellate proceedings the Ld. CIT(A) upheld the order of AO by holding that provisions for bad and doubtful debts and doubtful advances amounted to provisions for diminution in the value of assets as per clause i of Explanation 1 to section 115JB of the Act and were rightly disallowed. 17. We have already decided the issue of provision of bad and doubtful debts in favour of the assessee in ground No.2 directing the A .....

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..... w, the learned CIT(A) erred in confirming the action of the AO of adding back the Provision for Bad Debt amounting to ₹ 1,97,50,000/- and provision for doubtful advances amounting to ₹ 70,60,000/- to the Book Profit computed u/s. 115JB of the Act by treating it as a provision for unascertained liability within the meaning of clause (c) of the Explanation to section 115JB of the Act. 2. The Appellant prays that the AO be directed to delete the addition of aforesaid amounts of ₹ 2,68,10,000/- made to Book Profit under clause (c) of the Explanation to section 115JB of the Act. 20. The issue raised in first ground of appeal is against the order of Ld. CIT(A) allowing the claim of the assessee for deduction under section 35ABB of the Act to the tune of ₹ 23,95,81,194/-. 21. The facts in brief are that the AO observed on the basis of computation of income that assessee had added back a sum of ₹ 18,53,22,781/- on account of license fee paid to DOT against which a deduction of ₹ 40,24,22,970/- have been claimed under section 35ABB of the Act and accordingly called upon the assessee to explain the same. The assessee vide letter dated 23.11.2007 .....

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..... The issue raised in 2nd ground of appeal is against the deletion of disallowance of ₹ 90,25,06,859/- by Ld. CIT(A) as disallowed by the AO in respect of Revenue license fee on the ground that the license fee was capital in nature and only deduction under section 35ABB was allowable as per Act. 26. During the course of assessment proceedings, the AO noted that assessee is eligible for deduction of ₹ 7,18,89,454/- as against ₹ 26,43,96,313/- claimed by it. The AO observed the said facts from the letter filed by the assessee giving details of amount to be allowed and disallowable on account of Revenue sharing license fee paid. 27. In the appellate proceedings, the Ld. CIT(A) allowed the claim of the assessee by following the decision of the co-ordinate bench of the Tribunal in assessee s own case for A.Y. 2001-02, 2003-04 2004-05 and accordingly directed the AO to allow the full amount of ₹ 26,43,96,313/- paid towards RSLF under section 37(1) of the Act. 28. The Ld. A.R., at the outset, submitted that the issue is squarely covered by the decision of the Hon ble Bombay High Court in ITA No.1551 of 2013 order dated 11.04.2016 A.Y. 2003-04. The Ld. A.R .....

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..... ngs found that assessee has debited a sum of ₹ 96,80,000/- to the P L account towards foreign exchange fluctuation loss. The AO held the said loss to be notional loss which has not been actually ascertained by the assessee and accordingly added the same to the income of the assessee. 32. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: 6.1 Finding on Ground Of Appeal No. IV I have considered of the submissions of the appellant and the facts of the case. The appellant has pointed -that the foreign exchange loss amounting to ₹ 6,42,10,000/- is capitalized as part of the fixed Assets Block in Schedule -3 of the Audited Accounts . The appellant has further invited my attention to the Significant Accounting Polices of the Company pertaining to fixed Assets. As per this Policy foreign exchange loss/ gains are charged / credited to the P/L Account except when they relate to the fixed assets. Thus, from the above the appellant has shown that it has charged only that portion of foreign exchange loss which pertains to revenue items. Resultantly, the case of the appellant is covered by the decision of the Hon .....

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