TMI Blog2022 (12) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... s has we have already held that the bad debts have been actually written of and is not a provision following the decision of the Apex Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] . Accordingly, the actual write off of the asset cannot be considered as an addition under clause (i) of Explanation 1 to section 115JB. With regard to the contention of the ld DR that the decision of the jurisdictional High Court in the case of Yokogawa India Ltd [ 2011 (8) TMI 766 - KARNATAKA HIGH COURT] is not applicable, in our view though the question of law relates to whether the Appellate Authorities were correct in holding that the provisions made for bad and doubtful debts cannot be added back in accordance with the Explanation (c) to Section 115JB(1) of the Act, the ratio laid down by the Hon ble High Court is that the if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. We therefore hold that the bad debts which is reduced from the asset side of the debts which amounts to actual write off cannot be adjusted for the purpose of book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee are in appeal before the Tribunal. 5. During the course of hearing, the ld. AR submitted that the tax effect of the appeal of the revenue is less than Rs.50 lakhs and accordingly to be dismissed on the ground of monetary limit as per CBDT Circular No.7/2019 dated 8.8.2019. The ld DR did not raise any objections to this submission of the ld. AR. Revenue has filed appeal against the order of the CIT(A) for deleting the adjustment to book profits towards section 14A disallowance to the tune of Rs. 89,98,66. The tax effect of the impugned amount is less than Rs.50lakhs and accordingly, the appeal filed by the revenue in ITA No.1029/Bang/2022 is dismissed on the ground that the same is below the monetary limit for filing the appeal before the Tribunal as per the above circular. 6. We will now take up assessee s appeal in ITA No.988/Bang/2022 in which the assessee has raised the following grounds:- 1. The Order passed by the CIT(A) is not justified in law and on facts and circumstances of the case. 2. As regards adding back of bad debts of Rs.50,22,576/- while computing book profits under section 115JB: 2.1. The lower authorities have erred in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet. The extract of the relevant portion fo the trade receivables is as given below:- Trade receivables Rs. in Millions Particulars As at 31st March 2012 2011 (Unsecured) Debts overdue for a period exceeding six months - considered good 26 20 - considered doubtful 21 33 Other debts - considered good 4052 2805 - considered doubtful 19 2 Total 4,118 2,860 Less: Provision for doubtful debts (40) (35) Total 4,078 2,825 8. The assessee submitted before the CIT(A) that the amount of Rs.50,22,576 is in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been of Rs 4078 million and after taking into consideration the new debts during FY 2012-13 the actual debts would have been only Rs 4514 million as against Rs 4554 million shown in the balance sheet as on 31.03.2013 before considering provision. Net trade receivable i.e after considering provision for doubtful debt are shown at Rs 4508 million as on 31.03.2013. This is also noted that as on 31.03.2011 the 'debts overdue for a period exceeding 6 months' and considered 'doubtful' were Rs 33 million and a provision for the same was created in the books by the appellant. However, the amounts of doubtful debts of this category had reduced to Rs 21 million as on 31.03.2012 and as such the same had reduced by Rs 12 million. If the amount of Rs 33 million had actually been written off in the books of account as on 31.03.2011, the appellant would have shown the recovery from such written off debts as its income during the year under consideration, however this is not so. This also shows that the appellant had not been actually writing off the doubtful debts in its books and it had only been creating a provision year after year. The net figure is reflected in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) . The ld. AR also brought to our attention the decision of the jurisdictional High Court in the case of CIT v. Yokogawa India Ltd. [2012] 2004 Taxman 305 (Kar) where a similar view has been held. 12. The ld DR, on the other hand, submitted that decision of the Karnataka High Court in the case of Yokogawa India Ltd. (supra) was rendered in the context of adjustment made under clause (c) of Explanation 1 to section 115JB(2) and therefore cannot be applied in assessee s case where the adjustment is made by invoking clause (i) of Explanation (1) to section 115JB(2). The ld. DR further submitted that the provision debited to the P L account and credited to the provision account cannot be construed as actual write off. 13. We have heard the rival submission and perused the material on record. We notice that the Supreme Court in the case of Vijaya Bank Ltd. (supra) has considered a similar issue and held that 7. One point needs to be clarified. According to Shri Bishwajit Bhattacharya, learned Additional Solicitor General appearing for the Department, the view expressed by the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala (supra) was prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st sight of by the High Court in its impugned judgment. In the circumstances, we hold, on the first question, that the assessee was entitled to the benefit of deduction under section 36(1)(vii) of 1961 Act as there was an actual write off by the assessee in its books, as indicated above. 14. We also notice that the jurisdictional High Court in the case of Yokogawa India Ltd. (supra) has held a similar view with regard to provision for bad debts. From the above, it is clear that the ratio laid down is that if the provision for bad and doubtful debts which is debited to the P L account would constitute actual write off if the same is reduced from loans dvances / debtors to reflect the net balance in the statement of financials. In assessee s case, in the financials for the year ended 31.3.2012 [pg. 30 57 of PB], we notice that the assessee had shown the net amount for trade receivables after adjusting the provision for doubtful debts. Considering the ratio laid down by the Hon ble Supreme Court in the case of Vijaya Bank (supra), in our view the assessee has actually written off the bad debts as of 31.03.2012. The relevant extract of Explanation 1 to section 115JB(2) reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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