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TMI Blog2022 (12) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... ly allowed the appeal in favour of the assessee. In the meanwhile, vide notice dated 11.5.2015, the AO sought to rectify the book profits by adding Rs.50,22,576 towards provision for bad debts. The AO also issued one more notice dated 1.1.2016 again rectifying the book profits wherein besides adding the provision for bad debts, the disallowance u/s. 14A for an amount of Rs.89,98,661 was also added to the book profits. The assessee filed a response on 21.1.2016 and subsequently the AO dropped the proceedings u/s. 154. 4. The CIT(A), LTU subsequently initiated revisionary proceedings by issuing notice u/s. 263 of the Act holding the assessment to be erroneous and prejudicial to the interest of the revenue to the extent that provision for bad debts and the disallowance u/s. 14A were not considered while computing the book profits u/s. 115JB. The AO passed an order giving effect to the order u/s 263 by making the aforesaid additions to the book profits. The assessee filed an appeal against the order of the AO passed u/s. 143(3) r.w.s. 263. The CIT(A) gave relief to the assessee to the extent of disallowance made under section 14A to be added to the book profits u/s. 115JB. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward to the subsequent year along with the provision. 3. As regards levy of interest: 3.1. The lower authorities have erred in levying interest under section 234C of IT Act. 3.2. The lower authorities have erred in levying interest under section 220(2) of IT Act. 3.3. The lower authorities have erred in levying interests under section 234B and under section 220(2), when the said disallowance is not tenable, and thus question of levy of interest does not arise. On the basis of above grounds and other grounds which may be urged at the time of hearing with the consent of the Learned Commissioner of Income Tax (Appeals), it is prayed that the order passed under section 143 (3) r.w.s. 263 of IT Act be quashed and relief sought be granted." 7. During the year under consideration, the assessee has debited a sum of Rs.50,22,576 to the P&L account and the provision for doubtful debts was accordingly credited. The provision for doubtful debt as on 31.3.2011 stood at Rs.35 million and the same was increased by the amount debited to the P&L account during FY 2011-12 and accordingly the provisions as on 31.3.2012 stood at 40 million. The assessee in the statement of accounts has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts' and it is just an accounting entry in the balance sheet which it is trying to show as actual write off. As on 31.03.2011 the actual debts were Rs 2860 million and if the doubtful debts had actually been written off on 31.03.2010 the carry forward would have been Rs 2825 million only and after taking into consideration the new debts during FY 2011-12 the actual debts would have been Rs 4083 million only as against Rs 4118 million shown in the balance sheet as on 31.03.2012 before considering provision (see schedule 3.5.2 as reproduced supra from the appellant's reply). If the amount of Rs 50,22,576/-had actually been written off by the appellant during the year under consideration the carry forward 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' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs 50,22,576/- to the book profits while computing the same as per provisions of Section 115.113 of the Act is upheld and the grounds of appeal 3, 3.1 and 3.2 are dismissed." 10. Aggrieved, the assessee is in appeal before the Tribunal. 11. The ld. AR reiterated the submissions made before the CIT(A). He submitted that the assessee has reduced the provision for doubtful debts from the trade receivables and has shown only the net figure in the balance sheet of the assessee, which would mean that there is an actual write off in the books of accounts. The ld. AR therefore submitted that the assessee's case is covered by the ratio laid down by the Hon'ble Supreme Court in the case of Vijaya Bank (supra). 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 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debtors on the asset side of the balance sheet was shown as net of the provision "for impugned bad debt". In the judgment of the Gujarat High Court in the case of Vithaldas H. Dhanjibhai Bardanwala (supra), a mere debit to the profit and loss account was sufficient to constitute actual write off whereas, after the Explanation, the assessee(s) is now required not only to debit the profit and loss account but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of provisions for impugned bad debt. This aspect is lost 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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