R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC) The Division Bench of Delhi High Court followed the aforesaid decision in the case of CIT v. Rajinder Kumar [2014] 362 ITR 241/220 Taxman 3/[2013] 39 taxmann.com 126 (Delhi) and held that the amendment in the proviso to Section 40(a)(ia) of the Act is retrospective in nature.
Assessee is entitled to deduction of interest payable by him on capital charge only and not additional interest
Shew Kissen Bhatter [1973] 89 ITR 61 (SC)
Explanation 5 to Section 32 was specifically made applicable w.e.f. April 1, 2002 and was, therefore, prospective in nature.
| (i) | Commissioner of Income-Tax v. Kerala Electric Lamp Works Ltd. & Anr. [2003] 261 ITR 721, | |
| (ii) | Commissioner of Income Tax v. Sree Senhavalli Textiles P. Ltd. [2003] 259 ITR 77 and | |
| (iii) | Shri Ram Nath Jindal and Shri Jaghjiwan Ram v. The Commissioner of Income-Tax, Haryana, Rohtak [2001] 252 ITR 590 |
Out of Pocket expenses seperately received in advance or otherwise shall not form part of turnover for audit purpose . Hence no penalty held levialble u/s 271B- Shashank Rakesh Aggarwal [ITAT Mumbai]
Reimbursement of Expenses not a part of gross receipts of the assessee for audit purpose-ITAT Pune
Whether reimbursement of actual expenditure on which the payer has deducted TDS ought to be considered by the assessee as a gross receipts or the assessee was under a bona fide impression that reimbursement of expenditure does not involve element of income and not required to be considered as a part of gross turnover. After perusing various invoices raised by the assessee on its clients which are placed in the paper-book, we are of the view that the assessee remained under a bona fide impression that the expenditure incurred on behalf of its clients regarding payment of customs duty, transportation/freight charges, forklift charges, etc. were not required to be retained by the assesse [Aasita International-ITAT Pune 19-011-2015]
The assessee was entitled to depreciation under section 32 of the Act in respect of the immovable properties taken over by it from the State Government, even though their legal ownership had not been transferred to the assessee
Reduction in the Loans and Advances or Debtors on the asset side of it’s Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off: Held by SC in Vijaya Bank
Whether it is imperative for the assessee-Bank to close the individual account of each of it’s debtors in it’s books or a mere reduction in the Loans and Advances or Debtors on the asset side of it’s Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off
SC in the case of Vijya Bank vs. CIT 323 ITR 168 has held that
What is being 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 claiming deduction under Section 36(1)(vii) of 1961 Act……..because the Assessing Officer apprehended that the assessee-Bank might be taking the benefit of deduction under Section 36(1)(vii) of 1961 Act, twice over.
In this context, it may be noted that there is no finding of the Assessing Officer that the assessee had unauthorisedly claimed the benefit of deduction under Section 36(1)(vii), twice over. The Order of the Assessing Officer is based on an apprehension that, if the assessee fails to close each and every individual account of it’s debtor, it may result in assessee claiming deduction twice over. In this case, we are concerned with the interpretation of Section 36(1)(vii) of 1961 Act. We cannot decide the matter on the basis of apprehensions/desirability. It is always open to the Assessing Officer to call for details of individual debtor’s account if the Assessing Officer has reasonable grounds to believe that assessee has claimed deduction, twice over. In fact, that exercise has been undertaken in subsequent years.
There is also a flipside to the argument of the Department. Assessee has instituted recovery suits in Courts against it’s debtors. If individual accounts are to be closed, then the Debtor/Defendant in each of those suits would rely upon the Bank statement and contend that no amount is due and payable in which event the suit would be dismissed.
Further Held by Supreme Court that if amount is recovered subsequently and it is more than difference between debt and amount so allowed , the balance can be taxed u/s 41(4).
How to Write off a debt as per provisions of Section 36(1)(vii)
Held by Supreme Court in Southern Technologies Ltd. [320 ITR 577]
If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor’s account, it would constitute a write off of an actual debt.
However, if an assessee debits `provision for doubtful debt’ to the profit and loss account and makes a corresponding credit to the `current liabilities and provisions’ on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction
Held by Supreme Court in Vijya Bank 323 ITR 168
upholding the order of Tribunal and reversing the decision of High Court that besides debiting the Profit and Loss Account and creating a provision for bad and doubtful debt, the assessee-Bank had correspondingly/simultaneously obliterated the said provision from it’s accounts by reducing the corresponding amount from Loans and Advances/debtors on the asset side of the Balance Sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the Balance Sheet was shown as net of the provision “for impugned bad debt”.
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 it’s Books, as indicated above
Comprehansive Analysis of Income Computation and Disclosure Standads
CBDT has confirmed the decision of Supreme Court in TRF Ltd., which says that it is not necessary for assesseeto establish that debt has become irrecoverabie and it is enough if bad debt is written off as irrecoverable in the books of accounts of the assessee.
To mitigate litigation on baddebts, CBDT has asked officials not to file or pursue appeal s on the issue of failure of the assessee to establish that debt has become irrecoverable. CBDT has confirmed the decision of Supreme Court in TRF Ltd., which says that it is not necessary for assesseeto establish that debt has become irrecoverabie and it is enough if bad debt is written off as irrecoverable in the books of accounts of the assessee. [Circular No. 12/2016 dated 30-05-2016]