M/s Cummins Technologies India Private Limited, Dewas V. THE ACIT CIRCLE 1(1), Ujjain

ITA 232/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5943 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Business expenditure; Opportunity of being heard; Rule of consistency; Bad and doubtful debts; Provision of bad debts

Judgement Text

ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ..&./ I.T.A. NOS.258/IND/2015 : A.Y.2007-08 ..&./ I.T.A. NOS.232/IND/2016 : A.Y.2010-11 M/S CUMMINS TECHNOLOGIES INDIA PVT.LTD DEWAS PAN AABCT 2018B :: ( / APPELLANT VS ACIT 1(1) UJJAIN :: )*( / RESPONDENT ' +, - # / ASSESSEE BY SHRI GIRISH AGRAWAL ./ - # / REVENUE BY SHRI K.G. GOYAL 0 '/1 - $ DATE OF HEARING 10.1.2017 23456 - $ DATE OF PRONOUNCEMENT 19 .1.2017 #7 / O R D E R PER SHRI D.T. GARASIA, JM BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND COMMON GROUNDS ARE TAKEN, THEREFORE, THESE ARE BEING ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 2 DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE O F CONVENIENCE. 2. THE FIRST GROUND WHICH IS COMMON IN BOTH THE APPE ALS READS AS UNDER :- THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ADDITION ON ACCOUNT O F WARRANTY PROVISIONS IN THE ASSESSMENT YEAR 200708 O F RS. 30,65,282/- AND IN THE ASSESSMENT YEAR 2010-11 OF RS.16,98,831/- . IN THE ASSESSMENT YEAR 2010-11 THE SECOND GROUND READS AS UNDER :- THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF RS.20,38,655/- ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF TURBOCHARGERS. ORIGINAL ASSESSMENT U/S 143 WAS PASSED ON 24.11.2010. THEREAFTER, THE ASSESSING OFFICER HAS DISALLOWED PROVI SIONS OF WARRANTY EXPENSES OF RS.30,65,282/-. THE ASSESSING ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 3 OFFICER WAS OF THE VIEW THAT DURING THE FINANCIAL YEAR 2 003- 04 THE ASSESSEE HAS PRACTICE OF DEBITING WARRANTY CLAIM RECEIVED DURING THE YEAR IN PROFIT AND LOSS ACCOUNT. SUBSEQUENTLY, THE COMPANY HAS STARTED MAKING PROVISION FOR WARRANTY AND THIS AMOUNT WAS DEBITED IN PROFIT AND LO SS ACCOUNT. THE QUANTIFICATION OF PROVISION MADE IS NOT C LEAR AS TO HOW THE ASSESSEE HAS QUANTIFIED AND DEBITED. THE COMPANY HAS ALSO NOT SPECIFIED THE REASON REGARDING CHANGING THE POLICY. THE ASSESSEE CLAIMED THAT THE QUANTIFICATION HAS BEEN DONE UNDER THE ADVICE FROM TECHNICAL PERSON AND THE AVERAGE LAST QUARTER OF THE WARRANTY COST VS. LAST VS. LAST QUARTER OF SALES WERE USED FOR MAKING THE PROVISION. THE ASSESSEE HAS NOT GIVEN WORK ING. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE IS DIFFERENCE OF EXPENSES ON ACCOUNT OF PROVISION MA DE AND ACTUAL EXPENSES INCURRED BY THE ASSESSEE ON THE WARRANTY . THEREFORE, BOTH THE WARRANTY EXPENSES ARE ALLOWABLE ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 4 EXPENDITURE BUT THE METHOD IN WHICH THE ASSESSEE WAS CLAIMING, THEREFORE, THIS WAS DISALLOWED. 3. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS MAINLY ARGUED ON TWO COUNTS, FIRSTLY T HAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT AND AS PER THIS SYSTEM, THERE ARE REVENUE EXPENSES WHICH ARE ACCOUNTED ON ACCRUAL BASIS AND THE PROVISIONS BY APPLYING MATCH CONCEPT. HERE IN THIS CASE, THE ASSESSEE IS CLAIM ING WARRANTY EXPENSES WHICH ARE ALLOWABLE EXPENDITURE AS HEL D BY THE HON'BLE SUPREME COURT IN THE CASE OF ROTORK C ONTROL INDIA PRIVATE LIMITED; 314 ITR 62. AS PER THE DECISIO N OF THE HON'BLE SUPREME COURT, THE WARRANTY EXPENSES ARE ALLOWABLE AND IN THAT CASE, THE MATTER WAS RESTORED TO TH E ASSESSING OFFICER TO VERIFY WHETHER THE PROVISION I S MADE ON STRUCTURE POLICY OF LAST 8 QUARTERS OF WARRANTY COST AND LAST QUARTER SALES WERE USED FOR QUANTIFYING THE PROVISIONS. THE ASSESSEE IS FOLLOWING THESE PROVISIONS BASED ON THE P OLICY ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 5 WHICH WAS DISCLOSED AS MANDATED IN THE ACCOUNTING STANDARD. THE ASSESSEE HAS MADE STRUCTURE POLICY BY TAKING THE ACTUAL WARRANTY COST AND SALES OF LAST 8 QUARTERS TO MAKE ESTIMATE OF PROVISIONS FOR WARRANTY CLAIM. THE ACCOUNTING STANDARD 29 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT MANDATES MAKING SUCH PROVISION WHERE RELIABLE ESTIMATE CAN BE MADE. THEREFORE, WARRANTY EXPENSES DEBITED CANNOT BE CONSIDERED AS CONTINGENT LIABILITY. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PAGE 34 OF THE PAPER BOOK WHEREIN THE ASSESSEE HAS MADE WORKING OF LAS T 8 QUARTERS WHICH IS THE DEBIT NOTES PAID, FOC INVOICE S, TOTAL CLAIMS, DOMESTIC SALES AND % OF WARRANTY CLAIMS TO DOMESTIC SALES PERCENTAGE. IN THE LAST 8 QUARTERS THE PERCENTAGE COMES TO 0.12%. THE VARIATION IN THE PROVIS IONS MADE AND ACTUAL WARRANTY DEBITED IN THE PROFIT AND LOSS ACCOUNT, THEREFORE, BASED ON SUCH WORKING WHICH IS ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 6 MENTIONED IN PAGE 29 OF THE PAPER BOOK AND IN THE AUDI T ACCOUNT, THE ASSESSEE HAS CLEARLY MENTIONED AND DISCLOS ED THAT PROVISIONS OF WARRANTY MADE AND UTILISED AND REVERSE D DURING THE YEAR AS PER THE ACCOUNTING STANDARD 29 ISSUE D BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. SI MILAR DISCLOSURE HAS BEEN MADE IN NOTES TO ACCOUNTS FORMING PART OF AUDITED FINANCIALS REGARDING WARRANTY, THEREFORE , CONSIDERING THE JUDGMENT OF HON'BLE SUPREME COURT AN D COMPARING THE FACTS OF THIS CASE, WARRANTY EXPENSES ARE T O BE ALLOWED. 4. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. MOREOVER, THE LEARNE D DR SUBMITTED THAT THE ASSESSEE WAS FORMERLY FOLLOWING THE WARRANTY EXPENSES ON ACTUAL BASIS AND THE ASSESSEE THEREAFTER HAS CHANGED THE POLICY TO MAKE THE PROVISION FOR WARRANTY EXPENSES. THEREFORE, AS PER THE RULE OF CONSISTENCY, THIS EXPENDITURE CANNOT BE ALLOWED. ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 7 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SI DES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF TURBOCHARGERS AND OFFERS WARRANTY FOR TECHNICAL DEFAULT I N THE PRODUCT. DURING THE FINANCIAL YEAR 2003-04 THE COMPANY HAS PRACTICE OF DEBITING THE ACTUAL WARRANTY CLAIMS RECEIVED DURING THE YEAR IN THE PROFIT AND LOSS ACCOUNT. WITH THE IMPLEMENTATION OF ACCOUNTING STANDAR D 29 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS O F INDIA EFFECTIVE FROM FINANCIAL YEAR 2004-05 WHICH MANDAT ES MAKING THE PROVISION ON MATCHING CONCEPT PRINCIPLE, T HE COMPANY STARTED MAKING THE PROVISION FOR WARRANTY AND THIS AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. THE PROVISIONS WERE MADE AND ADVICE RECEIVED FROM TECHNICAL AND ENGINEERING TEAM. THIS POLICY OF MAKING THE PROVIS ION BASED ON TECHNICAL ADVICE CONTINUED EVEN FOR THE NEXT FINANCIAL YEAR. DURING THE YEAR THE COMPANY ACCRUED ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 8 WARRANTY COST ON DOMESTIC SALES. IN SCHEDULE 14 OF AUDI TED FINANCIALS THE ASSESSEE HAS MADE DISCLOSURE ON PROVISION S OF WARRANTY MADE AND UTILISED AND REVERSED DURING THE Y EAR AS PER THE ACCOUNTING STANDARD 29 ISSUED BY THE INSTIT UTE OF CHARTERED ACCOUNTANTS OF INDIA. THE AMOUNT WAS DISCLOSED AS UNDER :- FINANCIAL YEAR OPENING BALANCE ADDITIONS UTILISATION/ REVERSAL CLOSING BALANCE F.Y.2006-07 F.Y.2005-06 16,20,000 1,200,000 3,471,507 1,620,000 2,177,465 1,200,000 2,914,042 1,620,000 DETAILS OF ABOVE FIGURES ARE AS UNDER :- S.NO. PARTICULARS AMOUNT F.Y.2006-07 1 OPENING BALANCE OF WARRANTY PROVISION 16,20,000 2 ADD:PROVISION MADE DURING THE YEAR 34,71,507 3 LESS : PAYMENT OF WARRANTY CHARGES DURING THE YEAR 17,71,240 4 LESS : REVERSAL OF CREDIT AMOUNT LYING IN THE WARRANTY PROVISION AT THE YEAR END IN THE PROFIT AND LOSS ACCOUNT 4,06,225 5 WARRANTY PROVISION DEBITED IN THE PROFIT AND LOSS ACCOUNT 30,65,282 WE FIND THAT EXERCISE OF WARRANTY CLAIM DURING THE YEAR IS FROM THE PROVISION ACCOUNT WHICH DOES NOT AFFECT PROF IT AND LOSS ACCOUNT. UNDER NEW POLICY PERCENTAGE OF LAST 8 QUARTERS OF WARRANTY COST VS. LAST 8 QUARTERLY SALES WERE ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 9 USED FOR MAKING THE WARRANTY EXPENSES PROVISION. COMPARATIVE TABLE DISCLOSING THE IMPACT OF ACCOUNTING STANDARD 29 FOR THE FINANCIAL YEAR ON PROFIT OF THE COMPANY IS AS UNDER :- S.NO. PARTICULARS AMOUNT F.Y. 2006-07 1 WARRANTY PROVISION DEBITED IN THE PROFIT AND LOSS ACCOUNT 30,65,282 2 PAYMENT OF WARRANTY CHARGES DURING THE YEAR 17,71,240 3 DIFFERENCE BEING EXTRA CHARGE ON P&L OF THE COMPANY ON ACCOUNT OF FOLLOWING ACCOUNTING STANDARD 29 OF ICAI 12,94,042 WE FIND THAT THE ASSESSEE IS MANUFACTURING A PRODUCT WHICH REQUIRES WARRANTY AND THE ASSESSEE HAS ADOPTED REVERSING EXCESS PROVISION. THE ASSESSEE IS MAKING PROVISION OF WARRANTY APPLYING THE PERCENTAGE OF COST TO THE TURNOVER BASED ON PAST RECORD MAKING THE PROCESS MORE SCIENTIFIC BRINGING INTO HIGHER DEGREE OF ACCURACY. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING . THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE IN CONT ROVERSY IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SU PREME ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 10 COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. V S. CIT; 314 ITR 62 WHEREIN IT IS HELD AS UNDER :- BUSINESS EXPENDITURE ALLOWABILITY PROVISION FOR WARRANTY CLAIMS A PROVISION IS RECOGNIZED WHEN (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SETTLE THE OBLIGATION , AND (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT O F THE OBLIGATION IF THE HISTORICAL TREND INDICATES THAT LARGE NUMBER OF SOPHISTICATED GOODS WERE BEING MANUFACTURED IN THE PAST AND IN THE PAST IF THE FAC TS ESTABLISHED SHOW THAT DEFECTS EXISTED IN SOME OF TH E ITEMS MANUFACTURED AND SOLD THEN THE PROVISION MADE FOR WARRANTY IN RESPECT OF THE ARMY OF SUCH SOPHISTICATED GOODS WOULD BE ENTITLED TO DEDUCTION ASSESSEE IS MANUFACTURING VALUE ACTUATORS IN LARGE NUMBERS AND STATISTICAL DATA INDICATES THAT SOME OF THEM TURN OUT TO BE DEFECTIVE EVERY YEAR BEING A SOPHISTICATED ITEM NO CUSTOMER IS PREPARED TO BUY VALUE ACTUATOR WITHOUT WARRANTY AND, THEREFORE, WARRANTY BECAME AN INTEGRAL PART OF THE SALE PRICE ASSESSEE MADE A PROVISION FOR WARRANTY AT THE RATE OF 1.5 PER CENT OF THE TURNOVER SUCH PROVISION NEEDS TO BE RECOGNISED AS THE ASSESSEE HAS A PRESENT OBLIGAT ION AS A RESULT OF PAST EVENTS WHICH WOULD RESULT IN OUTFLOW OF RESOURCES AND A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION WARRANTY COS T BEING AN INTEGRAL PART OF THE SALE PRICE, ASSESSEE MUST PROVIDE FOR SUCH WARRANTY COSTS IN ITS ACCOUNTS FOR THE RELEVANT YEAR, OTHERWISE THE MATCHING CONCEPT FAILS IT IS APPROPRIATE TO PROVIDE FOR WARRANTY AS A PERCENT AGE OF TURNOVER BASED ON PAST EXPERIENCE AS IT SATISFIE S THE ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 11 ACCRUAL CONCEPT AS WELL AS THE MATCHING CONCEPT THEREFORE, ASSESSEE INCURRED LIABILITY DURING THE RELEVANT ASSESSMENT YEARS ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THE PROVISION MADE B Y IT IS ALLOWABLE AS DEDUCTION UNDER S. 37. WE RESPECTFULLY FOLLOWING THE SAME, ALLOW THE CLAIM OF THE ASSESSEE IN BOTH THE YEARS. 6. IN RESPECT OF SECOND GROUND FOR ASSESSMENT YEAR 2 010- 11 THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS CR EATED AND CALCULATED THE PROVISION OF DOUBTFUL DEBT ON THE B ASIS OF AGE OF THE DEBTOR. IN THE CASES WHERE THE AGE OF D EBTOR WAS MORE THAN 720 DAYS, 100% OUTSTANDING BILL WAS WRITTEN OFF IN CASES WHERE OUTSTANDING BILLS ARE BETWE EN 541 TO 720 DAYS, 75% OF THE AMOUNT HAS BEEN PROVIDED AND IN CASES WHERE BILLS ARE OUTSTANDING BETWEEN 361 TO 540 DAYS, 50% OF THE AMOUNT HAS BEEN PROVIDED. THE DISTINCTION BETWEEN GOOD AND BAD DEBTORS HAVE NOT BEE N KEPT IN MIND AND BY MAKING PROVISION OF BAD DEBTS ON THE BASIS OF AGE OF OUTSTANDING BILLS, GOOD DEBTORS HAVE ALS O ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 12 BEEN PROVIDED WHICH IS NOT THE INTENTION OF SECTION 36(1)(VII) OF THE ACT. THE ASSESSING OFFICER, THEREFORE, WAS OF THE VIEW THAT UNDER SECTION 36(1)(VII) OF THE ACT THE BAD DEBT CANNOT BE ALLOWED. 7 DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ARGUED THAT AS PER THE PROVISION OF S ECTION 36(1)(VII) OF THE ACT, THE PROVISION USED THE WORDS THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH CLEARLY IMPLIES THAT IT IS NOT NECESSARY THAT WHOLE OF THE DEB T MUST BECOME BAD AND DOUBTFUL TO CLAIM A DEDUCTION. EVEN A PAR T OF SUCH BAD AND DOUBTFUL DEBT IS ENTITLED FOR CLAIM O F DEDUCTION UNDER THE PROVISION. IN ORDER TO CLAIM DED UCTION UNDER SECTION 36(1)(VII) OF THE ACT, ONE OF THE CON DITIONS THAT IT REQUIRED TO BE SATISFIED IS LAID DOWN UNDER SEC TION 36(1)(VII) OF THE ACT. THE CONDITION STIPULATED IN F IRST LIMB OF CLAUSE (I) OF SUB-SECTION 36 IS THAT NO DEDUCTION ON ACCOUNT OF BAD DEBT OR PART THEREOF SHALL BE ALLOWED UNLESS SU CH ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 13 DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR AN EARLIER PREVIOUS YEAR. THE SECOND LIMB OF CL AUSE (I) OF SUB-SECTION (2) OF SECTION 36 SAYS THAT THE SAID C ONDITION IS NOT APPLICABLE WHERE SUCH DEBT REPRESENTS MONEY LENT IN THE ORDINARY BUSINESS OF BANKING OR MONEY LENDING WHI CH IS CARRIED ON BY THE ASSESSEE. THEREFORE, SECOND LIMB OF CLAUSE (I) OF SUB-SECTION (2) OF SECTION 36 IS NOT R ELEVANT. SECTION 36(1)(VII) OF THE ACT IS FOR COMPUTING THE TOTAL INCOME OF THE ASSESSEE AND BAD DEBT OR PART THEREOF HAS TO BE TAKEN INTO ACCOUNT. IT IS WELL SETTLED BY THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LIMI TED VS. CIT; 190 TAXMAN 391(SC) WHICH SPECIFIES THAT THE PROPOSITION OF LAW IS WELL SETTLED AFTER 1.4.1989. I T IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 14 IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THEREFORE, IN THE INSTANT CASE, THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK; 323 ITR 166 (SC) IS COMPLETELY APPLICABLE AND, THEREFORE, RELY ING UPON THE DECISION OF THE HON'BLE SUPREME COURT AND FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TAINWALA CHEMICALS & PLASTICS INDIA LTD. (201 3) 34 TAXMANN.COMN. 159 (BOM), IT MUST BE ALLOWED. 8. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF T.R.F. LTD. (SUPRA) AFTER 1.4.1989 IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASS ESSEE, IT IS ALLOWABLE AS BAD DEBT. THE LEARNED DR SUBMITTED T HAT THE ASSESSEE HAS RELIED UPON THE DECISION IN THE CASE OF VIJAYA BANK (SUPRA) WHICH IS COMPLETELY MISPLACED BECAUS E THE ASSESSEE COMPANY IS NOT DOING THE BUSINESS OF BANK ING OR MONEY LENDING. THEREFORE, THE JUDGMENT OF VIJAYA BANK ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 15 (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE OF T HE ASSESSEE. 9. WE HAVE HEARD BOTH THE SIDES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT AS PER THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. L IMITED, WHEREIN THE HON'BLE SUPREME COURT HAS CATEGORICALLY HE LD AS UNDER :- THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1.4.19 89, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD D EBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WRITTE N OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM S UNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT, THE BAD DEBT OR PART THE REOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS E XERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE , THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AN D THAT TOO ONLY TO THE EXTENT OF THE WRITE OFF. FOLLOWING THE ABOVE DECISION OF THE HON'BLE SUPREME COURT, WE ARE OF THE VIEW THAT THE ASSESSEES CLAIM OF BAD DEB T ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 16 AND DOUBTFUL DEBT IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT AND AS PER THE DECISION OF THE HON'BLE SUPREME COURT WHEREIN THE HON'BLE SUPREME COURT HAS CATEGORICALLY RESTORED THIS MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE WHETHER THE BAD DEBT OR PART THEREO F HAS BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE, THE MATTER HAS TO BE EXAMINED BY THE ASSESSING OFFICER DE NOVO AND CONSIDERING ALL THE ABOVE ASPECT, THE MATTER MAY BE DECIDED. WE, THEREFORE, RESTORE THIS ISSUE TO THE F ILE OF THE ASSESSING OFFICER TO DO THE NEEDFUL AFTER PROVIDING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. 10. IN RESPECT OF THE ASSESSEES CONTENTION THAT THE FACTS OF THIS CASE ARE IDENTICAL WITH THE FACTS OF THE CASE OF VIJAYA BANK (SUPRA), WE FIND THAT IN THE DECISION OF THE HON' BLE SUPREME COURT, THE CASE RELATED TO VIJAYA BANK AND THE BANK IS IN THE BUSINESS OF MONEY LENDING AND IN THAT C ASE THE HON'BLE SUPREME COURT HAS HELD THAT AFTER 1.4.198 9 ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 17 THE ASSESSEE IS REQUIRED NOT ONLY TO DEBIT THE PROFIT AND LOSS ACCOUNT BUT ALSO SIMULTANEOUSLY REDUCE THE LOANS AND ADVANCES OR DEBTORS FROM THE ASSET SIDE OF THE BALANCE SHEET TO EXTEND THE CORRESPONDING AMOUNT, SO AT THE E ND OF THE YEAR THE AMOUNT OF LOANS OF ADVANCES/DEBTORS IS SHO WN AS NET PROVISION FOR IMPUGNED BAD DEBT. WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT IN MONEY LENDING BUSINESS, THEREFORE, THIS DECISION IS NOT APPLICABLE TO THE FAC TS OF THIS CASE. DURING THE COURSE OF HEARING, THE LEARNED COUNS EL FOR THE ASSESSEE WAS SPECIFICALLY ASKED BY THE BENCH AS TO WHETHER THE ASSESSEE WANTS TO PURSUE THIS DECISION AN D STILL HE WANTS TO ARGUE THE MATTER OR HE WANTS THE MATT ER TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA), THE LEARNED COUNSEL FOR THE ASSESSEE SPECIFICALLY SUBMITTED THAT IT IS THE WISDOM OF THE T RIBUNAL. THEREAFTER, AGAIN THE SAME QUESTION WAS PUT TO THE LEARNED ITA NOS. 258 & 232/IND/2016 CUMMINS TECHNOLIGIES 18 COUNSEL FOR THE ASSESSEE AND THE LEARNED COUNSEL FOR THE ASSESSEE HAS FINALLY CONCEDED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER AS PER THE DECISION OF THE HON'BLE SUPREME COURT. THEREFORE, W E HAVE RESTORED THIS MATTER TO THE FILE OF THE ASSESSING OF FICER TO DECIDE THE SAME AS PER THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA). 11. IN THE RESULT, ITA NO. 258/IND/2015 IS ALLOWED AN D ITA NO.232/IND/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPO SES. TH E ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 19 TH JANUARY, 2017. SD/- SD/- (..) ( . .) (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER JU DICIAL MEMBER / DATED : 19 TH JANUARY, 2017. DN/