SCHINDLER INDIA P.LTD, MUMBAI V. ASST CIT 8(3), MUMBAI

MA 89/MUM/2022

AI Insights

Schindler India Pvt. Ltd. filed a Miscellaneous Application seeking rectification of the Tribunal's earlier order which disallowed the deduction for provision for bad and doubtful debts, citing a potential double deduction with bad debts written off. The Tribunal initially confirmed the disallowance, noting that allowing both claims would amount to double deduction. However, upon re-examination, the Tribunal recognized that the provision for bad and doubtful debts and the actual bad debts written off are accounted for separately and do not constitute double deductions. The Tribunal referenced decisions from the Hon'ble Supreme Court and other Tribunals to support the allowance of the deduction.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123753 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 05-01-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 24-02-2022
• Other Referred Cases: Tainwala Chemicals & Plastics India Ltd. v ACIT, Vijaya Bank v. CIT, CIT v. Tainwala chemicals & Plastics India ltd, CIT v. Yokogwa India Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J”, MUMBAI BEFORE SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.No. 89/MUM/2022 [ARISING OUT OF ITA NO. 7808/MUM/2012 (A.Y: 2008-09)] Schindler India Pvt. Ltd., 401-B, Delphi Hiranandani Business Park Powai, Mumbai - 400076 PAN: AAECS1548J v. ACIT – 8 (3) Mumbai - 400021 (Appellant) (Respondent) Assessee Represented by : Shri Yogesh Thar & Sakshi Dande Department Represented by : Shri Vranda U. Matkarni Date of Hearing : 06.01.2023 Date of Pronouncement : 04.04.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application assessee is seeking rectification of certain mistakes crept in the order passed by the Tribunal in ITA.No. 7808/Mum/2012 dated 17.02.2020 for the A.Y. 2008-09. 2. With reference to above Miscellaneous Application Ld. AR of the assessee submitted that Dispute Resolution Panel (DRP) while rejecting MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 2 the ground raised by the assessee on the claim of provision for bad and doubt full debts, held that the provision created by the assessee is of an unascertained liability and hence required to be added to the book profits u/s. 115JB of the Act and further, they observed that assessee adding back the provision for bad and doubtful debts to the book profits in the first place itself is admission of the fact that same is a provision for unascertained liability only. In appeal the bench vide order dated 17.02.2020 confirmed the disallowance made by the Assessing Officer by holding that in addition to the provisions for bad and doubtful debts the assessee has also claimed deduction of bad debts written off amounting to ₹.19,55,117/-. Therefore, allowing the claim of provision of bad and doubtful debts of ₹.1,40,22,384/- as well as bad debts written-off would amount to double deduction which is impermissible. 3. In this regard, Ld. AR of the assessee submitted as under: - “As far as merits of the case are concerned, the Applicant humbly submits that the Provision for bad and doubtful debts is made on the basis of ageing of debtors. Provision is created for the amounts outstanding beyond a particular period of time. If any amount actually becomes irrecoverable, the same is written off as bad debt. However, if provision is earlier created against any such debt written off, the amount is first adjusted against the provision already made and the balance amount, if any, is claimed as bad debt expense. Therefore, no question arises of any double deduction. In the Applicant's case, no provision has earlier been created or claimed by the Applicant for the bad debts actually written off, i.e. Rs. 19,55,117/-. Further, in case of write-off of debts for which MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 3 provision has already been made, the provision has been reduced/reinstated and only the net amount of additional provision, which in the Applicant's case is Rs. 1,40,22,384/-, has been charged to the profit & loss. Therefore, in view of the foregoing facts and circumstances, the claim made by Applicant for provision for bad and doubtful debts and the bad debts written-off are both different and in no way can be deemed as same claim made twice. Merits on Legality The Applicant humbly submits that it has debited an amount of Rs. 1,40,22,384/- to the Profit & Loss account by way of Provision for bad and doubtful debts and has simultaneously obliterated it from the debtors on the asset side of the balance. The same cannot be termed as the provision for diminution in the value of asset or a provision for unascertained liability. The same ratio has been laid down by the Hon'ble Mumbai Tribunal in case of Tainwala Chemicals & Plastics India Ltd. v ACIT (ITA No. 3338/M/2008), following the decision of Hon'ble Supreme Court in case of Vijaya Bank v. CIT (323 ITR 166) (SC) by holding that provision for bad and doubtful debts (PBDD) when charged to P&L account and at the same time, obliterated from account by reducing "the corresponding amount from the debtors on the asset side of the balance sheet" amounts to write-off and therefore does not fall in the ambit of fall in the ambit of clause (i) of explanation I of section 115JB of the Act.” 4. Ld. AR of the assessee further, submitted that assessee has created provisions of doubtful debts and written-off the actual bad debts in the same provisions of doubtful debts and for the sake of convenience and requirement of ERP the assessee has disclosed the provision for doubtful debts and actual bad debts claimed separately in the Profit and Loss Account. He submitted a copy of the provision for doubtful debts before us to explain the process of accounting adopted by the assessee, for the sake of clarity it is reproduced below: - MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 4 MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 5 5. Further, Ld. AR of the assessee submitted that as regards the double deduction of provision for bad and doubtful debts as well as bad debts written off, the assessee humbly submits that there is no such finding given by the lower authorities in their respective orders. Further these facts were never put-forth at the time of hearing. The finding given by Hon'ble Tribunal is based on issue which is not emanating from the order of lower authorities and is not discussed before. In view of the above facts, circumstances, merits of the case and settled legal position, the assessee most humbly prays that the assessee be granted the deduction for provision for bad and doubtful debts amounting to ₹.1,40,22,384/- in computing the book profit u/s 115JB of the Act. 6. On the other hand, Ld.DR objected to the above submissions and submitted that there is no mistake apparent on record and supported the findings given in Tribunal order. 7. Considered the rival submissions and material placed on record, we observe from the record that assessee has claimed deduction under the head provision of bad and doubtful debts in the Profit and Loss Account and while adjudication we observe that in the Profit and Loss Account the assessee has claimed separately bad debts and MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 6 ₹.19,55,117/- and also claimed provisions of doubtful debts, by observing the same, we came to the conclusion that it may end up double deduction to the assessee. However, this issue was never emanated from any order passed by the lower authorities. It is only a passing reference made by the bench while passing the order. On careful consideration, we observe that as per the policy adopted by the assessee, assessee follows regularly to credit provision for doubtful debts based on its regular accounting policy and claims the same as deduction in the Profit and Loss Account, it is settled position of law as per the decision of the various courts that once the assessee reduces the provision for bad debts from the debtors or advances then it becomes claim of bad debts and which is allowable deduction. We observe that the issue under consideration is relating to book profits u/s.115JB of the Act. The Ld. DRP has disallowed the provision created by the assessee by observing that it is only an unascertained provision created by the assessee which should be added back to the book profits declared by the assessee. Further, we observe that as per the Books of Accounts assessee is following the accounting policy regularly and the books were finalized and submitted before AGM and also adopted by the AGM. Therefore, the book profits declared by the assessee is to be the book profits of the assessee company. MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 7 8. Apart from that, we observe that assessee follows the provisions of bad and doubtful debts and in the current year assessee has created the provision for ₹.1.59 Crores and separately declared the actual bad debts and regular provision separately in the Profit and Loss Account. Therefore, as held in the case of CIT v. Tainwala chemicals & Plastics India ltd [2013] 34 taxmann.com 159 (Bombay) and CIT v. Yokogwa India Ltd., [2012] 17 taxmann.com 15 (Kar.) we are inclined to allow the claim made by the assessee in the grounds of appeal by withdrawing the observation made in the original order. 9. In the result, the Miscellaneous Application filed by the assessee is allowed. Order pronounced in the open court on 04 th April, 2023. Sd/- Sd/- (VIKAS AWASTHY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 04/04/2023 Giridhar, Sr.PS MA.No. 89/MUM/2022 Schindler India Pvt. Ltd., Page No. | 8 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum