Case Law Details
Elite International (P.) Ltd. Vs ACIT(ITAT Mumbai)
In the instant case Upon perusal of financial statements we find that the assessee has claimed the said expenditure of Rs. 530.47 Lacs under the head ‘Provision for doubtful advances’ and this provisions has been reduced from the figures of Advances recoverable in cash or in kind or for value to be received under the head Other current Assets, Loans & Advances in the Balance Sheet for impugned AY. A perusal of Debit notes / ledger extract of the suppliers placed in the paper-book reveals that the assessee has raised these debit notes between AY 2003-04 to 2008-09 against various suppliers / parties and made the provisions against doubtful advances for Rs.530.47 Lacs during impugned AY and claimed the same by way of debit to Profit & Loss Account and the same has been disallowed by the revenue treating the same as mere provisions and hence not an eligible expenditure. We find strength in the argument of Ld. DR that the issue under dispute is not at all covered by the provisions of Section 36(i)(vii) as this section deals with ‘bad debts written off’ by the assessee qua sundry debtors, which is not the case here.
As we are dealing with admissibility of expenditure u/s 37 and not u/s 36(i)(vii) according to which, there must be an expenditure at the first instance which has crystallized during the impugned AY as against deduction u/s 36(i)(vii) which is allowable to the assessee the moment bad debt is written off in the books of accounts, notwithstanding the fact that whether the same has actually become bad or not.
Therefore, to conclude, we hold that the impugned expenditure, being mere provisions, were not allowable to the assessee which results into dismissal of all grounds of assessee’s appeal.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
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