MEDIAEDGE CIA INDIA LTD.,MUMBAI vs. DCIT CIR. - 12(3)(2), MUMBAI

This is an appeal by the assessee against order dated 27th April 2016, passed by the learned Commissioner (Appeals)–20, Mumbai, for the assessment year 2011–12.

2 M/s. Mediaedge Cin India Ltd.

assessee has actually reduced it from the book debts by removing it from the asset side of the Balance Sheet. Therefore, he submitted, the amount in question cannot be added to the book profit. In support of his contention, the learned Authorised Representative relied upon the following decision:– i) CIT v/s HCL Comnet Systems & Services Ltd. [2008] 174 Taxman 118 (SC); ii) CIT v/s Vodafone Essar Gujarat Ltd. [2017] 85 taxmann.com 32 (Guj.); and iii) CIT v/s Indian Petrochemicals Corporation Ltd., [2016] 74 taxmann.com 163 (Guj.).

the learned Departmental Representative that the amount in dispute is in the nature of unascertained liability as per clause (c) of Explanation–1 to section 115JB of the Act is unacceptable. More so, in view of the decision in case of CIT v/s HCL Comnet Systems & Services Ltd.(supra). In any case of the matter, the amount in dispute being recorded as a debt in the books of account has to be treated as an asset and not liability. Reverting back to the issue in dispute, it needs to be examined whether the deduction claimed by the assessee is in the nature of a provision or not. It is the contention of the learned Authorised Representative that the assessee has reduced the debt from the asset side of the Balance Sheet, meaning thereby, the amount in dispute has actually been reduced from the book debts. Hon'ble Supreme Court in case of Southern Technologies v/s JCIT, [2010] 320 ITR 577 (SC), has held that if an assessee debits an amount of bad and doubtful debt to the Profit & Loss account and credits the asset side like sundry debtors account, it would constitute a write–off of an actual debt. Referring to the aforesaid decision, the Hon'ble Supreme Court in Vijaya Bank v/s CIT, [2010] 323 ITR 166 (SC) held that if the assessee besides debiting the Profit & Loss account and creating provisions for bad and doubtful debt, had simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances / debtors

5 M/s. Mediaedge Cin India Ltd. on the asset side of the Balance Sheet and consequently, at the end of the year, the figure of loans and advances of the debtors on the asset side of the Balance Sheet was shown as net of the provision for the bad debt, it will constitute actual write–off of the bad debt. The same principle has been reiterated in the case of CIT v/s Vodafon Esser Gujarat Ltd. (supra) and CIT v/s Indian Petro Chemicals Ltd. (supra). Thus, in the context of the principle laid down in the decisions referred above, the claim of the assessee that the amount in dispute in not merely a provision but an actual write–off requires to be examined afresh. Therefore, we restore the issue to the file of the Assessing Officer for verifying assessee’s claim and deciding the issue in accordance with and keeping in view the relevant statutory provisions and the ratio laid down in the decisions referred to above. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue.