INCOME TAX ACT, 1961

Section 80P

Business deduction under section 36(1)(vii) - Bad debts - Excess provision for BDDR of earlier years written back -

Assessee filed appeal against the addition made by AO on account of Bad and Doubtful Debts Reserve for earlier years written back in this year in the books of account on the ground that excess provision for BDDR of earlier years written back is taxable income. Held: On going through computations of total income, it was manifested that the assessee was creating BDDR for earlier years as per the RBI norms and was simultaneously adding back the same in computing the total income. To put it simply, the net effect of creating the provision and then adding back in the computation of total income was that there was no deduction claimed by the assessee at the time of creation of provision. Once the assessee did not take any deduction in the computation of total income on account of BDDR created on the basis of RBI norms, its reversal in subsequent years, cannot call for any addition.

REFERRED :

FAVOUR : In favour of assessee.

A.Y. : 2013-14

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