Relief to Bosch Limited: ITAT deletes Income Tax Addition on reduction of Bad Debts from Sundry Receivables and debited to Profit and Loss account [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore deleted addition on reduction of bad debts from Sundry Receivables and debited to Profit and Loss account thereby granting Relief to Bosch Limited.

The assessee, Bosch Limited has debited a sum of Rs.19,44,73,470 towards provision for doubtful debts. The assessee submitted before the AO that the provision for doubtful debts is an allowable expenditure by placing reliance on CIT vs Sandvik Asia Ltd. The AO rejected the contention of the assessee and disallowed the claim by stating that the provision is a contingent liability and therefore cannot be allowed. On further appeal, the CIT(Appeals) confirmed the disallowance by stating that only the actual write off can be allowed as a deduction and not any provision made for doubtful debts.

The Counsel for the assessee, submitted that the assessee has actually written off the impugned amount by debiting the P and L account. In this regard, the Counsel drew the attention to thr statement of financials where the amount written off as provision for doubtful debits is reduced from the trade receivables.

The Counsel also drew the attention of the Tribunal to the break-up of other expenses where the impugned amount is debited to the P&L account (pg. 94 of PB). The ld.AR further submitted that the detailed movement of provision for bad debts was submitted before the lower authorities from which it would be clear that the amount was provision made during the year is debited to the P&L account and therefore should be allowed as a deduction.

A Division Bench consisting of N V Vasudevan, Vice President and Padmavathy S, Accountant Member held that “From the perusal of the facts it is noticed that the assessee has reduced the provision for bad debts from Sundry Receivables and the same is debited to the Profit & Loss account. Therefore, respectfully following the decision of the coordinate Bench, we direct the AO to delete the impugned disallowance.”

To Read the full text of the Order CLICK HERE

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