Relief to Thomas Press: ITAT deletes Disallowance of Rs.1.23 Cr in Bad Debts due to Double Taxation [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal(ITAT)granted relief to Thomas Press India Pvt.Ltd by deleting the disallowance of Rs. 1.23 crore in bad debts, noting that the adjustment against the provision for doubtful debts had already been accounted for, and any further disallowance would lead to double taxation.

Thomson Press India Ltd,appellant-assessee, engaged in the business of commercial printing and phototypresetting, filed its income tax return for the year on 30.09.2009, showing a loss of Rs. 24.85 crore. The case was scrutinized, and the assessment was completed on 26.12.2011, with an addition of Rs. 4.06 crore, reducing the loss to Rs. 20.78 crore. The assessee appealed the decision, and the Commissioner of Income Tax (Appeals)[CIT(A)] partly allowed the appeal in the order dated 31.01.2019.

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The assessee aggrieved by the decision appealed before the tribunal.

The main issue was the disallowance of bad debts worth Rs. 1,23,11,728/-, which the AO made and the CIT(A) confirmed.

The assessee's counsel explained that during the year, bad debts of Rs. 12,27,174/- were written off, and a provision for doubtful debts of Rs. 3,05,74,218/- was made. The provision was reconciled by adding the current year's provision to the opening balance and adjusting the Rs. 1,23,11,728/- written off. This was detailed in the Paper Book.

The counsel argued that since the provision had already been added to the total income and no separate claim was made for the written-off amount, any further disallowance would be a double addition. The counsel requested the deletion of the disallowance.

The Senior Departmental Representative(DR), however, supported the lower authorities' orders.

Read More: ITAT upholds Disallowance on Bad Debts, limits Unrecovered Debtors’ Balance to Rs.228.87 lakhs

The two member bench comprising Anubhav Sharma(Judicial Member) and Manish Agarwal(Accountant Member) reviewed the submissions and the record. It found that the assessee claimed Rs. 3,05,74,218/- for the provision of doubtful debts, but did not claim a deduction for the Rs. 1,23,11,728/- written off from that provision in the Profit and Loss Account.

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Since the amount was not claimed in the Profit and Loss Account and was adjusted against the provisions, no disallowance could be made. Additionally, since the provision for doubtful debts was already added back to the total income, making a disallowance would result in double taxation. The ITAT, therefore, directed the deletion of the disallowance of Rs. 1,23,11,728/-.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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