COMMISSIONER OF INCOME TAX Vs. HINDUSTAN ZINC LTD.

JUDGEMENT

(1.) THE controversy involved is very short, inasmuch as the assessee was following a practice of creating a provision, on account of bad and doubtful debts, by first debiting it in its P&L a/c and then adding it back while computing its total income.

(2.) THEREAFTER , in later year some amount was received, that was shown to the credit in P&L a/c but was not offered for taxation. It is on these facts, that the AO observed, that for the asst. yr. 1989 -90, the assessee had added a sum of Rs. 8.74 lakhs, on account of provision for bad and doubtful debts, while the sum written back is a sum of Rs. 39.56 lakhs, and the difference amount has been found to be liable to tax. Similar is the position in other financial year under consideration. The learned CIT(A) found, that when the amount for which provision had been made in the earlier years has already been subjected to tax, then if the amount is received in subsequent years, that amount cannot be taxed twice over. The learned CIT(A) verified the factual aspects, from the accounts and other details of the assessee, and looked into the continued account of the past years. It was also found that the AO had himself also accepted the correctness of the claim of the assessee, but had given the benefit only to the extent of the provision made, instead of the written back amount. As such, it was found that the AO was required to allow the deduction with respect to the written back amount, even if it pertained to the provision made in the earlier assessment years, and accordingly directed the deduction to be allowed for the complete written back amounts, in respect of the assessment years. The learned Tribunal found that the AO has not disputed the non -taxability of the written back amount, against the provision for the relevant years, but has held that the amount received against the provision for earlier year should be put to tax, which has been found to be a basic fallacy in understanding of facts, viz., the assessee was assumed to have claimed deduction at the time the provision was made. It was found that if the assessee had claimed deduction on account of the provision in the earlier years, of course the written back amount could be liable to tax, but then, since no direction was claimed, when the provision was made, subsequent realization from the debtors cannot be charged to tax.

(3.) IN our view, the findings recorded by the learned Tribunal, are perfectly in accordance with law.