Description:
The apex court in the case of Southern Technologies Ltd b. Joint CIT (2010) 32 (I) ITCL 505 (SC) : (2010) 320 ITR 577 (SC) has held that nature of expenditure cannot be conclusively determined by the manner in which the accounts are presented in terms of Non –Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. Though they deviate from accounting practice as provided in the Companies Act, they do not override the provisions of the Income Tax Act.
The Tribunal applied the apex court decision in the case of T.R.F. Ltd v. CIT (2010) 36 (I) ITCL 2 (SC): (2010) 323 ITR 397 (SC) in which it was held that it is enough if bad debts are written off as irrecoverable in the accounts of the assessee and it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable.
In view of the above, the practice of maintaining two sets of books, one meant for income-tax purpose and another meant for Companies Act cannot be viewed adversely by the tax authorities. Also, the claim of deduction cannot be negatived merely for the reason that the claim was made only in the books meant for income – tax purpose and not in the books meant for Companies Act.
Source:
1. www.tpcc.in
2. The Tax Referencer .Volume120. Issue No.8, 22 August 2011 Page No.35.
Our Comment:
The bad debts need not be written in books of maintained for the purpose of the Companies Act. It is sufficient if it written off in books of account maintained for Income tax purpose.
