Appeal outcome: Write-off for outstanding dues disallowed, except for those returned under court decree.

The appeal involved the disallowance of write-offs of outstanding dues by the Assessing Officer. The Tribunal held that the write-off claimed as expenditure for an advance made to a Chartered Accountant was not allowable under section 36(1)(vii) or section 37. However, regarding the write-off of outstanding due balance returned to Hughes Communications Ltd., the Tribunal found it should be allowed as a deduction under section 37 since it was returned under a court decree. The appeal was partly allowed on this ground.

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Issues involved:
The appeal involves issues related to the disallowance of write-offs of outstanding dues and the confirmation of additions made by the Assessing Officer.

Issue 1: Write-off of outstanding due from Sh. Sanjay Aggarwal
During the financial year 2020-21, the assessee claimed to have made an advance of Rs. 4,00,000 to Sh. Sanjay Agarwal, a practicing Chartered Accountant, for services related to loans Syndication and enhancement of working capital limits. The amount was later written off and claimed as expenditure. The Assessing Officer disallowed the expenditure, stating that it cannot be claimed as bad debts under section 36(1)(vii) of the Income Tax Act. The appellant argued that even if the wrong section was cited, the advance should have been allowed as expenditure under section 37. The Tribunal noted that the claim was not made for allowance under section 37 before the lower authorities. The Tribunal held that the deduction was not allowable under section 36(1)(vii) and denied relief under section 37. The appeal was decided against the assessee on this ground.

Issue 2: Write-off of outstanding due balance of Hughes Communications Ltd
The appellant also sought to write off the outstanding due balance of Rs. 6,71,417 returned to Hughes Communications Ltd. following court cases. The Assessing Officer disallowed the expenditure under section 36(1)(vii) but allowed interest payment under section 37. The Tribunal found that the amount received from Hughes Communications was not an advance but was received mistakenly and had to be returned under a court decree. The Tribunal held that if interest was allowable under section 37, the principal amount returned by court order should also be allowed as a deduction under section 37. Therefore, the findings of the lower authorities regarding this issue were not sustainable, and the appeal was allowed partly.

Separate Judgment:
The order was pronounced by Sh. Anubhav Sharma, Judicial Member, on 20th July, 2023.

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