2014 (12) TMI 213

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....nbsp;   2.2.....     3. The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 31/12/2008, thereby the Assessing Officer (AO in short) made addition of Rs. 6,243/- and made disallowance of bad debts claim of Rs. 1,17,16,78,697/-. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions dismissed the appeal. Now, the assessee is in further appeal before us. 3. The only effective ground in assessee's appeal is against the disallowance of deduction of bad debts amounting to Rs. 117.17crores. The ld.counsel for the assessee submitted that the issue is covered by the judgement of Hon'ble Apex Court rendered in the case of TRF Ltd. vs. CIT reported at (2010) 323 ITR 397(SC). He reiterated the submissions as were made before the ld.CIT(A) and made in the statement of factscum- synopsis. 3.1. On the ....

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....hat appellant did not fulfill the condition of section 36(1)(vii) of the IT Act and he confirmed the disallowance made by the AO. During the course of hearing, the ld.counsel for the assessee drew our attention towards page Nos.72 & 73 of the paper-book (Annexure-B). It is submitted by the assessee-company that during the AY 2006-07, it has written off an amount of Rs. 117.17 crores as bad debt pertaining to two of its distributors, M/s.Argus Cloth Co.Ltd. and Niagara Distributors Ltd. to give effect to the award of the arbitrator in the matter of disputes with these two distributors. The ld.counsel for the assessee also drew our attention towards page Nos.103 to 124 of the paper-book, wherein it contained the award passed by the Arbitrator. The ld.counsel for the assessee has also drawn our attention towards Audit Report along with Audited Accounts for the assessment year under consideration to buttress his argument that the debts were written off in the accounts of the assessee. It was contended by the ld.counsel for the assessee that the finding of ld.CIT(A) that there was no break-up extra-ordinary and exceptional items in the Audit Report is ex-facie incorrect. He drew our att....

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....ion for diminution in value of investment 22,00,00,000/-   Net Amount 55,25,78,167/-"   4.2. It is the contention of the Appellant that the only reservation of the AO is that the appellant has shown the amount of bad debts written of under the head of exceptional and extra-ordinary items in the P&L A/c and thereby has debited only Rs. 33,25,76,167/- in the profit and loss account that too in the profit and loss appropriation account. Another contention of ld.Sr.counsel for the assessee is that probably AO has been misguided by the presentation of bad debt written off of Rs. 117.17 crores in the profit and loss account. The fact of the matter is that sum of Rs. 117.17 crores has been clubbed and grouped together with two other extra-ordinary items and algebraic sum obtained after the aforesaid grouping of these three items has been taken to the Profit and Loss Account. It is submitted that these groupings of items were done purely for the purpose of presentation of these items in the profit & loss account, however the same cannot be interpretable to mean that individual item is not part of the profit and loss account as have not been given effect in the p....

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....tained by the assessee. Therefore, the requirements of Section 36(1)(vii) are duly complied with. To buttress this contention, he drew our attention to Section 36(1)(vii) of the Act, which reads as under:-     Section 36(1)(vii)     (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-     ....     ....     (vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year]:     [Provided that in the case of [an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause;]     [Explanation 1: For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the asse....