TaxTMI 
TaxTMI 
2013 (10) TMI 1399
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....n 143(3) of the Income Tax Act, 1961 (in short "the Act"), for the assessment year 2007-08. 3. In the appeal of the assessee, the first issue relates to the action of the CIT(A) in upholding the action of the Assessing Officer in denying the assessee's claim for bad debts written-off u/s. 36(1)(vii) of the Act amounting to Rs. 18,32,840/-. 4. Briefly put, the relevant facts are that assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, interalia, engaged in the business of manufacture and marketing of various packaging machinery and systems. The Assessing Officer noticed that for the assessment year 2007-08, assessee had claimed deduction on account of bad debts written-off u/s. 36(1)(vii) of the Act amounting to Rs. 40,89,839/-. Not being satisfied with the explanation of the assessee, Assessing Officer disallowed the claim of the assessee. In appeal before the CIT(A), claim of the assessee to the extent of Rs. 22,56,998/- was allowed by the CIT(A) and the balance of Rs. 18,32,840/- was denied. The assessee, by way of Ground of Appeal No. 1 has challenged the sustenance of disallowance of Rs. 18,32,840/- whereas the Revenue in its cross-a....
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....the Hon'ble Madras High Court in the case of South India Surgical Co. Ltd. (supra) was affirmed and accordingly an amount of Rs. 18,32,840/- was disallowed. 7. In this background, rival counsels have made their submissions. The learned counsel for the assessee has referred to pages 4 to 9 of the Paper Book wherein is placed the details of the bad debts written-off amounting to Rs. 40,89,838/-. It is pointed out that each of the amount was outstanding for recovery from the respective debtor for a long time and therefore it was written-off as irrecoverable u/s. 36(1)(vii) of the Act. According to the learned counsel, the requirement of proving a debt as irrecoverable is no longer fastened on an assessee before claiming deduction u/s. 36(1)(vii) of the Act. For this proposition reliance was placed on the judgment of the Hon'ble Supreme Court in the case of T.R.F. Ltd. vs. CIT, (2010) 323 ITR 397 (SC). It was also contended that assessee satisfies all the conditions prescribed in section 36(1)(vii) r.w.s. 36(2) of the Act and in view of the judgment of the Hon'ble Supreme Court in the case of T.R.F. Ltd. (supra), the claim has been wrongly disallowed by the CIT(A). 8. On the othe....
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....n'ble Supreme Court, prior to 01.04.1989, every assessee had to establish, as matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. Further, explaining the provisions of section 36(1)(vii) of the Act as amended w.e.f. 01.04.1989, the Hon'ble Supreme Court observed that under the amended provisions it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough that the bad debt is written-off as 'irrecoverable' in the accounts of the assessee. In order to emphasize the point sought to be made out, we reproduce hereunder the relevant portion of the judgment of the Hon'ble Supreme Court in the case of T.R.F. Ltd. (supra) :- "2. ........... Prior to April 1, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word "established", which earlier existed in section 36(1)(vii) of the Income-tax Act, 1961 ("the Act", for short). 3. For the sake of clarity, we reproduce hereinbelow the provisions of section 36(1)(vii) of the Act, both prior to April 1, 1989 and po....
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....ed in the Paper Book, are specific bills or part of specific bills raised by the assessee, which have not been collected from such parties. Therefore, merely because assessee had dealing with that particular concern or that the concerns are otherwise financially viable does not distract from the fact that the amounts in question, which are individually of small values, were specific bills of the assessee or part thereof, which were outstanding for a long period of time and therefore considering the aforesaid aspect, on facts, the judgment of the assessee of treating them as 'irrecoverable' cannot be faulted. Thus, in our considered opinion, the claim of the assessee for writing-off of such amounts u/s. 36(1)(vii) of the Act as 'irrecoverable' was fair and proper. 13. In so far as the judgment of the Hon'ble Madras High Court relied upon by the Revenue in the case of South India Surgical Co. Ltd. (supra) is concerned, the same, in our view, does not help the Revenue. The Hon'ble Supreme Court in the case of T.R.F. Ltd. (supra) has opined that post-01.04.1989, it is no longer necessary for the assessee to establish that the debt, in-fact has become irrecoverable before claiming de....
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.... Ostensibly, the expenditure in question does not pertain to the period under consideration, which is evident from the invoice raised by M/s. Safire Hotels Ltd.. There is also no material on record to show that the liability represented by the invoice of M/s. Safire Hotels Ltd. dated 20.01.2006 crystallized during the year so as to be deductible in computing assessee's income for the year under consideration following the mercantile system of accounting. In the course of hearing, it was specifically put to the learned counsel for the assessee to show as to in what manner the liability crystallized during the year and not in the preceding assessment year as sought to be canvassed by the Revenue based on the date of the invoice raised by M/s. Safire Hotels Ltd.. No satisfactory explanation has been rendered before us and therefore we deem it fit and proper to sustain the action of the lower authorities in disallowing the impugned claim of Rs. 7,34,265/- being a prior period expenditure. Thus, on this Ground assessee fails. 19. The last Ground in the appeal of the assessee is with regard to the disallowance of Rs. 7,42,435/- made out of legal and professional charges. The relevant ....
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....nsidered the rival stands and the orders of the authorities below, we deem it fit and proper that the matter be re-visited by the Assessing Officer after allowing the assessee a reasonable opportunity to produce all the relevant material in support of the impugned expenditure. Needless to say, the Assessing Officer shall consider the submissions and material put-forth by the assessee on its merits and thereafter adjudicate this aspect afresh as per law. We may add here that if the Assessing Officer is not satisfied with the submissions of the assessee and proceeds to make a disallowance, the same shall not exceed a sum of Rs. 7,42,435/-, i.e. the amount sustained by the CIT(A) in the impugned order. Thus, on this Ground assessee succeeds for statistical purposes. 23. In the result, whereas the appeal of the assessee for assessment year 2007-08 is partly allowed that of the Revenue is dismissed. 24. Now, we take-up ITA No.1624/PN/2012 and ITA No.1640/PN/2012 which are also cross-appeals preferred by the assessee and the Revenue respectively against the order of the Commissioner of Income Tax (Appeals)- III, Pune dated 31.10.2011 which, in turn, has arisen from the assessment o....