TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 706
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.... as computed by the A.O. is wrong as it consists of expenses already disallowed on other grounds and as such there is a double disallowance. 3. The learned C.I.T.(A) erred on facts and in law in upholding disallowance of expenditure of Rs. 6,49,798 on genuine business activity on the ground that the relevant business activity is sham and is a colourable device. He also erred in directing the A.O. to assess it as Income from Other Sources. He failed to appreciate that the entire disallowance made by the A.O. was based on surmises and conjectures. He also failed to appreciate the facts in its proper perspective, as also the arguments and contentions advanced by the assessee in this behalf. 4. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal. 3. The issue in ground of appeal No.1 is against disallowance of Rs. 68,750/- written off as bad debts under section 36(1)(vii) of the Act. 4. Briefly, in the facts of the case, the assessee was engaged in the business of manufacturing, hiring and trading activities. During the year under consideration, the assessee had written off debts in respect of two parties i.e. M/s. S.S. Deisel....
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....r and proper, is to be allowed as deduction under section 36(1)(vii) of the Act. Reliance in this regard was placed on the ratio laid down by Pune Bench of Tribunal in cross appeals in DCIT Vs. Nichrom India Ltd. and Nichrom India Ltd. Vs. Addl.CIT in ITA Nos.870/PN/2014 and 919/PN/2014, relating to assessment year 2009-10, order dated 29.01.2016. 8. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 9. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the claim of deduction on account of writing off of debts by the assessee during the year under consideration. Admittedly, the assessee had written off certain debts as unrecoverable which were due from M/s. Goodwill Engineering Services to the tune of Rs. 68,750/-. The claim of the assessee before the authorities below was that it had supplied machinery to M/s. Goodwill Engineering Services which was not up to the mark and hence, the total amount was not paid by the said concern. The cost of machinery was Rs. 1,68,750/-, out of which Rs. 1 lakh was received by the assessee in the next year i.e. assessment year 2008-09 a....
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....ant previous year. Further, sub-section (2) of section 36 prescribes the conditions in order to claim deduction for write-off of bad debts. In so far as the present case is concerned, the condition applicable is to the effect that such debt ought to have been taken into account in computing the income either in the previous year in which the amount of such debt or part thereof written-off or of an earlier previous year. 10. With respect to the aforesaid statutory requirement there is no dispute in the present case. Firstly, the debts in question have been written-off as irrecoverable in the accounts of the assessee; and, secondly it is also not in dispute that the same have already been taken into account in computing the income of the assessee in the preceding years. However, the stand of the Revenue is that, on facts, assessee has not been able to establish that the debts have become irrecoverable. The Assessing Officer as well as the CIT(A) have proceeded on the proposition that the assessee was required to establish that the debts had become bad; or, in other words, that the debts were 'irrecoverable' and only then the writte-off of such bad debts would qualify for deduction....
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.... irrecoverable in the accounts of the assessee for the previous year." 4. The position in law is well-settled. After April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. ........" 11. Thus, in so far as the assessment year before us is concerned, which is post-01.04.1989, in terms of the judgment of the Hon'ble Supreme Court in the case of T.R.F. Ltd. (supra), the stand of the Revenue that assessee was required to establish that the debts in question, in-fact, had become irrecoverable in order to allow the claim u/s. 36(1)(vii) of the Act, is quite misplaced. 12. Nevertheless, even on facts also, we find that in so far as the irrecoverability of the impugned debts is concerned, there cannot be any doubt. In this context, we have perused the details of amounts due from different debtors which has been written-off as bad debts amounting to Rs. 40,89,838/-, the relevant details are at pages 4 to 9 of the Paper Book. Against each and every entry assessee has explained the reasons for treating the same as a 'bad debt'. A per....