TaxTMI 
TaxTMI 
2006 (1) TMI 111
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....ment year, the assessee filed return of income declaring nil income after a claim of deduction under section 80-IA of the Income-tax Act. The Assessing Officer completed the assessment under section 143(3) determining the income at Rs. 83,52,860. That determination was made on disallowance on account of exchange fluctuations in respect of purchases from foreign countries in a sum of Rs. 16,31,594, disallowance of claim of bad debts in a sum of Rs. 65,28,748 under section 36(1)(vii) and disallowance of deduction under section 43B in a sum of Rs. 1,05,141. On appeal by the assessee, the Commissioner of Income-tax (Appeals) allowed the claim relating to section 43B, but confirmed the disallowance in respect of the other two counts. That order ....
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.... inasmuch as the debts were more than three years old and consequently had been written off by the assessee. Inasmuch as the condition of section 36(1)(vii) has been fully satisfied, the conclusion of the Tribunal that the debts have not become bad is incorrect in law. On the other hand, learned counsel appearing for the Department argued for sustaining the order of the Tribunal. We heard the argument of learned counsel on either side and perused the material on record. The facts are not disputed. The assessee supplied the goods to reputed hospitals and most of them are Government hospitals. It is also an admitted fact that the assessee is still maintaining business transactions and making supplies to these hospitals from which amo....
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....ome bad and doubtful. The question is really one of fact depending upon congeries of facts and diverse circumstances bearing on the debtor's pecuniary position, his commitments and obligations, and the natural apprehensions that would be caused in the minds of the creditors regarding recovery of their dues. The court further held that it cannot be laid down as an inflexible rule of law that a waiver by a creditor of a portion of his debt would amount to proof positive of the debt, or any portion thereof, having become bad and doubtful. The onus of establishing that the write off of the alleged bad debt is proper and permissible in the circumstances of the case is upon the assessee. In the next decision of Sarangpur Cotton Mfg. Co. Ltd. v....
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....iling of the suit would not in any way help the assessee to recover the amount, but rather burden the assessee with the additional financial expenses, the filing of the suit is not necessary to write off the debt as a bad debt. The other decision of Jhunjhunwala Co. v. Asst. CIT [2003] 259 ITR 178, rendered by the Bombay High Court is also a case where the management of the two debtor textile mills was taken over by the Central Government and the Central Government categorically informed the assessee that it was not possible for the Government to make payment to the suppliers of raw material to the two mills during the pre-takeover period. Further, in view of section 8(1)(c) of the Textile Undertakings (Taking Over of Management) Ordinan....
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....aring on the debtor's pecuniary position, his commitments and obligations. The judgment of the assessee in regarding the debt as a bad debt must be an honest judgment and not a convenient judgment. The judgment of the assessee must be established to have been taken on relevant facts and circumstances, which should show that the debt is not realisable for some fault on the part of the debtor or some supervening impossibility on the part of the debtor to pay, but not possible difficulties or hurdles the assessee may have to incur to compel the recalcitrant debtor to pay. The assessee for his convenience may decide that the debt is too small and it is not worthwhile to pursue the debtor but that judgment would not be an honest judgment, which ....
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....th Mallya Hospital, Bangalore, to whom the appellant-company was making substantial supplies. The said doctor was connected with taking decisions regarding purchase of equipment from the appellant-company to the said hospital. Dr. Ramesh refused to pay the amount as he had got the orders to the assessee from Mallya Hospital. The said reason cannot be a ground for writing off the amount, as in any event it could only be treated as commission in kind. The Tribunal in its turn has concluded that it was an admitted fact that there is nothing on record which might show that all these debtors were either financially not in a position to pay the debt or have ever refused or expressed a desire not to pay. On the contrary, the assessee was still ....