2017 (10) TMI 1158

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....unal") in ITA No. 1967/DEL/2009, for the assessment year 2005-06, claiming following substantial questions of law:- (i) "Whether on the facts and in the circumstances, the learned ITAT was right in law in upholding the order of CIT(A) in deleting the addition of Rs. 90,97,536/- made by the Assessing Officer on account of bad debts written off disregarding the fact that the assessee had failed to prove that the written off debts had actually become bad and also failed to furnish any justification? (ii) Whether on the facts and in the circumstances, the learned ITAT was right in law in upholding the order of learned CIT(A) in deleting the addition of Rs. 15,55,893/- made by the Assessing Officer on account of cessation of li....

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....nses. Among various additions made by the Assessing Officer as noticed above, relief was allowed by the Commissioner of Income Tax (Appeals) [CIT(A)] in respect of these additions made by the Assessing Officer vide order dated 09.03.2009, Annexure A.II. The revenue filed an appeal before the Tribunal. Vide order dated 20.01.2016, Annexure-III, the Tribunal dismissed the appeal inter alia on the ground that the Assessing Officer had added an amount of Rs. 90,97,536/- on account of bad debts written off during the year under consideration on the ground that the assessee had failed to prove that the written off bad debts had actually become bad. The CIT(A) deleted the addition of Rs. 90,97,536/- made by the Assessing Officer relying upon CBDT'....

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....by the CIT(A) on this issue. Hence, the instant appeal by the appellant-revenue. 3. We have heard learned counsel for the appellant-revenue. None has appeared on behalf of the respondent. 4. With regard to question No.1, qua addition of Rs. 90,97,536/- made by the Assessing Officer on account of bad debts written off, it has been recorded by the CIT(A) that the Assessing Officer was oblivious of the amendments made by the Finance Act w.e.f. 01.04.1989 which had been explained by the CBDT's circular dated 23.1.1990 wherein in Para 6.6 it had been mentioned that the amendment was to rationalize the provisions regarding the allowability of all debts. It was laid down that the assessee had only to write off debts as irrevocable in its acc....

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....r the revenue was unable to demonstrate that the concurrent approach of CIT(A) and the Tribunal was perverse or erroneous in any manner. Thus, the claim for bad debts written off by the assessee could not be validly declined by the Assessing Officer. 5. As regards question No.(ii), qua addition of Rs. 15,55,893/- made by the Assessing Officer on account of cessation of liabilities under Section 41(1) of the Act, relying upon the judgment of the Apex Court in CIT Vs. Sugauli Sugar Works Private Limited, (1999) 236 ITR 518, it was held that merely by virtue of the fact that a debt becomes time barred, the right of the creditor will not come to an end nor the liability will cease and in these circumstances, Section 41(1) of the Act was not ....

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....g the debt, has been well settled. If that principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section. The decision of the Calcutta High Court in CIT Vs. Sugauli Sugar Works Private Limited 140 ITR 286 affirmed." 15.1 The issue to be decided by the Tribunal is squarely covered by the judgment cited as Sugauli Sugar Works Limited (supra) because merely by virtue of fact that a debt become time barred the right of the creditor will not come to an end nor the liability w....

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....ear. Further, Section 35DDA of the Act did not preclude the assessing authority to consider the VRS payment as revenue expenditure. Thus, the Tribunal rightly upheld the findings recorded by the CIT(A) on this issue. The relevant findings recorded by the Tribunal on this issue read thus:- "16. The. A.O. made an addition of Rs. 10,02,735/- by disallowing the deduction of VRS expenses for the financial year 2000-01 under Section 35DDA on the ground that the aforesaid section came into effect w.e.f. 01.04.2001 without any retrospective effect. 16.1 A perusal of the findings returned by the A.O. in para 5 of the assessment order apparently go to prove that the addition has been made merely on the basis of wrong interpretation ....