TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 851
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....7/- on account of bad debts claimed in the P&L account of the assesse is erroneous and bad in law. 3. That on the facts and in the circumstances of the case the action of the A.O. in making assessment u/s 147 /143(3) of the act without providing the reasons recorded for reopening of the case is erroneous and bad in law. 4. That on the facts and in the circumstances of the case the action of the A.O. issue notice u/s 148 of the act is erroneous and bad in law. 5. That the order passed by the Ld C.I.T (A) upholding the addition made by the A.O. are arbitrary, excessive and bad in law. 6.That the above grounds of appeal will be argued in detail at the time of hearing and the assessee crave leave to submit additional grounds of appeal, if any, and/or after verify, modify or rectify any grounds of appeal at or before the time of hearing. 3. Although, in this appeal. the assessee has raised a multiple grounds of appeals but at the time of hearing, the main grievance of the assessee has been confined to Ground Nos.1,2 and 5 and Ground Nos. 3 & 4 were not pressed by the assessee. The Ground Nos.1, 2 and 5 raised by the assessee, relate to only one issue that disallowance ma....
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....ducted therefrom. The assessee sought to claim the benefit of the tax so deducted from the payments made to it in its assessment under the provision of the Income taxAct,1961. The income tax officer however on an enquiry by the assessee informed it that since the tax deduction had not been made by the Govt. of Sikkim in accordance with the provision of section 192 onward of the I.T Act, 1961 and the payment had not been furnished. lt shall not be treated as payment of tax on behalf of the person from whose income the deduction has been made and no credit can be allowed on the strength of the said TDS certificate issued. The assessee further submitted before the Assessing Officer that since the amount of TDS Company whereas the debit balance on such amount being carried forward in the Balance-sheet turned out to be a bad & doubtful balance and the Company, was left with no other option but to write off the same in the p & L A./c during financial year ending 31.03.2007. The assessee also submitted that according to Supreme Court ruling. the Apex Court has upheld that the tax-payer need not establish the debts are irrecoverable for claiming deduction. The Apex court has re-affirmed th....
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.... at source. As per the provision of income lax Act the payment of Income tax is not allowable as deduction in the profit & Loss Account. The assessee would have made the efforts to ask the deductor to pay the deducted tax to the account of Central Govt. and issue of TDS certificates in accordance with the provisions of the LT. Act and thereafter. the assessee may claim the credit of TDS. The CIT(A) therefore. held that the TDS cannot be treated as ,debt receivable,. Therefore, the same cannot be allowed as u/s 36(1) (vii) of the Act. This way, the td. CIT(A), confirmed the addition made by the Assessing Officer. 7. Before us, the ld. Counsel for the assessee has submitted that assessee is an Indian resident company and during the course its construction business jt entered into a contract with Urban Development & Housing Department, Govt. of Sikkim for construction of a ropeway at Gangtok, Sikkim. A sum of Rs. 2l,56,187/- was deducted by the Govt. of Sikkim on account of Income Tax @ 3% al source. From time to time during the Assessment Year 2002-03 to 2OO4 05 certificates for deduction of such tax have been furnished by the Govt. of Sikkim giving the details of the payments to th....
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....s Chapter and paid to the Central Govt. shall be treated as a payment of tax on behalf of the persons from whose income the deduction was made or of the owner of the security or of the contractor or of the owner of the property or of the unit holder and of the share holder, as the case may be" This way, the ld. Counsel has submitted before us that the assessee is entitled to claim TDS amount which was not deposited by the Sikkim Govt., and therefore it ls a complete loss ln the hands of the assessee and hence he is entitled to claim as a bad debt. The ld. Counsel for the assessee also relied on the judgment of CIT Vs. Shreyans Industries Ltd. of High court of Punjab & Haryana in (2008) 303 ITR 0393, wherein it was held that it is a fact that the assessee had offered gross amount of interest including TDS o{ Rs. 2,04,259/- to tax in the assessment year 1992-93.lt is also a fact that the assessee was not allowed credit for the TDS of Rs. 2,04,259/- for want of TDS certifrcates. lt ls also a fact that in spite of best efforts, the assessee could not obtain TDS certificates. Thus, it was a case of loss which has arisen to the assessee during the course of its business. !f the loss occ....
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.... of assessee by way of deducting TDS and depositing the same on behalf of the assessee into the Central Government account, if the deductor does not deposit the amount into the Central Government Account, then to that extent of amount not deposited into the central government account, would be the business loss to the assessee, ln the assessee.s case under consideration, the Sikkim and Bhutan govt. neither paid the said amount to the assessee nor deposited the said amount to the Central Govt. account, therefore, it is a revenue loss in the hands of the assessee company. We observe that Sikkim and Bhutan Govt. suppose to deposit the said amount to the Central Govt. account on behalf of the assessee but in fact the amount was not deposited to the Central govt. account, therefore, it is a revenue loss in the hands of the assessee company. Therefore, the assessee is entitled to write it off as a bad debt. Since the TDS certificate was not issued by the deductor nor any actual payment was made by them, the assessee company could not claim credit thereof against the 1ax liability. Therefore, when there was no possibility of TDS certificates being received from the clients, the assessee ....