TaxTMI 
TaxTMI 
2018 (4) TMI 497
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Global Finance Ltd., after allowing a sum of Rs. 42,12,434/-, representing bad debts. 2.1 Briefly stated, the facts of the case are that the assessee had entered into a hire purchase agreement with Zen Global Finance Ltd. (in short 'ZGFL') whereby the assessee had given its plant and machinery costing Rs. 3,05,63,112/-. As per the terms of agreement, the said ZGFL had pledged some of equity shares as security. Subsequently, ZGFL defaulted in making payment of hire purchase instalment from September 1996. Consequently, the assessee sold the shares pledged to it by ZGFL to recover a part of the dues. ZGFL submitted a written proposal on 24.05.2001 for payment of a total sum of Rs. 25 lacs for settlement of the dues. The assessee submitted before the AO that since no recovery could be made till that date from ZGFL, it agreed to accept the above payment towards settlement of dues. Accordingly, the assessee worked out the loss on termination of contract and claimed the same as bad debt. The details are as under: Amount in Rs. Value of stock on hire (unpaid installments unpaid of future 26014707 Less: unmatured finance charges (unpaid hire charges to future) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... recovery was at least to get back the leased machines. The appellant is a businessman and it has leased out such costly machines to ZGFL. There is no evidence that the appellant has made any effort at least to retrieve these assets. Such huge machines cannot just vanish without trace, without any possibility of recovery. Under the circumstances I am not satisfied that this is a genuine case of loss arising out of termination of assets contract. Under the circumstances the loss arising out of the leased deal has been correctly disallowed by the AO and added to the appellant's income. Out of the total loss of Rs. 2,21,92,554/- claimed, Rs. 42,12,434 represents bad debt which is allowed. The disallowance of balance loss of Rs. 1,79,80,120/- is confirmed." 2.4 Before us, the Ld. counsel of the assessee submits that the assessee had entered into a hire purchase agreement with ZGFL dated 08.03.1995, whereby it had given plant and machinery costing Rs. 3,05,63,112/-. As per the terms of agreement, ZGFL had pledged some equity shares as security. ZGFL had defaulted in making payment of hire purchase instalments from 30.09.1996. Consequently, the assessee had sold the shares pledged....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons for our decision is given below. In the instant case, the assessee had initiated legal proceedings against ZGFL in Chennai and Mumbai u/s 138 of the Negotiable Instruments Act for default by ZGFL in making the payments. On 24.05.2001, ZGFL submitted a written proposal for payment of a total sum of Rs. 25 lacs in instalments for settlement of their dues. Since no recovery could be made till that date from ZGFL, the assessee agreed to accept this payment towards settlement of their dues from ZGFL In Dhanrajgirji Raja Narasingirji (supra), it is held : "that the assessee had incurred the expenditure for the purpose of his business. It was for the assessee to decide how best to protect his own interest. It was the duty of the assessee to see that the prosecution was properly conducted. The fact that he did not leave the carriage of the case in the hands of the prosecuting agency of the Government was no ground for disallowing the expenditure. It was not open to the department to prescribe what expenditure the assessee should incur and in what circumstances he should incur that expenditure." In the case of TRF Ltd. v. CIT (323 ITR 397) (SC), the Hon'ble Supreme Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been set aside by the Tribunal in assessee's own case for the AY 1996-97 and therefore, the matter may be restored to the AO. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 3.4 We have heard the rival submissions and perused the relevant materials on record. As mentioned earlier, the Ld. CIT(A) has followed the appellate order of his predecessor for AY 1996-97. However, the ITAT 'J' Bench, Mumbai in assessee's own case for AY 1996-97 (ITA No. 4502/Mum/2004) held: "6. Thus, from the above, it is seen that he has relied upon the order of the Commissioner (Appeals) for assessment year 1995-96 for dismissing the assessee's claim on merits without appreciating that the learned Commissioner (Appeals), in the said order, has not discussed the issue on merit. The proper opportunity of hearing on merits has not been provided by the learned Commissioner (Appeals) as evident from the records. Before us, the learned Counsel has contended that the matter should be restored to the file of the Assessing Officer to re-examine this issue afresh because even the Assessing Officer has placed reliance on certain material without confronting to the assesse....