TaxTMI 
TaxTMI 
2007 (1) TMI 147
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....nto ? (2) Whether, on the facts and circumstances of the case, after the amendment of section 36, an assessee is entitled to claim deduction in respect of any debt written off as bad ? (3) Whether, on the facts and circumstances of the case, the Tribunal was right in permitting the assessee to claim expenditure on advertisement in one year, while the matching fee receipts were spread over more years ? and (4) Whether, on the facts and circumstances of the case, the asses see is entitled to follow a system of accounting which is not in accordance with the matching principle ?" 3. The assessee is a company engaged in the business of running a tutorial for professional entrance examinations. On March 28, 2000, it took over the business ....
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....II. In the course of hearing before the first appellate authority, the Commissioner of Income-tax called for a report from the Assessing Officer, wherein it was stated that mere writing off of the amount from the assessee' s books of accounts as a bad debt was not acceptable and, hence, unless and until the assessee proved that the debt really became a bad debt and in the absence of any satisfactory proof to that extent, the claim, as such, could not be granted. The first appellate authority, by his order, dated November 24, 2005, confirmed the order of the assessing authority, stating that there was no considerable force in the submission of the assessee. 6. The aggrieved assessee preferred a further appeal before the Tribunal. The Tr....
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....estment Corporation Ltd. v. CIT [1997] 225 ITR 802, could not be applied to the facts herein and the benefit of expenditure on advertisement would not be available on a specified future period. The Tribunal further held that the benefit would be available for a long period of time, but such period of time could not be defined by any method. The Tribunal also rejected the reliance placed on the assessee\qs own case for the earlier years, on the ground that the assessee was following the cash system then. Going by the language of section 37(1) it is clear that it does not impose any condition except those that are explicitly set out in the provision that the expenditure is laid out exclusively for the purpose of business and that the expendit....
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....ows that as a matter of fact there had been a fall in the receipts of income through franchisees. Referring to the details of the income, it was stated that the assessee had been receiving sufficient amount by way of advance in the form of security deposits and, hence, there was no reason for the assessee to have bad debts for the assessment year 2002-03 of such a huge magnitude. It was further stated that after the take over of First Computers, the assessee- company had withdrawn from the business and taken a unilateral decision of closing their accounts and claimed it as bad debts. 10. A perusal of the details given before the Assessing Officer shows that there had been an actual fall in the receipts, which is said to be due to the crash....
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....ed as a bad debt. 13. Explaining the amendment, the Board issued a Circular No. 551, dated January 23, 1990 (see [1990] 183 ITR (St.) 7 ), which read as follows (page 37) : "The old provisions of clause (vii) of sub-section (1) read with sub- section (2) of the section laid down conditions necessary for allowability of bad debts. It was provided that the debt must be established to have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the Assessing Officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminat....
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....tion 37, the Tribunal correctly held that the assessee was entitled to the deduction sought for. 17. When once it is admitted that the expenditure is of revenue nature and incurred fully and exclusively in the business, a further enquiry as to whether the income has flowed thereon from the expenditure, would not be a justifiable ground for rejection. On the other hand, an expenditure satisfying the character as revenue expenditure should be allowed in the assessment. 18. In the decision in CIT v. Southern Roadways Ltd. reported in [2006] 282 ITR 379, this court, to which one of us was a party (Justice P. D. D.), referring to a decision of the Division Bench in CIT v. Southern Roadways Ltd. reported in [2004] 265 ITR 404 (Mad), considered ....