TaxTMI 
TaxTMI 
2020 (3) TMI 779
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....said debt had been taken into account in computing the income of the appellant in the relevant previous year and earlier year 3. Because, the Ld. CIT(A) failed to appreciate the fact that after 01.04.89 for allowing deduction for the amount of any bad debt or par thereof, it is not necessary for the assessee to establish that the debt, in fact had became irrecoverable, it is enough if bad debt is written off or irrecoverable in books of account of the assessee. 4. Because, the Ld. CIT(A) erred in holding "the matter is subjudice and recovery work is still in progress, at the moment it cannot be accepted that the assessee has formed an opinion of write off the sound reasoning". 5. The Ld. CIT(A) erred in holding that there was a hope of recovering the debt and therefore it could not be treated as bad debts. 6. Because, the Ld. CIT(A) failed to appreciated the fact that the appellant written off only 25% of the outstanding amount. 7. Because, the Ld. CIT(A) failed to appreciate the fact that Hon'ble CBDT had issued Circular No. 12/2016 dt. 30th May, 2016, regarding admissibility of claim of deduction of bad-debts under section 36(1)(vii) read with section 36(2) of the Incom....
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....ounds of appeal deduced hereinabove. 2. The appellant craves, leave to amend, alter or delete any of the grounds of appeal at or before the time of hearing." 2. Briefly stated, the assessee company which is engaged in the business of financing, trading and sub-broking of shares and securities, agro commodities and investment broking had e- filed its return of income for A.Y 2014-15 on 27.11.2014, declaring its total income at Rs. Nil (after claiming current year loss of Rs. 2,06,99,797/-). The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee company had inter alia claimed 'bad debts' of Rs. 1,98,70,000/-. On being queried, it was submitted by the assessee that it had carried out purchase and sale of commodities on the platform of National Spot Exchange Limited (for short 'NSEL') through M/s Motilal Oswal Commodities Broker Private Limited. It was the claim of the assessee that the aforesaid trading transactions carried out on the platform....
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....re guaranteed by NSEL, therefore, compensations against non-delivery of commodities bought on the exchange platform were legally enforceable. On the basis of his aforesaid observations, the A.O was of the view that the claim of 'bad debts' raised by the assessee due to non-delivery of stock was premature and hence could not be allowed. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the matter was sub judice and the recovery was still in progress, the CIT(A) was of the view that as the 'writing off' of part of the outstanding amount of Rs. 1,98,70,000/- by the assessee was not backed by any sound reasoning, therefore, the A.O had rightly disallowed the claim of the assessee. Accordingly, the CIT(A) dismissed the appeal of the assessee. 5. The assessee being aggrieved with the order of the CIT(A) has carried matter in appeal before us. The Learned Authorized Representative (for short 'A.R') for the assessee took us through the facts of the case. It was submitted by the Ld. A.R that as the profit arising from the trading transactions carried out on the NSEL platform had been taken into account in computing its income, therefore, the 'writi....
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....c platform. As per the bye-laws of NSEL, it acted as a legal counter party in respect of transactions executed and also guaranteed the settlement of net financial obligations. The traded commodities were claimed to be kept in the designated warehouses controlled by NSEL. The exchange used to issue delivery allocation report for the purchase transaction. The warehouse receipts were kept in the custody of exchange and the same were tendered by NSEL against the commodity pay-in obligation of the client. 8. As is discernible from the orders of the lower authorities, the assessee had entered into numerous paired traders contracts in which it bought the commodities and obtained allocation report in lieu of warehouse receipts. As observed by us hereinabove, a scam was unearthed in July, 2013, which revealed that NSEL had defaulted in its payment obligation to its various investors and traders from August, 2013. On a perusal of the records, we find, that the assessee company which was one of the trader in NSEL could recover only an amount of Rs. 58 lacs (approx.), as against its outstanding dues of Rs. 8,22,62,078/- on 01.08.2013. As such, the balance outstanding due by NSEL towards the a....
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.... 1987, w.e.f. 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the 'debt' is 'written off' as irrecoverable in the accounts of the assessee. Admittedly, in the case before us, the assessee company had 'written off' 25% of the balance outstanding from NSEL i.e. Rs. 1,98,70,000/- as a 'bad debt' in its books of accounts for the year under consideration. As observed by us hereinabove, the only reasoning for declining of the aforesaid claim of the assessee by the lower authorities was that as the case was under investigation and the seized assets were yet to be realized, therefore, the aforesaid claim of the assessee was premature. In our considered view, the aforesaid observations of the lower authorities are not in conformity with the settled position of law. As observed by the Hon'ble Supreme Court in the case of TRF Ltd. Vs. CIT (2010) 323 ITR 397 (SC), as per the post-amended Sec.36(1)(vii), it is not necessary for the assessee to establish that the debt in fact, had become irrecoverable. It is enough if the 'bad debt' is written off as irrecoverable in the accounts of the assessee. As per the aforesaid....