TaxTMI 
TaxTMI 
2020 (12) TMI 231
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....ench, dated 15.07.2016, for the Assessment Years 2006-07 and 2007-08, the issues involved in both the appeals are entirely different and therefore, both the writ appeals are being disposed of by separate orders. 2. The substantial questions of law arising in the present appeal filed by the Assessee, as framed by the Assessee, are as under: (i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the bad debt was not written off as required by law as per the provisions of Section 36 of the Act, though the write off of the debt is made from the accounts of the debtors, and the amount of loans and advances at the year end in the balance sheet is shown as net of the provisions for....
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....agreement. Relevant portiions of the agreement are as follows: "10. The second party has paid an amount of Rs. 30,00,000/- (Rupees Thirty lakhs only) by way of cheques as security deposit interest free for due performance of the contract which the first party shall return without interest after completion of the first party's share of the total built up area including the penthouse as per the specifications and acceptance thereof by the second party and in the case the penthouse is not constructed for want of permission the settlement is made as per condition mentioned in clause 7." "7. The second party has also agreed to construct a penthouse exclusively for the first party admeasuring 1250 sq.ft. out of which 1000 sq....
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....eposited as security deposit. Therefore, it is capital in nature. Thus CIT(A) observed that the said amount cannot be held as an expenditure and confirmed the order of AO. 9. We have heard both the parties and perused the material on record. The amount of Rs. 30 lakhs was still appearing in the balance sheet of assessee under the head "provisions for claims and compensation" and it was not written off in the books of accounts of assessee. Being so, it cannot be treated as bad debt in the assessment year under consideration. Accordingly, placing reliance on the judgment of Supreme Court in the case of M/s. T.R.F. Ltd., reported in [2010] 323 ITR 397 (SC) wherein held that:- "After the amendment of section 36(1)(vii) of the ....
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.... debts under Section 36(1)(vii) of the Act it was not for the Assessee to establish that the debt in fact had become irrecoverable and deduction should have been allowed in the hands of the Assessee, since a provision was made with regard to the said compensation of Rs. 30.00 Lakhs. 6. Per contra, Mr.M.Swaminathan, learned Senior Standing Counsel appearing for the Revenue, argued that mere creating of a provision for the said advance of security deposit made by the Assessee in favour of the land owner will not entitle the Assessee to claim deduction, as the Assessee, by his own conduct, has shown it as outstanding receivable in the Balance Sheet of the Assessee for the relevant previous year. The fact that the Assessee has not written of....
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.... Either the Assessee admits this liability and pays the said amount to the land owner or the advance given thereafter is written off in its Book of Accounts to conclusively express its intention not to claim anything back from the land owner only could have been a reasonable conclusion of such expenditure being claimed as Compensation or a Business Expenditure under Section 37 of the Act. 9. It is not a question of such advance turning to be a bad debt but the more relevant provision applicable to such facts would be Section 37 of the Act. A developer of a building could claim it as an expenditure in the year in which such expenditure is actually incurred or the advance is written off and its right to claim the refund of such security is....